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>> my personal thoughts are, you know, i've dealt with these esops over my career and they provided very good benefits for people. so i think one of the things you're hearing from everyone here is that we shouldn't be cutting back on retirement benefits and esops and s corporations they are an important benefit and i think everyone is fine with continuing on. >> you're nodding your head a little bit too. should esops be used to serve as a model as part of tax reform or

having that encompassed? >> i think it's important to maintain them. i am not sure i can say they are a model. when you deal with an employer and what they should be doing when it fits a situation it's a wonderful thing. it doesn't always fits a situation. it sits alongside other retirement programs. >> let me ask a question for some of the panelist, there's a lot of mention of some of the current law, the nondiscrimination rules that apply to 401(k) plans to make sure lower income benefits can benefit from these plans and can you talk a little bit about how these rules work from the perspective of how a tax incentive can help a small business owner for the contributions that would be required for those type of rules? anyone? >> i can speak to that. i think, you know, most commonly, if you're dealing with a small business whose probably their accountant said go see so-and-so about putting in this retirement plan and they've gotten to the point where they

are making some money and they are coming to the end the year and they go oh, wow i have this $30,000 sitting there and oil take it out as a bonus and pay all sorts of income taxes on that money. so you can show them how if they put in a qualified retirement plan and make a contribution for themselves, and save on that from income tax purposes they can use some or all in some cases to make the required contributions for other people. that way then you say to them, okay, you can take this bonus home and you can write out a check to uncle sam for 28% or 31% or 36% or you can put in this plan and give that money, to you find out the receptionist's name and give that money to your employees. most times they are very eager to have retirement savings themselves and help other, their employees save as well.

so that tax incentive is a key part it. you have to show them how to use rather than just take it home. >> anyone else? thank you, mr. chairman. >> yes. >> thank you, very much, mr. chair hahn. i apologize i was in the budget committee defending the interests of the ways and means committee. >> thank you for that service. >> it's pleasure. i'm sorry i not able to be more of a part of this, i had a chance to review some of the material. and it strikes me as something that would be, that our time is well spent. with all of the vagaries surrounding tax changes, some of the budget pressures, retirement security seems to me to loom very large and i appreciate advice and admonish from the panel members about looking at

the big picture, about things that encourage employers to provide a range of choices. i know at times it may be bewildering, which is why i have supported automatic ira enrollment, which is why i'm the co-sponsor on the esop, where it's appropriate, it's very powerful. but i was struck by something mr. johns said something about the experience in great britain. be careful about tinkering. about take an already confused and confusing system and with all the best of intentions, changing it again. it seems to me that with your help and advice and mr. chairman and the committee zeroing in on things that are refinement, not sea change, i am willing to

explore all sorts of modifications in the tax code including in some cases raising taxes on myself and others, but i think that the investments that have been made in the tax code to incent retirement savings, insurance, these are things that a lot of people are relying on. these are things that it takes a while for the consumer to be educated. and there are opportunities for a whole host of unintended consequences if we are not careful. so, i just -- i wanted to express my strong support for the committee working on this for the advice and counsel about refinement at a time when americans have hit choppy water economically. where millions of people have

lost what they thought was the value of their home. maybe it was artificially inflated but they borrowed against it and counting on it. or retirement savings and college education accounts have been diminished. i think the advice that we're getting here about refinement, not tinkering, moving forward is well taken and i hope it's something that we can work on together to strengthen these retirement opportunity, send clear signals, automatically enroll, incent innovative approaches and have continuity. i appreciate the courtesy. i think your contribution is very important and this hearing i think is very important. thank you very much, mr. chairman. >> thank you very much. to another ways and means member who also serves on budget committee dr. price. >> thank you. i too apologize for not being here for the entire hearing. i want to thank you for your

testimony on an incredibly important issue. i want to hone in and it may have been discussed but i want ask if you would, my sense small business folks at home, people i talk to tell me there are impediments and obstructions to both the employer and employee being able to contribute to what might be a more open flexible and i think you called it a creative plan, miss miller. if you had to identify the greatest impediment that the government puts in place to either the employer or employee for setting up a flexible responsive retirement plan, what would that be? >> well, i'll focus on the responsive part of that. one of the major improvements we've had in the retirement system in this country,

certainly since 2006, is the increase adoption of automatic enrollment and automatic escalation of contributions. for a variety of reasons a number of employers have adopt ad safe harbor approach, this auto mattic escalation, which unfortunately, currently has a maximum cap of 10%. i think if you talk to most financial planners, they would say that in addition to what the employers probably matching, perhaps 3%, you need especially for employees who are starting this process late in their careers, something more than just a 10% contribution per year and i think ways to not only first of all have employers increase the default contribution rate as david had already mentioned from perhaps 3% to 6% or more, but to allow those employees who want to automatically allow their contributions escalate over

time, to go beyond the you would increase the cap? >> yes. >> on that issue there's some data in our testimony that shows when you do that, it's luke telling your kid a c is good enough grade. you'll get a c. you tell them the a is the grade you want you get closer to the a. you consistent bar higher even the people who don't do automatic do more because they see the bar and they go oh, that's what i'm supposed to do. >> one important point to make automatic enrollment isn't as popular with smaller employers as it is with larger ones. one reason it's too easy, practitioners don't recommend it. it's too easy to trip up and then you get hit with penalties. we need to look at some issues that would make it easier for small employers to do this kind

of thing without incurring additional expense and the example is if you're automatically enrolling, when somebody completes their year service you sign them up. the small business sometimes you forget that date passes and you didn't do it. you get to the end. year and whoever is doing your retirement plan works oh, so-and-so should have been enrolled. if they happen to have only miss ad few months that's okay, can you get them signed up. but if they were out close to a year, the small business owner to do this automatic, this safe harbor correction not only has to put in whatever match they would have made but they've put in the automatic enrollment contribution. the employer gets their salary but employer money. it's so much hassle that they just don't want to bother. that makes no sense. to make the match yes not to have to put the contribution in. small business deals with top heavy rules where if over 60% of

benefits are for key people there's a minimum contribution of 3% of pay which is fine but if the owner wants to be nice and let everybody contribute to the plan even if they haven't had a year of service in, suddenly they have to make the contribution for everybody which as i mentioned if they are going short term they don't want to. so they really are constrained by some of these things that are particularly difficult for small businesses and really would be pretty easy to clean up. >> thank you. my sense is there is to be a right balance between this competitive and creative market that we want out there and regulation. would you say that balance is, has been strike now? >> we have -- there's room for improvement. definitely room for improvement. >> great. i think i would appreciate each of the panelist physician you desire to follow up on that score, identifying those areas where the regulatory environment is actually less helpful to employers and employees. thank you, mr. chairman. >> thank you, dr. price.

i want to thank our panelists for excellent testimony. some good information was transmitted to us as many good points were made and with that this hearing is now adjourned. >> all right. thank you. congress continues its investigation of waste and mismanagement at the general services administration. today the senate environment and public works committee will hear from the inspector general of the gsa and acting mr. stator. live coverage at 10:00 eastern here on c-span 3. later today, the senate budget committee will begin work on the 2013 budget. live coverage of the markup begins at 2:00 p.m. eastern also on c-span 3. according to the international monetary fund the general outlook for the global

economy has improved slightly. this comes ahead of the imf meetings in washington this week. this briefing is about 45 minutes. >> good morning, everyone. welcome to this press conference on the latest world economic outlook. one of imf's flag ship publ publicatio publications. this is a live on the record press briefing. let me introduce the panel. we have today with us economic counselor and director of the research department. next to me is jorg, decresson.

then the chief of the world economic studies division. and next to him is the head of the world economics division as well. with without much ado i'll pass this on to mr. blanchard who will give some opening remarks and then we'll open the floor to questions. >> good morning to all of you. i hope my voice will last for the duration. if it doesn't. for the last six months the world economy has been on what is best described as a roller coaster. in the fall before the european crisis became acute threatening another lehman size event and the end of recovery. strong policy measures were taken, new governments came to power in italy and spain.

the european union adopted a tough fiscal fact and the european central bank injected badly needed liquidity. things have quieted down since then. and one has the feeling that at any moment things could well get very bad again. so this very much shapes our forecast. based on our forecast as you'll see in a minute is for low growth in the countries especially in europe but with down side risks being extremely present. our baseline is constructed on the assumption that another european flare up will be avoided.

but that uncertainty will especially in europe will linger on. it recognizes that even in this case, even in the absence of another flare up, there's still very strong breaks to growth in advanced economies. let me talk about those briefly. fiscal consolidation is needed, it is proceed iing about it is clear iweighing on growth. bank leveraging is needed but needed especially in europe not to a credit crunch but to a tight credit. in many countries particularly the united states some households are burdened with very high debt which leads them to have low consumption, low demand. foreclosures are weighing on housing rises and housing vemt.

2% in 2013. these are low numbers. a bit more detail. for the united states the numbers are 2.1%, for 2012. and 2.4% for 2013. where things are worse is for the euro area where the numbers are minus .3% for 2012 and .9% for 2013. now, this negative number for the euro for 2012 we flekts negative growth of around minus

2% for italy and spain but positive growth for germany and france but their numbers are still very low. let me turn to emerging and developing economies. our forecast there for continued strong growth although somewhat lower than they have been in the past. for many countries, the challenges come mainly from the outside. in the form of lower exports to advance countries because of the low growth there, of the volatility of commodity prices which affects import earns exporters and high volatility of capital floss which we have seen and continue to see. now our forecasts for both economies reflect our belief that they will be able to handle these challenges by using the fiscal space that they still have and most of them still have, and by using appropriate

macro prudential tools to deal with volatility of capital flows and any high domestic credit growth. let me again give you a few numbers here. our forecast for 2012 are for 8.2% for china. 6.9% for india. 3% for brazil. these are roughly the same numbers as we gave you in january when we last met. and our forecast for russia is 4% which is higher than it was last january. if you turn to developing countries, for example, for s subsahara frooik our forecast is for strong growth at 5.4%. now putting things together this forecast implies, forecast for world growth of 3.5% for 2012

improving to 4.1% for 2013. you may ask how does this rethe light our forecast as of last january and as of last september. it's about 2% higher than our forecast in january, and about .5 home runs lower than they were in september. now, let me turn to the risks. so geopolitical tension affecting the oil market is surely a risk. but the main risk remains that of another acute crisis in europe. the building of the so-called fire walls where it is completed will represent major progress, but by themselves fire walls cannot solve the difficult fiscal competitiveness and

growth issues that some of the european countries face. bad news on the macro economic front, of the political front still carries the risk of triggering the type of dynamics that we saw last fall. this takes me to the last part of my introductory remarks which is implications for policy. so, first about the baseline and whether growth under the baseline can be made stronger. so many or even most of the policy debates here center around how best to balance the adverse consolidation of bank deleveraging against the favorable effects in the long run. now in the case of fiscal policy, the issue is complicated by the pressure from markets for immediate and strong fiscal

consolidation. it is further complicated by the fact that the markets appear somewhat schizophrenic, asking for fiscal consolidation but reacting adversely when consolidation leads to lower growth. so, what is the advice? we think the advice is the same as we've given before which is that while some immediate adjustment is needed for credibility, you cannot just say i'll do it tomorrow. the search should be for critical long term commitments. how do you do this? bypassing measures that decrease trend spending and by putting in place fiscal walls that reduce that. in fiscal progress in designing such a medium term plan is especially noticeable in the united states and in japan.

turning to bank deleveraging, the challenge here is to make sure there is deleveraging but it doesn't thread a credit crunch either at home or abroad. partial public recapitalization of banks should remain on the agenda. to the extent that it will increase credit and activity, could it easily pay for itself. more so than most other fiscal measures. turning to policies reducing risk the focus is on 100%. the measures taken in response to the crisis in the fall will result in important progress. further measures must however be taken to decrease the links between sovereign states and the banks. these measures run from common

deposit insurance to common regulation and supervision of banks. now that the fiscal pact has been introduced and is being put in place, euro countries should explore the scope for issuing common sovereign bonds. finally, taking one step back, perhaps the highest priority at this point but also the most difficult to achieve is to increase growth and degreet one employment in advanced economies and particularly in europe. low growth not only makes for subdued baseline forecast and lasting unemployment but also makes for a much harder fiscal adjustment and therefore much higher risks along the way. this search for structural and fiscal reforms that help in the long run, but do not depress demand in the short run should

be very high on the policy agenda. such reforms probably hold the key to successful and doable exit from the crisis. thank you. >> thank you very much. just want to let you know that mr. blanchard's opening remarks will be available to you at the end of this press conference. we open the floor to questions. please identify yourself and your affiliation now. yes. >> barry wood. hong kong. mr. blanchard, i would like to address what you call in your introduction the holy grail. take the case of spain where you have austerity, you have commentators on the right and least calling this insane. with house prices declining, there's a lot of forecasts that say the fiscal problem in spain is going to worsen. so is it correct for the ecb and

other european institutions to insist on further austerity when growth is not even on the radar screen? >> i shall let jorge start with answers specifically aimed at spain and then make comments after this. >> there certainly is a need for fiscal adjustment in spain, but the deficit is very large and reducing it is more akin to a marathon than a sprint. we feel the spanish government has struck thing right balance. at the same time, it willing be very important to do something about reforming the labor markets. again there the government has tabled some strong plans and the key is implementation. finally there's the financial

structure that needs to increase their liquidity buffers. there's good plans that need to be followed through. you may say there's no light the end of the tunnel. we disagree. there are various indicators turning around and showing that policies are working. first, you see the current account deficit in spain having narrowed quite considerably. second, you see that prices have slowed down. this is all part of rebuilding competitiveness. and third, the fiscal deficit is going to be much lower according to our estimates this year than it was only a couple of years back. now, before growth will return it will take some time but these are all prerequisite in order to get it going again and we expect by 2013 growth will be positive again. >> i take the more general issue of fiscal consolidation in jump.

many of these countries face two challenges, the first one is fiscal consolidation and the second is competitiveness. there's no down that fiscal consolidation is needed for the long run but in the short run it won't receive growth so there's no great surprise that fiscal consolidation is lead fogstive growth this year. the question is not whether there should be fiscal consolidation or not there should be fiscal conso delays. the question is at what speed. in the case of spain the question is complicated by the reaction of markets which decrease the margin of maneuver that the government has. when we look at what spain is doing in terms of the measures they are taking, for example, the improvement in the relations between the regional governments and the central government, advised of measures they are taking, we think these are the ri