they didn't have a dialogue, very little dialogue resulted in nothing and kicked the can down the road for yet another year and we'll see what that $1.2 trillion means but just cutting health care and defense and not addressing really the bigger issue of, you know, what should be rationalized and what should be, you know, included in a budget and what shouldn't be is a rather comprehensive, you know, set of items that requires congress to come together with the, you know, both parties to come together and resolve. so i think it starts and stop there's with what's required. >> kristin, richard a view on wloo policymakers should avoid doing to make matters, should observe the hippocratic injunction to first do no harm? i. do have a little concern more on the micro level but a little bit of concern about some of the proposed changes in the money market mutual funds. it is soft the life blood, where most enterprises keep their cash. where we keep cash, where the universities operate cashes. they have to some degree

replaced banks. that's where our working capital is. and the threat to the money market mutual funds of those freezing out could be quite severe. it would be as severe as a banking crisis. and some of the proposed changes involved gating or restrictions on redemptions, which the university and the foundation community saw that we did not experience that at penn, but many institutions that did experience that, because some of the money market vehicles that foundations and endowments use were not protected during the financial crisis, and they faced an inability to access their cash. and that scramble to make payroll. and i think the needs of retail investors and the needs of institutional investors are very different and i would like to see policymakers recognize that we need liquidity.

for institutional investors we need liquidity a floating nav a far better than gate because we need access to our money when we need access to our money. >> richard, any candidates for the not to-do list? >> don't raise taxes. if you want a strong economy, don't start by raising taxes. that's pretty simple subpoena. i think the -- i think that we live in a dangerous and fragile world filled with a lot of risks. particularly to the financial system, and our europe, but in the long run, these threats will come from wherever you don't anticipate them coming from. we need a strong financial system here in the u.s. i'm very pleased that the u.s. financial system has made a lot of strides. i think the u.s. banks have done a far better job than the european counterparts have been able to do in rebuilding capital levels and there's always more to be done, and some institutions are in better shape

than others, but strong capital, a strongly capitalized banking system is very important. you know, the mind market funds is a very tricky issue. i think the broader policy question of -- of, you know, where does this too big to fail policy lead us? it's very, very troubling to me. i think in the end, the idea that you can create massive amounts of moral hazard by having implicit federal underwriting and offset it by regulation and supervision will fail every time. there's no example in history whether fannie mae and freddie mac, too big to fail banks, there's just no example that you can offset too much impolice is subsidies with enough regulation to make it work. so i think you have to be careful. there should be parts of the financial system that are absolutely safe and bedrocks protected and understood as such and other parts maybe penn and

other institutions need to be clear. mind market funds are outside the safety net, that that's where they are and maybe some amount of payroll needs to be in the bank instead of a money market fund. >> i'm not saying we should be protected i'm arguing whatever the entity, strike that as the nav rather than pretending it's a buck and then aiding the buck. >> much better and very lahard impose capital rules tree treat them as if they're banks sort of banks not really banks and then how to people understand and hand that going forward? the sec has tried to address a very real risk that we saw in '08. if money market funds lock up, but there isn't an easy solution to turn them into something that is guaranteed that has been is torically outside the safety net although hopefully well in the forefront of the minds in the people at the treasury and fed

in taking actions, but i think better clarity, one of the things dodd-frank did not fix, in my view, is the whole issue of too big to fail. we've approached it as one of the earlier panelists talked about by having now living wills and more oversight of supposedly systemically important financial institutions, but we really -- i think we have not done the job we need to do of before, and hopefully decades before, the next crisis. establishing clearer lines of what's in the safety net, taxpayers are on the hook for and what's outside of it. the market will function much better if we're more clear of where those safety zones lie. >> uh-huh. peter some questions? >> we do have a question. a europe-related question our panelists to weigh in on globe outlook. $30 billion or more in imf

lending sources help stabilize the global economy, european situation won't be the consequences of u.s. reluctance to commit mu funds of its own? >> bruce? >> i think it's a great thing. youbly, $430 billion isn't enough to solve the problem and that would need to be leveraged. it's a great thing. i find it interesting that the u.s. hasn't supported the expansion of the imf resources and i wonder if that's not just a let europe deal with europe's problems, but it's fascinating to me we've gone from a decade of the '80s and '90s when the world bank and imf were foevg issed on developing country and now focuses on the developed country problems and resource availability, the problem is has much larger and since it's affecting kuns of reserve currency status this sewn a good sign. >> the war chest, the going to get worse in europe before it

gets better. you need the huge facility and the central bank of europe, ecb to play its part. it has. and i'm sure another fund. helpful led by japan, $60 billion. u.s. put in nothing. the leader. 17% of all imf funding so so much bigger than any other country and to kristin's point i think it was their subtle way of saying, you know, we've put in enough already. let others contribute. we're running our own deficits too. but let others contribute and let's start with, you know, some policy and some, in europe, that brings some confidence back and so let's put the onus not on us to help bail out europe but for europe to put the discipline in place that they need to rectify some of their issues. >> i don't think it was very subtle, and deservedly so. clearly, american taxpayers don't want to be participants in refunding european sovereign

debt. it really is a responsibility for europe, just as we have to solve our budget problems here. what all of these facilities have helped do, and i think the european authorities should be really congratulated. they've done a wonderful job of building from a time where it looked like there could be a sudden collapse and really was affecting the u.s. market, because of fears that we could be back in the posttype crisis and the european leadership have built time. they've given enough liquidity into their banking system and they've helped give the political leadership time to have further fisk's integration or further attempts sow solve tsolve -- to solve the underlying problems they're not solved but not as close to the edge in terms of how much time they have to work on those problems. >> peter, time for more or out of time? >> i'm told the trains need to

leave the station on time. we're going to wrap it up here. thank you all very much. appreciate the discussion and the thoughts. thank you very much. ken, richard, kristin and bruce. thank you all. the military academy at west point this morning published 17 declassified documents recovered from osama bin laden's compound in pakistan. translated into english, the documents total 175 pages and are available on other website. go to c-span.org. later today we bring awe discussion on the one-year anniversary since the death of bin laden. it's hosted by the potomac institute just after 3:00 p.m. eastern here on c-span3. republican presidential candidate mitt romney is in southeastern virginia today. he's in the city of portsmouth where he'll be joined by virginia governor bob mcdonnell who will bring you they're remarks live starting at 1:15 eastern. former republican candidate and minnesota congresswoman michele bachmann will also be there. earlier she did endorse romney

for the nomination. live on c-span again at 1:15 eastern. also the libertarian party selects their president's knollny this weekend at the national convention in las vegas. live coverage starts tomorrow, 9:00 eastern a two-hour debate between the libertarian candidates including former new mexico governor and republican presidential candidate gary johnson. live coverage continues saturday at noon eastern with the presidential selection process. convention delegates will hear speeches by the candidates and then vote for their party's presidential nominee, all live on c-span. and now from the bloomberg summit on the economy, economists give their assessment of the fiscal state of the country calling on congress to address the debt and deficit. this event also includes former fed vice chair al ins rivlin and ranking democrat chris van hollen who vitt sized the budget put forward by house republicans. this is just over an hour.

>> -- with that we'd like to get the show on the reeoad and begi with tail winds and head winds and my colleague dan moss is going to be moderating that panel discuss, and if he and his guest koss come up here onstage right now, a quick introduction and they'll get this show on the road. let me tell you first of all about his first, dan xeblttive editor of bloomberg news responsible for government and economics at bloomberg and we have, here you can see two of our panelists robert f ingles and michael railroad molino, professor's management at financial services director of volatility ins student at the sterns school of business in new york university. a nobel prizelaureate, author of the pulitzer prize winning author and author of "the quest." which as i saw this morning in

the "new york times" said is necessary reading for ceos, conservationists, lawmakers, tech geeks, thriller writers, among others. with that introduction, dan, please take it away. >> well, you will the opportunity, peter, of asking the final question at his press conference on wednesday. and peter, you asked that here we are, the economy has been growing for almost three years. what in the chairman's perspective is the most confounding thing about this recovery? his response was that the most frustrating thing was that the recovery is still quite slow, and unemployment has not drop bead low 8%. rob engle, the chairman says he's frustrated, but should he be surprised? >> well, i think we expected this to be a long recovery, because financial crises tend to have slow recoveries.

in addition, it's hard to imagine how to have a recovery if you can't get the housing market to recover, if your trading partners are weak. we didn't anticipate the european sovereign debt crisis. that's been a real negative, i think, for the recovery. and i think it's still moving, and that's what's the good news is. >> the fed uses the term modest to moderate. to describe the current expansion. what has to happen to get us beyond the modest part? >> well, i think that we need to take a little quick look back at the great depression. where we had a similar sort of a financial crisis. it lasted years and years, and then in 36 and '37, there was an effort to rebalance the budget to stop the -- the deficit

spending, and the economy turned back down again. so i think that we need to keep our eyes on historical events like this, and recognize that, it's need for stimulus in the short run is still with us. the long runtat austerity that needed to bring revenues and expenditures in line is of more important, but we can't cut the stimulus at this point without turning the economy back down again. >> well, vince reinhart, you've xritennized the aftermath of financial crises. shot chairman really be surprised? >> not particularly. my wife carmen and i did a paper for the jackson hole symposium about a year ago, which was nothing but bad flus. bottom line, we looked at the 15

last crisis in the second half of the century and ten years after the crisis the level of gdp per capita is 15% below that predicted by the trend ten years prior to the crisis. so financial crises have long lived consequences. we always leave unfinished business. we always have a very pronounced leverage cycle and overshooting and the united states is ticked all three boxes. >> can i jump in there, daniel, because i think that regulatory overshooting is very interesting as we went into this crisis. it was as though the great depression was not something that happened a long time ago. something that happen add few years ago and went back to lessons. one is also about the importance of business confidence. you go back to that turned '36, '37, hostile environment, that has a feedback and that's what vince was just referring to and we shouldn't forget that part of it. >> here's a question for you. do you know what the top

margin's tax rate will be 10 months from now or the treatment of dividends? >> i'm not going to comment. >> okay. or -- >> exactly. >> or for your environmental policy what it will be? always an option value for waiting in fixed investment, and the option is probably pretty valuable right now. >> yeah. >> so, vince, you ran the monetary affairs division at the fed. what does the fed do now? >> could i deny that? >> chairman bernanke stressed a number of times wednesday that there are things that are within the fed's realm and things that are not. what would your advice be? >> so the overall message the fed has sent is, it's resigned. that is, it's not willing to get inflation above goal. it's not willing to use its balance sheet much beyond what it's done, until the data materially soften. it's saying in thrs forecast, this is the best it can get. that's not particularly good. i think there's probably still

scope for a balance sheet action that conditional. contingent on the economic outlook. as long as the fed has a forecast that is materially short of both of its goals, it's got a responsibility to use the size and composition of its balance sheet to provide more policy accommodation. >> dan, without the drive towards energy self-sufficiency, how much worse would things be? >> i think, struck by the tilgt of our session. head winds and tail winds. the head wind and a tail wind. it's both. the tail wind in your question, which is the growth of u.s. production. it's up about 20% since 2008, oil production. certainly we've seen in international gas, low natural gas prices helped offset some of the high oil prices, and i think one of the things that's become apparent in the last couple of years, a buy expansion of energy in our country as very large supply chains and a lot of job implications. two things. we would have had less jobs.

600,000 jobs created by shell gas, and if oil -- if our production had not increased by a million barrels a day, look at much higher oil prices than we're seeing today. >> let's talk a little more about the employment aspect of that. how is the drive toward energy self-sufficiency reshaping the labor market? both on a macro level and at a regional level? >> it's turned out to be a surprise about how extensive these supply chains are and job creation. even if you look at offshore oil, what's happening at shale, creating manufacturing jobs in ohio, creates i.t. jobs in california and that it, you know, i think that even i think a couple of years ago, i had more focus on energy security, balance of payments and not so much on, if you have these rather large dollars being invested here in the united states, rather than being in a sovereign well fund somewhere else, a big impact and resonates out into the economy. you can see the shift that's

occurred here in the political discussion in washington and a lot of the discussion about energy is really now a discussion about jobs. >> in terms of the economy data that's been released this year, the perception amongst most economists the year got off to an encouraging start. now the narrative has been slowdown. are we headed for a repeat of last year, the slowdown became quite substantial ledding in ih into the summer and people were talking double dip? is that on the plmenu again. >> from last summer to the middle of the first quarter as financial market volatility dropped from -- from, well, the aggregate was 45% down to well below average, but actually for the financial sector, it was much higher than that last august, and has come back down again. so we've had a blip up in the

last few weeks, whicorresponds h the new gdp numbers. so i don't think this is the beginning of the next high volatility and negative information negative information for the economy. and there are a couple reasons to feel encouraged by these gdp numbers even though they were not up to expectations. they're still robust. and there are some reasons to look inside the numbers to feel encouraged. particularly interesting is the residential construction number which was up 19% from previous quarter and when you couple that with kay shiler housing price series which if you read it carefully you can say, well, it looks sort of like the bottom is believable that the bottom has been reached. it might suggest that the

housing market is actually a source of recovery and this gets added to consumer expenditures and we're very strong in the data. if we could get businesses to come along and this is the point that we're waiting if business comes along, maybe this recovery is alive and well. >> do not count out the resilience of the market economy. market economies want to grow unless they're impeded. but here's the problem. the world's a risky place. there's an ongoing sovereign and banking crisis in europe. there is a risk of elevating energy prices because of events in the middle east. and we face a fiscal cliff on december 31st. our politicians have dug the equivalent worth of five percentage point of gdp hole. in a world in which you have such uncertainties, investors reasonably lack conviction. if you don't have conviction you

don't have durable wealth creation. it's wealth creation that pulls an economy up relative to trend in. a risky world without conviction you don't get the wealth creation, so you grow a trend. the bad news is the trend right now is depressed because we went through a severe financial crisis. hence, we grow something in the neighborhood of 2%. can we do better? surely. are we in fact, are we impeding our own progress? yes. >> a accompanying that increase in consumption is a decline. how significant is that? >> i don't think it is. it's mostly about the quarterly pattern of gdp. basically there's a whole lot of pent up demand associated with the earlier rise in energy crisis at the end of 20 so into 2011. we had a lot of purchases and durables late in the year. the saving rate tends to be paid

fairly closely pinned oto the wealth to income ratio. that's the bad news. because we destroyed something like one in 3/4 worth of income equivalent of we'll in terms of what we did to ourselves in 2008 and 2009. as long as we dent goat that durable wealth creation, there's a need to save. if there's a need to save, then consumption isn't the overall contributor to gdp growth. we have some good news. we're a big nation. we're building houses on both of the coasts and some -- in the middle part of it, middle part of the country. that's a contributor to gdp. we have a strong external sector that's a contributor of the gdp. that's going to offset the higher saving rate. >> let's talk about those energy prices then. some of the recent softness in consumer confidence has been

attributed to energy prices. where are we going to with this. >> i think a lot -- it's partly what we're talking about here and the ongoing drama in europe and what pace the local economy grows and particularly the emerging markets. the other thing is starting in november we entered a new phase in relations with iran over its nuclear weapons when the u.n. said iran is assembling the weapons. our sanctions on iranian or anybody doing business with the central bank of iran go in at the end of june, but they're already starting to have their impact. last week or two there was this relax krags, negotiations, they're going to meet this month in a neutral city, baghdad to continue the negotiations. and so you know, you see israel kind of debate. there's kind of -- you know, that's taking $7 or $8 out of the oil price because basically the security premium it's still

high. we're still on a track to tighten -- to see the oil market tighten as these sanctions go into place. the key question is where is the other supply going to come from and that will really determine the price. i think there's no question that oil prices as in 2008, you know, high oil prices are a drag on the economy and they add to the worries of consumers. they take purchasing power out of the economy. i think this is one of your big head winds. >> in terms of the macroeconomic impact it doesn't matter what's driving it now is different from 2008. it only matters if it's going up and down. >> up or down and how much anxiety there is, expectations about the future. in 2008 we were basically looking the kind of world discovered the emerging markets really count. that was the sort of fundamental thing. this time it's -- it is iran and a tight oil market and the need for new supplies.

>> it's also worse when it's about supply. if prices are going up because of concerns about supply, that is more material when prices are going up because it's global demand growing because demand the an offset. always a little bit different than 2005. >> always remember that two months before lehman brothers collapsed oil prices hit their peak and what was hale hurt the most? people who are paying sub prime mortgages. >> let's do another comparison with 2008. china was perceived to be one of the big heroes of that period. not just because of their stimulus, but certainly that was a -- perceived to be a major contributor. now we have china slowing. so what role can china play? >> i think one of the things that happened in china is the stimulus got out of control. >> too much of a good thing. >> too much of a good thing. and it was actually turned out to be very difficult to monitor

when -- once the spigot is opened at the top every municipal government says this is my opportunity to build whatever i want to build. and china has been on a building spree. and there is a mountain of debt that we don't know too much about in china. and there is a question if ultimately that is going to be a big problem in china is still to be seen. i think the fact that china is able to sit down and make five-year plans and design policies that are targeted as whatev whatever. if we were to come up with five-year plans it might be a useful exercise. >> five week plans if we carry

it out. >> i think there are a variety of things that we can do. i think it is a concern. >> what i call the test the build out of china is clearly one of the fundamental factors driving the world economy. however, we tend to think that everything is very well organized there. but as we can see this kind of disarray that's going on in terms of the leadership right now, it is a transition point, a very critical point. it only happens once every ten years in china and that adds to the uncertainty of the whole picture. >> it's a very opaque economy. the line between the public and private sector is at best indistinct. the good news about that is it means there's lots of levers of policy. the bad news is that every ten years or so they have to take a hit associated with the mistakes

you make in terms of allocating capital and credit on such a large scale. it's probably the case that is -- as the middle class gets bigger. as there's more market related activity in china it will become less and less a decision of the official community when to take the hit. we don't think they're there yet. so that china doesn't grow -- doesn't slow. it will be continued tributor to global growth. which is good news. the u.s. is a best of trend and europe is in a shallow recession. is the struggle of the economy driven by the government and the party and how much it's going to be more market oriented. we're seeing that play out in