>> let me answer that slightly differently, in a slightly different way. the fed is 100 years old. how many of those years have been years in which we've had stable growth or relatively stable growth and low inflation? well, there was 1923 to 1928. on the gold standard. limping gold standard but a standard. i mean, there -- then there was 1985 to 2002 when they followed something called the taylor rule. more or less followed it. not identically every meeting. but pretty much followed it. that's it. the rest of the time they produced the great inflation, the great depression, a whole variety of business cycles and they contributed, they didn't cause, but they contributed to the current crisis. so that should tell you that all this discretion and making policy judgments from quarter to quarter is a bad idea. and the economics profession is, if it's solidly on the side of anything, it's solidly on the side of rules are going to work

better than discretion. and, you know, would we have had bubbles if we had followed rules? no, we would not. the bubbles are people getting out of money and into real -- into real assets, trying to protect themselves. and that bids up these prices, and the fed can't do much about that, but it can do a lot about preventing that. that's what we need them to do. we need them to provide stability, not to be ambitious. when it comes to regulation, they're abysmal. >> okay. i'm tempted to keep going, but let's move to the issue of reversing -- of reversing the policies. i mean, we all now understand your view that it was a mistake to build up a balance sheet to this extraordinary extent in the first place. but it's been done. what do you think is the likely course of action now, you know, to reverse this? and what would you do if you

were in a position to influence the decision? >> i would start to reverse it. >> straight away. >> i would start to reverse it. i would raise the interest rate slightly to 1%. i would look around and see what happened. you know, if it was too much, i might back off. but i certainly wouldn't go further. if it didn't create a lot of problems, well, i would go a little further, slowly, working toward some equilibrium. let me say -- think about this. there's $15 trillion worth of u.s. government debt. approximately $12 trillion is held outside the government itself. every 1% that we increase the interest rate is going to raise the cost of interest payments by $150 billion. so while we're thinking about congress struggling to cut a little bit off the budget deficit, we're going to be adding with three percentage points in interest rates, we're

going to be adding $450 billion or $360 billion. you know, is that good? heck, no, it's not good. now, you know, people will say, well, you pay it yourself so it doesn't matter. but we don't pay it to ourselves. we pay half of it to the rest of the world. so that's going to have big repercussions on the balance of payments. we have worked ourselves into a terrible position. you know, we're like the guy who says -- i'm like the guy who says, stop digging. >> okay. okay. i mean, what argument -- we're going to talk about europe in just a moment because i know you've got strong views on that also. but if you -- you know, if you compare the u.s. and europe, if you look at where they are right now, you might conclude there's something to be said both for our strong fiscal stimulus, which the u.s. had by global

standards, and for aggressive monetary ease which, again, the u.s. had much more than europe did, because the u.s. is actually seen to be emerging from the recession, does it not? you don't see those signs of recovery by any means in europe. >> i think the europeans have a mess and they're making it a bigger mess. you know, the greek bailout, it is surprising and extremely disappointing to me that when i read "the financial times" or most of the discussion, never is the word used about cost of production. but greece has a cost of production, unit labor cost, 30% higher than germany. so every time they make an estimate of what the greek economy is going to do, it's going down. now, they say, well, by 2020, they're going to have a debt to gdp ratio of 120%. don't bet on it. their economy is collapsing.

now, what are the solutions that are being given to them? they're told -- "the ft" every day practically has somebody who says let the germans inflate or print money. germany's debt is about 80% of gdp. if it does what "the financial times" gurus tell it to do, it'll soon be in the same sink that the others are in. you know, and the idea that germany is going to inflate its way out of this is nonsense. it has the highest productivity growth rate of any of them. so the result will be that the others will inflate relative to germany. and that goes in the wrong direction. the german response is, well, let them deflate. what are we talking about? for greece we're talking about a 30% deflation. 30% deflation. that's like the great depression in the united states. you know, would you bet a plugged nickel that that's going to happen?

the greeks are very, very slow to implement any reforms. 30% reduction in wages? it's just not going to happen. for italy, it's 20% to 25%. for spain, it's 20% to 25%. nobody even talks about cost of production. but cost of production is the solution to growth. so my proposal is a very simple one which no one in europe wants to hear. and i'll tell you why they don't want to hear it in a minute. what i say is, keep the euro. divide it in two. take the southern countries and have a soft euro. float it against the hard euro. the hard euro can adopt the fiscal restraint. the soft euro will deflate, devalue against the hard euro. when it devalues to a new equilibrium, if they join the fiscal responsibility pact, they come back into the hard euro. that would do what the greeks, the italians, the spanish are used to. that is, you solve the problem by devaluing.

and that will cut wages without having to go through the massive recession which is being imposed on greece and italy and the others. now, that would require to do -- to solve the problem that the germans and the french who after all run the eu don't want. and that is, they have to fix their banks, because their banks would be, many of them, under water. so they would have to, in my scheme of things, they'd have to lend the money to the banks to keep their capital up when they do this. but that would solve most of this problem and get europe back to growth. they don't want to do that. you know, i have a close friend who is an adviser to the top of the german government. they don't even want to hear about it. because they don't want to do what they have to do for their own banks. >> i'm interested to -- first of all, let me say, i think you might find there's more support for that kind of analysis in europe than you think.

i mean, including, actually, in the aft. i'll just say a word for my former employer. i think i have seen the occasional references to the competitiveness issue within europe. i think the ft is aware of that problem. let me just say that i'm a little surprised to hear you argue -- to hear you say that, you know, your long-term solution for the -- for europe includes the euro. that you're proposing this adjustment which would be, you know, a hell of a -- have a hell of an impact on the european union. i'm not saying it's a small thing. but then you go back to fixed exchange rates. wouldn't -- i think i might have expected you to argue that the fixed exchange rates for europe were a mistake in the first place. >> well, i am not fond of the fixed exchange rate system. i take that as a constraint because everybody that speaks about this says we don't want to

give up the euro. so i'm trying to find a way in which -- >> so you do accept some political constraints in your earlier analysis? >> oh, i believe -- i am, perhaps, on the side of saying that policy and politics have the same greek root, and it's not an accident. >> okay. so you think there is a way to rescue the -- the euro with -- with greece in the system? provided they're allowed this sort of one-shot devaluation? >> right, right. that will prolong the fixed exchange rate system. will it prolong it forever? who knows? i mean, my crystal ball doesn't look that far ahead. >> okay. we're already -- i mean, i'm already conscious that we're running out of time. i feel like we're only just getting started here. if people go to the microphones to ask questions, i'll turn in just a second to see if anyone's there. i have another one i want to put to you if i may while people are organizing their thoughts. another very interesting column you wrote just the other day for

the "wall street journal" took on another issue which is very saline to american politics right now. this is the question of inequality. you argued if i understood the column correctly that we're making too much of this issue in the u.s. that it isn't -- it isn't a distinctively american phenomenon. and dealing with the inequality problem, if we have an inequality problem, shouldn't be the organizing principle or shouldn't be an organizing principle for economic policy going forward. just -- i mean, have i got that right? >> you did. >> okay. >> let me say, first, i am a strong believer in the idea that every election and certainly this one is an election about whether we have more spending or more -- or lower tax rates. that's always true. and to pat myself on the back, i wrote the most -- excuse me -- the most widely cited paper i

wrote is a paper that says -- exactly that. >> let me get you something to drink. >> so now what the column says for the benefit of those people who don't read "the wall street journal" -- thank you. what the column says is -- it shows a picture of seven countries, diverse countries -- the united states, britain, france, canada, australia -- those are among the seven. for 100 years it shows the share of the income going to the top 1%. that's what the people who complain about this most vociferously talk about, the one

in '99. so it shows it. and what it shows most strikingly is that they all move down together. and they move up after 1980 together. now, there are two very interesting facts in that chart. at least two. the first one i've already told you. they all move together. the second one is that during that period in which we had massive redistributions in all countries, all seven countries had very little effect on the share of the 1%. the big fall in the share of the 1% comes as a result of the operation of capitalism. it reduced the real interest rate and, therefore, the income of those in the 1%. now, after 1980 they all turn up, some more than others. the united states, britain and canada turn up the most. sweden somewhat less. france, much less. why do they turn up after 1980? could it have something to do with the fact that 600 or 700 million workers were added to the labor force in china and india, and that holds down the

incomes of people who are are in labor? in low incomes, middle income groups? boy, we've certainly seen the destruction here. societies a pretty prima facie case that that's the case. what about the top 1% or the top 5%? now, why are they doing so well? incidentally, it's not my data. it's data i took from two swedish economists. the economist named sherwin rosen wrote a whole series of papers on the super incomes. and he said -- he attributed to and showed that it was pretty responsible of an idea, that these were people with very high skills. who are they? well, rock stars? athletes? no one complains about their getting high incomes. but i suppose there are people who think that it's wrong for alex rodriguez to make as much money as he does. but he gets it because he's a superstar.

then there are surgeons, trial lawyers, even a few college professors. and businessmen. now, most of these people have extreme skills. try to think about what it takes to run a company that has branches in 100 different countries. and if it's a bank, that there are 50,000 people every day who are making commitments. it would kill you. that's a big management job. that's why they get these high incomes. are there disparities in the thing? are there injustices in the thing? of course. life is full of injustices. but that's not the main point. the main point is that what's happening here is happening everywhere. so it's not a result of the local political decisions, the bush tax cuts or the obama expenditures. i mean, it may have an effect.

but the dominant effect is an international effect. it's something that's going on. like the chinese and the indians adding enormous number of people to the labor force. >> okay. okay. could you just say who you are as you ask your question? thanks very much. >> i'm jeff kosnett. i'm a columnist and senior editor at kiplinger washington editors. i took classes from dr. meltzer in 1978. >> i'm sure he remembers you. >> my question is this. you were describing the banks and their recent efforts which i guess are probably just starting to raise their dividends, buy back stock. in other words, do they want to go back to the days of when bank stocks paid dividend yields twice the s&p 500 and banks were largely run for their shareholders? i mean, it's one thing to say that this is appalling. it's not thing to say where is this going and why? thank you.

>> let me just say, your interview is being incompetent here. we need to keep on a strict schedule. please keep your answer brief. it will have to be the -- >> i'm sorry. what did you say? >> i would stop it. that is i would reverse -- if we're going to bail out the banks, then congress should vote to lend them the money. which they haven't. >> why do you think the banks want to go ahead and do this, then, if it's contrary to good public policy? >> because they -- it's not contrary to their private policy. >> i think we'll finish there. thank you very much, indeed. thanks, allan. >> thank you. >> thank you, clive. thank you, allan. house republicans passed a budget last week that keeps defense spending at its current level, which is $8 billion more than deficit reduction numbers agreed to in negotiations with the white house. president obama's defense budget

cuts non-war spending by 1%. defense secretary panetta and joint chiefs chair dempsey explained the budget to the house budget committee. watch it here on c-span3, 5:15 eastern. this saturday at noon eastern, on c-span2s book tv, joinous live call-in program with distinguished former navy s.e.a.l. and author chris kyle as he talked about his life from professional rodeo rider to becoming the most lethal sniper in u.s. military history. at 10:00 p.m. on afterwards. >> if you think of yourself as a family and if you think of yourself as a team, and she said you know when i get a raise at work he's so proud of me. it's like we got a raise. our family got a raise, but i really felt as though she had redefined providing to include what her husband does, and that she had a lot of respect for what her husband was doing. >> the richer sex author on the changing role of women as the bread winners of the family and

how that impacts their lives. also this weekend, america the beautiful. director of pediatric neurosurgery at johns hopkins ben parson compares the decline of empires past with america, and shares his thoughts on what should be done to avoid a similar fate. sunday at 3:30 p.m. book tv, every weekend on c-span2. this is c-span3, with programming throughout the week and every weekend 48 hours of people and events telling the american story on american history tv. get our schedules and see past programs on our websites, and you can join in the conversation on social media sites. the worse u.s. mining accident in 40 years took place two years ago today. 29 workers died in an explosion at the upper big branch mine in west virginia. the house education and workforce committee held a hearing on miners' safety and health.

among those testifying, labor department's assistant secretary joseph main who asked the committee to pass tougher criminal sanctions. this is nearly three hours. a quorum present, the committee comes to order. good morning. assistant secretary main, thank you for being with us todayon april 5, 2010, the people of montcoal, west virginia suffered a tragic loss. around 3:00 in the afternoon workers completing their shift at the upper big branch mine felt a strong blast of wind hit their backs. it was a chilling morni ining w violent explosion was tearing through the mine, killing 29 miners and severely injure two more. as a nation we continue to mourn the men and women who died and keep their families in our prayers. since that failful day the people of west virginia have

been searching for answers. how could such a catastrophic event take place? could it have been prevented? what steps need to be taken to make sure this kind of tragedy never happens again. as part of a federal response to the explosion, three teams were stoent examine upper big branch. a team to determine the cause of the explosion, and an internal review team to examine actions and a team from the national institute of occupational safety and health to conduct an independent assessment of mshas internal review. afternoon examining more than 1,000 pieces of oefd, msha released its report last december. documents events that facilitated the worst mining disaster in 40 years. first, worn drill bitsened faulty water control create add spark or ignition. then a buildup of methane gas combined with ignition triggered an explosion. finally a massive accumulation of coal dust fueled the fire that quickly spread throughout the mine.

while this explains the fiscal cause of the disaster, its real genesis lies ins corporate cull cherry that it valued profit over safety by engaging in the reckless disregard of important safety that they bear responsibility for the deaths of these miners. the investigation revealed numerous safety violations including keeping two sets of books and routinely providing advance notice to miners that inspectors were on site. all part of a campaign to conceal the true working conditions underground. disabling multigas detectors that could have alerted miners to the accumulation of methane gas and failing to comply with rock dusting standards that would have contained the fire before it consumed the mine. the list of violations goes on and on. safety was clearly not a priority for massey, and 29 miners and they're families paid the price.

federal prosecutors are to be commended for efforts to bring justice to those who engaged in criminal activity. mine operators have a legal and moral responsibility to protect their workers. cecil roberts, president of the united mine workers association whom we will hear from shortly once noted that 95% of mine operators are trying to do the right thing. yet bad actors continue to jeopardize miner safety. that is why we have the mine act and the mine safetiy and health administration, when workers are needlessly put in harm's way, federal enforcement must require action and hold the mine operator accountable. we've learned in startling detail from internal review and independent assessment, regrettably this did not happen at upper big branch. instead miners were forced to face reckless safety practices and enforcement failures on numerous occasions. inspectors identified safety violations yet didn't require abatement of the hazards.

more schork i shocking hazards that went unnoticed what so zfr. in december 2009, msha secured a new plan to secure the roof of the mine. however, four subsequent inspections failed to cite massey for violating the approved plan proving a critical error allowing for the buildup of methane gas. it is difficult, almost impossible to imagine personal nil missing inherent dangers of coal dust accumulating throughout the mine. this enforcement error was a safety concern that later enhanced the magnitude of this disaster. we've learned over the last two years tools were poorly used or never implemented. rules in 2006 create add new category of flag grant vileations yet never imposed against massey. computer glitches allows massey to avoid tougher measures and one that outlined concerns with

methane in the mine were never transferred to the mine operator. sadly, the list of enforcement lapses could go on as well. niosh states in its assessment, the proper enforcement would have lessened the chances of and possibly could have prevented the ubb explosion. there may be a number of reasons for these reasons. however, no excuse can come from those who lost a loved one. some em forcement failures plagued the agency for years and deadly mistakes are always followed with a pledge to do better, yut upper big branch still happened. tragedy strikes, enforcement regime goes on. i hope you convince this committee and the nation's miners that this time it will be different. that this time we will learn from past mistakes and keep our promise to do better. i look forward to discussing

these matters further with my colleagues and look to my distinguished league for her opening remarks. >> thank you, mr. chairman. certainly as we examine the lessons learned from the upper big branch mine disaster, we can never lose sight that there are 29 families who lost their fathers, their brothers, their husbands and their best friends. almost two years ago this committee traveled to beckley, west virginia, where we heard chilling testimony from the families and miners about the unbelievable conditions in that mine. most of which you listed just in your opening testimony, mr. chairman. so i won't repeat it, but leo long, a lifelong miner and grandfather of one of the 29 miners who lost his life testified that day. mr. long said, i'm asking for you all to please do something for the rest of the coal miners that's in the mines. i pray for it every night, every

day. if you don't do something, something like this is going to happen again. mr. long, we hear your cry. massey failed to prevent this and failing to comply with long established safety any mine workplaces. massey failed to prevent this tragedy because it didn't quench the ignition or shore up the mine roof to keep the mine ventilated and it failed to keep the mine rock dust to prevent coal dust explosion. on top of massey's failure to follow basic safety protection, it also engaged in a pattern of obstruction. massey routinely provided mass inspections which gave foreman time to correct hazard conditions or stop production before msha inspectors arrived

underground. massey kept two mine examination books and engaged in the pattern of intimidation by threatening miners' jobs if they tried to stop production to crack unsafe conditions. the governor's independent panel concluded that these failures were the result of a culture where, and he said it, wrongdoing became acceptable, where deviation became the norm. under the mine act, mine operators responsible for the health and safety of its miners, and if that operator fails it is up to the safety agency to bend the operator back into line. but msha's effort was compromised as ubb. poor inspection practices and a failure to identify violations. there's a failure to put this mine on pattern of violations or apply maximum penalties. there was a failure to investigate massey managers who may have engaged in knowing and

willful violations. and mine plans were improved without resolving previous safety concerns. today, mr. chairman, we must examine why this happened. we have to know what broke. we know that budget cuts and retirements incapacitated msha's effectiveness, particularly in the early 2000s. then after three mine tragedies in 2006, congress finally reversed course and provided resources to put more inspectors back into the mines. but the new inspectors didn't have the needed experience, and there were not enough technical specialists. violations went undetected, including critic's violations highlighted in the latest niosh report. only a few weeks before the ubb explosion, in fact, m shsha inspectors were underground but the lead inspector only had 13

months experience and obviously miss add number of violations that may have prevented this accident in the first place. while msha definitely fell short it was not for lack of trying. msha issued $1.3 million in penalties prior to the accident. the agency shut down parts of the mine 52 times in the previous year. but these citations didn't change massey's conduct. in fact, rather than fixing problems, msha's penalties were met with litigation, not compliance. at ubb, massey contested 92% of all penalties prior to the explosion. what is clear is that msha was no match for massey or any other mining operation where a corporate greed comes before the health and safety of the workers. today we recognize that