thank you, mr. chairman, distinguished chairmen. i look forward to responding to questions. >> thank you. ms. burke. >> thank you, mr. chairman, distinguished members of the committee. my name is lindsey burke. the views i express in this testimony is my own and not representing any official position of the heritage foundation. for many earning a college degree is the way to climb the ladder of economic mobility. associated with greater earnings. median earnings for individuals whose highest degree was a high school diploma totaled $30,000 in 2011, compared to $45,000 for those earning about a bachelor's degree. college graduates on average earn $650,000 more over the course of a 40-year career. while the college degree isn't the only route to upward mobility, for many it represents the most promising path for achieving their full earnings potential. the value of earning a college

degree is demonstrable. the cost of earning that degree, however, has become rehibitively expensive for many as college costs have risen. average tuition for out of state students reached $22,200 this academic year and at private universities average tuition is over $30,000 annually. many students leave with a bachelor's degree in hand, but burdened with tens of thousands of dollars in student loan debt. many students leave college without graduating and lacking the paper credential they hoped put them towards middle class stability or better. well intentioned policies have failed to drive down college costs. an easy flow of federal student aid has enabled students to take out sizable student loans with little, if any credit check or consideration for their future earnings potential. some have even argued that such policies have enabled universities to raise tuition, creating a vicious lending and

spending cycle. federal higher education subsidies have increased substantially over the past decade and now represent 71% of all student aid. according to the college board, during the 2012/2013 academic year 40% of all student aid was in the form of student loans. the college board notes over the past ten years, the number of students borrowing through federal student loans increased by 69% from 5.9 million students during 2002 to over 10 million today. approximately 60% of students who earned a bachelor's degree during the 2011/'12 academic year left school more than $26,000 in debt. and as the chairman mentioned, total cumulative student loan debt exceeds more than $1 trillion which is more than credit card debt. increases in debt have been driven by increases in college cost. in the last 30 years tuition inflation and fees increased by

153%. tuition and fees at public universities increased in real terms by 231%. that's an increase that's greater than increases in the cost of health care. increases in tuition and fees over the past 30 years suggest that growth in federal subsidies such as loans and grants has done little to mitigate the college cost problem. in order to make college more affordable, federal policy should do three things. stop the higher education spending spree, understand the true cost of federal student loans and decouple finanederal financing. continuing to increase federal subsidies will fail to drive down college costs. in 2014, the $33 billion pell grant program provided grants to 9 million college students making it the largest share of federal education budget. it grew the pell grant by expanding eligibility and funding resulting in a doubling of the number of pell recipients since 2008. in order to control higher

education spending, pel grant funding should be targeted to lower income. it should use fair value accounting practices to get an accurate measure of what those programs are costing taxpayers to ensure the loans use a nonsubsidizing interest rate. in a report released last month, cbo calculated the four largest student loan programs, unsubsidized stafford loans and parent plus loans will cost taxpayers money, not result in a net gain and negative subsidies for the federal government as is often claimed. while the report states that the four loan programs will yield the savings of $135 billion from 2015 to 2024, cbo calculates in the same report that using fair value accounting measures, the four loans would have a cost of $88 billion over the next ten years, not including administrative costs. in other words, the four largest student loan programs represent

an $88 billion taxpayer finance subsidy. cbo explains the utility of using fair value accounting to fully understand the cost of federal lending stating that the government is exposed to market risk when the economy is weak because borrowers default on their debt obligations more frequently and recoveries from be orers are lower. fair value estimates take this market risk into account and, as a result, more accurate reflection of the cost of student federal loans. congress should not expand the federal student loan program without requiring that fair value accounting be used to calculate the cost of these loans. any program should use a subsidized interest rate, absent and fair value accounting it is impossible to tell the extent to which the student loan program is providing a subsidy to borrowers. specifically, the department of education should be required to use fair value accounting estimates calculated by cbo and adjust loan rates accordingly going forward on an annual

basis. this will help determine whether they are costing money for taxpayers and ensure the programs break even. finally, a federal policymakers want to drive down college costs and increase access to higher education for those historically underserved by the traditional four-year system. the single most important reform that can be made is decouple federal financing from accreditation. continuing is simply increase federal subsidies for higher education will fail to solve the college cost problem. moreover such subsidies shift from paying for college from the student who directly ben fits from attending college to the taxpayer, transferring the burden of student loan financing from university graduates who will earn significantly more over the course of a lifetime than someone with a high school diploma to the three-quarters of taxpayers who do not hold bachelors degree is inequitable. higher education opportunities, policymakers should stop the

federal spending spree, employ fair value accounting practices. thank you. >> thank you, ms. burke. my apologies mr. geremia and ms. burke. i never left a committee and it was a call i had to take and i know of your story after columbia, i appreciate that. and ms. burke, sorry to you at the beginning of your remarks. mr. hoover, start with you. your testimony and others on the panel point out, obviously, that financial futures of students depend on fair, responsible servicing practices, but students aren't able to choose who will service their student loan, they're selected by lenders often paid by the number of loans they service rather than the quality of that servicing. talk about that structure. i know from your testimony you don't consider that the right structure. explore with us the better way to do this, sort of an analysis

of that structure the way it is now and the better way to do that, if you would explain your thoughts that way. >> thank you, senator brown. currently, the servicers contractors, a volume of loans is signed to the servicers based on metrics. there are three metrics that are based on satisfaction. school satisfaction, customer satisfaction, borrower satisfaction and satisfaction from fsa and some other federal agencies. the other two metrics are the percentage of loan defaults and percentage of the dollars and defaults. those are metrics that for each of the servicers are measured to get their volume of loans. the loans are assigned to these servicers, the student does not know to whom the servicer, their loan has been serviced. they, the federal, the department of education has done a good job of trying not to have mixed borrowers. they're trying to have all the loans for a student with one

servicer. however, there are some students who have loans that are still ffel loans that were not sold to the department. there are still cases where students have more than one servicer. what i'm suggesting is that the servicers are contractors. they can still service the federal loans, but they need to be invizable to the students. because when a student calls, a student needs to understand it's a federal loan they're repaying. they go to studentloans.gov and they do their counseling and know everything about their loans there and continue the trajectory of being able to start the repayment of their federal loan. when they go there, if they have an inquiry, there is technology today that would transfer that call to the contractors. the contractors can still be the servicers. just needs to be invisible to the students because students are getting e-mails from the various servicers and they do

not understand who these agencies are. they think it is spam mail or junk. that's my suggestion. >> how could your experience going after getting your degree for your masters at columbia, how could yours be better and different based on that structure and the way that you were treated and your interaction with servicer? >> i think, i believe the best way would be a little bit more information about how much interest i would pay over time. i wasn't quite sure about the process, even though i went through interviews, exit interviews. i wasn't sure of what the total debt would look like at the time. and, so, i wish i actually had a conversation with someone. of my servers. i think yesterday might have been the first time that i actually had a telephone call or a conversation.

so, definitely more in person conversations or phone interviews. yeah. >> good. mr. hubbard, you represent a group of people that have had some significant legal issues, if you will. if a servicer is found to repeatedly violate their federal contracts or federal laws, should there be consequences and what should they be to the servicer? >> thank you for the question, chairman. this is a critical question. right now there are many bad actors out there. some are under the table. the recent sallie mae case was a good example, a clear signal to the industry that these kind of issues will not be accepted. they will not be tolerated. $60 million being paid out is a sign that if you are going to take advantage of the system, you're going to abuse service members and their loans, then it will not be tolerated. i think absolutely compliance is a critical step in that process.

>> okay. >> ms. hoover, the 2014 report said they might consider providing notices prior to and following a change in servicer so the consumer can monitor the transition to ensure there are no servicing interruptions. many consumers were unaware of the servicing change until problems arose, unquote. talk about your views on borrowers experiences with servicers and the cost from servicers lack of or poor communications. >> i have to say the experiences i had with my students were limited in this respect because i, for the number of years, my students have been in the direct loan program and already had one contractor.

i have not had and that's because of my student body, but i do believe that the complaints had been registered with the consumer bureau are true and, as we monitor, as our student begin to be more into this multiple servicer environment, i should listen to it very carefully. so far i have not heard that from my actual students as graduates. >> anybody else want to comment on that. mr. hubbard? >> i think this brings up a very important point and that's just a level of opaqueness in the system. when you're a student and you have different loans, you might not even know where those loans are. you don't even see them if you go on to logon to some dashboard to figure out what those loans are and how much you even owe, that could be a challenge to figure out sometimes. having an aggravated view of this loan data would be

important. >> senator warren. >> thank you, mr. chairman. thank you for holding this hearing. we should be doing everything we can to help student loan borrowers repay their loans and part of that is improving loan servicing. but if we want to make sure people can repay their student loan debts, shouldn't we start by doing what we can to reduce the size of their debt loads. right now the federal government is collecting loans at 6%, at 8%, at 9%, at 10% and even higher. so, what i'd like to do is i'd like to just ask a question about whether or not you could talk about the impact on people, if we refinanced their student loans. down to lower rates. i thought, mr. geremia, you might start that. >> thank you, senator. thank you, mr. chairman. it would be a wonderful opportunity to have the ability, opportunity to refinance my student loan.

as i move into my 30s and would like to begin a family and buy a home, i would like to be able to have that opportunity. >> yeah. >> and you talked about, mr. geremia, you have a home mortgage at what interest rate sph. >> i do not have a home mortgage. >> you have a car loan? >> i have a car loan at 1.9% interest rate. and many car loans are offered at 0%. >> you want to be careful about those. >> yeah. so -- >> read closely. >> so, it would make sense to me that maybe there are more options available to refinance at perhaps a lower rate. >> thank you. mr. hubbard, could you speak just a little bit about what the impact would be on people's live physical we brought down the interest rate on student loans? >> thank you for the question, senator. this is a huge problem right now. if you look at individuals who

go into the service with existing debt to begin with and then they're in the service, they have deployments, they have loss and protections and taken advantage of and they can't even do anything about it. when you're in a combat zone, are you really thinking about your student loans? that's a problem. on the back end, as you are potentially going for your education, you're say, a reservist. you might not have the gi bill. you're taking out large loans and taking out the loans with very little information at your disposal and might have just been coming off active duty and very difficult to have access to anyone who knew about getting that right information. so, that makes it very complicated. you're not able to buy a house when you come out of your education. you're not able to invest in your retirement. that impact is when the gi bill, the investment of the gi bill is completely lost when you're mirrored in student debt. when you see what an individual can do without student debt, when they take advantage of the gi bill, it's impressive.

it really is impressive. you've got 25 to 30 year olds buying houses for the first time. they're very young. they're investing in the future. the impact of this is on the larger economy. but i would actually like to point out something that is not often looked at and that's the issue of security. national security is a big problem with existing debt for veterans and service members. a service member loses a clearance as a result of their high credit. their high-student debts. that is a direct impact to the national security of the united states. so, that's something i think is worth looking at. one thing that is an issue that would be great, refinance would be terrific for service members. unfortunately, the protections offered are lost when a student, a veteran goes to refinance their loans. that's something that hasn't been addressed. >> makes a very powerful point and i appreciate it. what we're talking about here is how the impact of student loan debt on individuals and also as

you rightly point out, the impact on the larger economy. we've got studies now showing that it's causing people not to be able to buy homes. they're not able to start small businesses. they're not able to start their economic futures and build something strong. this is why more than 30 senators have introduced the bank on students emergency refinancing bill. we want to lower interest rates so that more people have a fair shot at getting started at life. i want to pick up on the point you made, though, mr. hubbard. you know, in march, the consumer financial protection bureau put out a report analyzing complaints from veterans about financial products and the report suggests that private student loan debt collectors may be making misleading or intimidating statements to coerce veterans into paying their debts, including threatening to contact a service member's chain of command or

repercussions under the military code of justice for failure to pay. and in march the gao released a report raising issues regarding the oversight of contractors who collect on federal student loan debt. mr. hubbard, are you concerned that the federal student loan debt collectors are also using military service members service to pressure them to repay? >> it's a great question, senator. i'm not only concerned, i'm absolutely outraged. this is something that is unacceptable. the sallie mae case was a clear signal that this was not something that will be accepted in our society. when an individual goes into service, that is not an opportunity for a servicer to take advantage and abuse those service members because they don't have the right information. if you have an individual who doesn't have access to clear information and then somebody calls them offering what they believe is information, taking advantage of them, that is just simply unacceptable. >> well, thank you very much.

you know, i remain deeply concerned that debt collectors for the federal student loan program are breaking the rules and misleading borrowers. if a borrower fails to pay a loan, the federal government should be able to collect. but contractors must be following the law and should not take advantage of people. i think this is an issue that deserves very serious attention. thank you, mr. chairman. >> senator warren, senator reid. >> thank you very much, mr. chairman. thank you and senator warren for your extraordinary leadership on this issue which is critical to not just individual progress, but to our economy overall. i want to recognize everybody, particularly robert geremia. you're from rhode island, aren't you? >> yes, sir. originally. >> where in rhode island? >> yes. south kingston, rhode island. >> are you related to kennedy geremia? >> no. >> only rhode island can you have this conversation. i played pee-wee softball he's

your uncle, your cousin. >> yes, distant cousin, sir. >> see, i knew it. no, no, he is. you, after graduating rigyou we on to columbia and teaching wilson high school in washington, but i have a question. federal law requires that the individual borrower be informed of his or her rights for repayment options before they enter the program and as they graduate. do you think you get effective sort of advice, information, counseling. you had the full range about full repayment options and public service and can you comment? >> thank you, senator. yes. i did receive counseling. i do not believe, especially with my graduate loans that was particularly effective. it involved unexercised, going

through the motions and clicking on boxes. there really isn't that, hey, do you have a question kind of, that one-on-one interaction. at rhode island college during my undergraduate years. i felt like i had that opportunity. things were a little bit more clear spelled out. and, of course, there was your parents. our parents were helping out. as we advance in our careers and our lives and sort of looking to fine tune teaching skills, yes. i read through it, it wasn't clear. it wasn't effective. especially for someone like myself who is trying to pay rent, trying to teach 100 students, grade their essays, finish a master's thesis. yes. >> one of the rhode island college, i was there for the graduation, the tuition is still roughly $8,000 a year. in fact, we have a federal limit on what you can borrow as an undergraduate. there is no limit at graduate school. so the counseling for graduate

has to be more focused, more intense and more effective because they are really talking about big sums of money. no limit money there is no limit on that. but i appreciate that very much. ms. hubbard, thank you for your service. thank you for your testimony. under the service members relief act, there are lots of -- they used to call it the soldiers and sailors civil relief but now it's the service members there are many rights that service members have, but they have to be aware of the rights. how good did the department of defense, or do you think they do about informing service member, particularly those who are about to leave the service about their rights as veterans or their rights as service members? >> well, there is a couple of pieces of that puzzle. and i think this is a great question. so thank you for that. >> yes, sir. >> senator. the department of defense is certainly responsible to some degree for making sure that their people are taken care of. on the other end of things, if a

servicer is giving them false information, simply lying to them, who is to say that the chain of command, some captain is an expert on education loans? they're probably not. there is definitely individuals within the department of defense that are, but can they reach every single individual? i doubt it. unfortunately, servicers are reaching every single individual, and they are giving them false information. for that member of the military to be able to reach out and find their own information with, say, through an aggregated dashboard or something similar, that would hopefully allow them to alert some red flags. those red flags would bring that person to go out and seek that information from that dod education expert. and hopefully that could circumvent the process of those servicers simply lying to those service members. >> again, this is a rough historical analogy. but in the old days you used to be able to put places off limits because they treated soldiers and airmen and marines and

sailors badly. i urge secretary hague toll think about this. maybe there has to be a consistent effort of identifying services who are consistently not just, you know, negligent, but doing worse. and maybe that's what, you know, that dashboard or at least in the company or the battalion or the squadron you can have, don't go there. i think that's important. ms. hoover, can i ask a question. it goes right back to the services. we don't have -- i think we have sometimes become overreliant on major entities to do the servicing. and that has an inherent failure. do you have any advice about how we can provide better services to ones that don't sort of try to take advantage of students? just a general question. >> how we can do better with the servicers? thank you, senator. as i indicated in my testimony,

i still believe there needs to be one place of contact for all borrowers, and that the contractors be invisible to the students. i think if the student -- if the servicers were mandated to be contracts with identical processes and policies, a lot of this confusion could be eliminated. and that's where i keep coming back to one place, keep it simple, and therefore when the contracts are renewed for servicing, maybe they can be offered to entities outside. because credit cards and mortgage servicers have some excellent technology and don't have the default rights that we have that are inherent today. >> thank you very much. thank you very much. >> thanks, senator reed. we will try to do a second round if we can before votes. question for all of you. federal student loans are seen as safer than private loans because they offer repayment

options. but we often hear that federal loans lack comprehensive and consistent servicing standards. so i'd like each of you just yes or no question on this. to regulators, the cfpp, do the regulators need to establish standards so that borrowser have more protection, ms. hoover? >> yes. >> geremia? >> no. >> let me talk for a moment about credit rating. student loan borrowers are typically young. not always, but typically young, typically limited credit history. they enter this marketplace if the servicer doesn't serve them quite right, they end up -- if the servicer makes mistakes, report loans or a payment plan is delayed, borrowers can be penalized for irresponsibly managing their debt, if you will. mr. geremia, how do servicers affect credit cards and credit scores, excuse me. how do servicers affect credit

scores and inability to access credit later in their lives? >> well, i would imagine that if there were issues repaying, there was a default payment, that would affect credit scores down the line, and therefore would inhibit ability to make home purchases, car purchase, even apply for jobs or government jobs. thank you. >> mr. hubbard, you talked about a soldier in combat. you talked about veterans, soldiers and sailers and airmen and women coming home and facing student loan -- various student loan kinds of problems, and how it's much more difficult to launch their economic lives, as senator warren said. talk to me what a credit score means to current and former military personnel who may have to pass credit checks in order in terms of security clearance

and getting their economic lives in order, or both if you would. >> thank you for the question, senator there is two sides of this coin there is the security issue and there is the economic issue. on the security side, if an individual has a bad credit score, they're not going to get a good clearance. they're not going to get a clearance. that might be critical to their future in the military or even their personal future on the private side. >> have you seen anile examples of that? >> yes, absolutely. >> okay. >> and then alternatively, the economic -- the economic issue is huge. the investment that america has made in service members is ultimately crippled when these individuals cannot invest in themselves and then further on in the economy. when they can't buy a home, that money is lost. it is lost to servicers, and it is taken out of the economy and not reinvested. >> and you see in terms of government investment, you see a soldier who is, for whatever reason, has now has a lower

credit score. sometimes reasons beyond his or her control. you see the government, you see that -- that soldier eligible for a promotion, eligible perhaps the military is looking to provide, to give them security clearance for this new position, this new rank, and they're denied because of the credit score. and the government investment then goes to waste in that sense? >> it does. it goes to waste. this comes to a question of common sense. if we have good individuals who are strong soldiers, sailors, airmen, marines, they do well, but they have a bad credit score, what it looks like is they're not responsible. when if you take it back and look at the context, a servicer might have taken advantage of this individual, flat-out lied to them, and allowed this person to take out more loans than they were capable of, or completely inflated the rate on them, they go deploy, they've got $50,000 in loans. they come back, it's $75,000. that is a big problem.

>> and there is no real for the soldier looking to get security clearance for a new position, there is no real appeal on this, i assume, to the military of well, my credit score is lower because of x, y and z that i had nothing to do with. >> well, there are appeals, but it doesn't take away the doubt. and the doubt once seeded is very difficult to scrub. >> thank you. senator warren? >> thank you. so we've talked a lot today about how federal investigators have uncovered serious problems with student loans, servicers, and collectors. just recently, the gao raised questions about federal debt collectors that are breaking the rules and federal regulators have cited sallie mae for violating federal laws by overcharging service members on their student loans. now when loan servicers break the rules, they push borrowers to do things that are good for the bottom line of the servicer,

but not good for the borrower. and ultimately, if students are not able to repay, then it's the taxpayers who will pick up the bill here. part of the problem as you've pointed out is the rules are complex, and it makes it hard for borrowers to know what they should expect from their servicers. but i want to ask the question from a little different angle. and that is when a borrower thinks that something is wrong, thinks that maybe they haven't been told the truth or that someone has broken the law, where do they turn? where do they go now? ms. hoover, how about i start with you. >> most of the time the students now are going back to their financial aid office, because they are so confused about where else to go. and -- but the tragedy is that sometimes students don't do anything. >> well, fair enough. >> but in a small school like mine, we do due diligence, and

we continue corresponding with our students who are delinquent. so they do come back to us. but again, i'm a small school. and that is not realistic for large schools. >> and the further people get out of school, i'm sure the less likely it is that they're going back to their old financial aid offices to be able to get any help. so basically what you're telling me is they don't have much of any place to turn, or at least don't know much of any place to turn. >> until we had the consumer bureau protection agency. but again, the students are not aware of that. and it's, again, just the lack of not understanding of where to go. >> mr. hubbard, how about for vets? >> well, i would like to point out one scenario, if i can, senator. there was a service member cited by the cfpb after they solicited comment on this very particular topic. and this individual went to lower -- under sacra went to lower their loans to 6%. the servicer looked at their loans. everything that was below 6% was

raised. >> oh my -- >> that 6% did not get lowered. this individual is an example of what happens. this particular issue was found out by the cfpb, which is the primary route for individuals to make that complaint. since the consumer bureau has come out and been soliciting this information, these stories have come out in droves. and stories like that, they make me sick. >> as they very well should. borrowers shouldn't bear the responsibility for keeping servicers in line. federal contracts should include accountability and oversight protections that require servicers to perform to a high standard. but at the very least, if borrowers have questions or they believe they've been mistreated, should it be clear where they can turn for some kind of relief. i want to ask about one other

issue, if i can. and that is you may know that sallie mae has been touting its status as the federal student loan servicer with the lowest default rates. and in february, i wrote a letter to sallie mae asking for data about the company's default prevention strategies. i asked for these data not because -- because not all strategies to reduce defaults are going to provide a path to success for repayment. and some may even leave borrowers deeper in debt. sallie mae responded to my letter, but cited only a few limited pieces of information about its direct portfolio. it did not provide the data needed to evaluate their default prevention program. and as a result, i've asked the department of education to provide default prevention data for sallie mae and other federal loan servicers. so far no answer. so i want to try this from

another direction. mr. hubbard, do you believe that borrowers are getting sound advice from servicers like sallie mae about what to do when they get behind on their payments? >> thank you for the question, senator. off the bat, the single metric of the lowest default rate is pure nonsense. just because you have low default rate doesn't mean that the individuals are not mirrored in high amounts of debt. if i make a low payment every day for the rest of my life, i won't default, but i will be paying forever. i will never get a house. i will never have the money to start a family. i will never have the money to start a business. i will never be able to put back into the economy what the american economy has given to me. that's a huge problem. in addition to that, just because an individual goes out of their way to find out information doesn't mean on the back end it's not being treated properly. we found issue after issue with sallie mae in particular with tons of complaints coming into the cfpb. they were the number one

complaint servicer of any servicer by a long shot. just because they have a low default rate. well, congratulations. but you still have a ton of debt for student veterans who are dealing with that debt and it's impacting them in their daily lives. >> well put, mr. hubbard. you know, about a quarter of sallie mae's loan portfolio is in deferment or forbearance. and these borrowers are trying to get their heads above water by deferring their payments. but as you point out, the interest continues to accumulate. this is going to add to their debt burden, and ultimately may drown them. we need real data to tell us which strategies work as a life preserver and which work as an anchor for borrowers. also, better data can help drive stronger accountable for sallie mae and other loan providers. i hope we continue to push for that. mr. chairman, thank you. and thank you all for being here today and sharing your stories. thank you.

>> thanks, senator warren. and to the witnesses, thank you all for joining us. there is a vote called. ms. hoover, mr. hubbard, mr. geremia and there will be written questions from members who were here or not here. and please answer them within a week if you can. thank you.

the reason we are trying to focus on the speaker is because it is the speaker with the full majesty and weight of his position who yesterday made certain allegations, which at this point at least he has not yet answered to. would you prefer i -- well, i was going to yell to mr. wright. >> you don't normally have that in the 26 hours that you presented this case to the public. but the interesting fact is the

whole tenor of your remarks going back to 1970 and going back to 1972, taking out of context on mr. bowen, you were there for one and one purpose alone, in my opinion, and that was to imply that members of this side were unamerican in their activities. you stopped, you waited, your motions. will you respond? you knew that there was nobody here. you knew that there was nobody here. >> camscam. put those two men from your perspective. give us your perspective on the two of them. >> well, speaker o'neal was really a giant. he knew the politics of the house. he knew the politics of the house and he kept much of it to himself in terms of other members. but he obviously received a great amount of intelligence all day long from members what was going on in different places. and he always believed that the politics was the art of the

possible. that nobody got their way all the time, and he was a broker within the democratic caucus and within the house. and what you saw was newt gingrich, who made a conscious decision that they would always be in the minority because they worked with the majority. and so he started attacking bob michael, the leader, and john rhodes and everybody on that side. >> in his own party. >> in his own party, because he just said the only avenue to the majority is through confrontation. and we're going to take them down. and this was an argument about the misuse of tv now coming to the floor where he would ask these rhetorical questions and make these charges. and he knew in fact that the chamber was empty. but at that time remember the camera was very tight on the speaker at the time, wherever they were. and the rule came to show the chamber either had people in it or was empty. and of course it changes the whole dynamics.

but that was a process that now many years later has torn this institution apart, and has really paralyzed the institution. >> congressman george miller, sunday night at 8:00 on c-span's q&a. c-span's new book sundays at eight including financial journalist gretchen morgenson. >> what role should the government play in subsidizing finance? we want to talk about it and the populace agrees it's something we should subsidize, then put it on the balance sheet and make it clear and make it evident, and make everybody aware of how much it's costing. but when you deliver it through these third party enterprises, fannie mae and freddie mac, when you deliver the subsidy through a public company with private shareholders and executives who can extract a lot of that subsidy for themselves, that is not a very good way of

subsidizing homeownership. >> read more with gretchen morgenson and other interviews from our book notes and q&a programs from public affairs books, now available for a father's day gift at your favorite book seller. michael lind, policy director at the new america foundation recently wrote a cover story for the journal national interest where he argues for revamped policies on immigration, trade and defense. he discussed his proposals which he call news democratic nationalism at an event hosted by the center for the national interest. this is an hour and 20 minutes. >> hi, i'm jacob heilbrunn, the editor of the national interest,

which has a website with a number of new articles every day, and we also publish a bimonthly magazine and cover story this month is by michael lind. michael lind is the director of the economic growth program at the new america foundation. michael has a long affiliation with the national interest. during his tenure, he published -- when i was there, he published an article on german unification in 1990, if my memory serves me right. he went on to become the executive editor of the national interest under its then editor owen harries. michael participated in the many of the foreign policy controversies of the 90s, went on to become an editor at harper's, then a senior editor at the new republic, a year at the new yorker and then returned to washington at the new america

foundation where he has in the past two decades written a number of books, both on american domestic and foreign policy. and he is also quite a renaissance man, having written a children's book and is a published poet. and i would say one of the most creative minds that i have known in washington. now, michael's piece today is called "the promise of american nationalism." and in it he pro poes a sweeping revision of american foreign and domestic policy, focusing on trade, immigration, and our approach to the outside world. and with that, i'd like to ask michael to speak for about 20 to 30 minutes and give us a press

of his thoughts on the foreign policy and domestic policy debate right now. >> thank you, jacob. as you mentioned, this is a return for me in a sense to the national interest, where it was my privilege to serve as the executive editor a quarter century ago under owen harries when at a time at the end of the cold war the national interest, more than any other publication i think was responsible for one of the great debates of american foreign policy history, the national interest had a series of essays by people representing different potential strategies for the united states in the post cold war world. from patrick buchanan, a neo isolationist strategist to samuel huntington and jane kirkpatrick, calling for the united states to become an ordinary country again. as it happens and unfortunately as i will argue, the essay that turned out to be the most

prescient, at least in terms of outlining what would become the new consensus in u.s. foreign policy was by charles krauthammer and was published in foreign affairs in 1991, the unit polar moment. krauthammer was speaking for a wing of the neo conservatives. at the time i considered myself a neo conservatives. there were a number of neo-conservatives, including patrick and moynihan who wanted a much more entrenchment in u.s. foreign policy. but krauthammer spoke has emerged as the predominant consensus in u.s. foreign policy. he argued that the united states at the end of the cold war was the sole super power. that the u.s. had such enormous advantages compared to all other great powers in the world, that it was ridiculous to act with

excessive restraint, which was underestimating our own strength, and he made an argument which is repeated to this day by defenders of american hegemony which is the only alternative to the u.s. being the sole superpower with total domination of the world is chaos and anarchy. this became the consensus in the united states not just because charles krauthammer wrote an article but i would argue because a series of events shifted elite consensus toward this position. the first was the gulf war, where what appeared to be a very easy, quick victory, gave a lot of americans what i think in retrospect was an exaggerated sense of a u.s. military power in being able to solve major problems around the world. that sense of u.s. triumphalism

was then underlined in the course of the balkan wars in the clinton years, which were also significant for bringing over much of the progressive political community to what had been a kind of neo conservative foreign policy position. madeline albright famously asking general colin powell why we have this military if we're not willing to use it in humanitarian interventions. so by the end of the clinton years, you had what was clearly a new consensus uniting so-called neo liberal hawks, humanitarian interventionists with the neo conservists, and the realists, the neo isolationists were simply marginalized. this was a new consensus and it has endured until recently. now, the german philosopher hagel says the owl of minerva flies at dusk, which is a fancy way of saying that as a period

is drawing to an end, you can see the actual shape of it is. i may be mistaken but i think the period of this particular consensus, even if it is not in the near future, the end is in sight. so looking back we can describe this consensus of the hegemonic census as it evolved and became shared by the foreign policy of elites of both parties in the '90s and the 2,000s. and i would argue they had two components. there was a pattern of power, and a system of world order the hardware and the software, hard power and soft power. the geopolitical military strategy that underpinned it was u.s. hegemony. now, what do i mean by that? the united states fought world war i, world war ii and the cold war with the objective of

preventing a eurasian hegemon, which is an alliance of hostile powers which would control the three significant regions of eurasian continent. the consensus much to the surprise of many of us in the more realist camp that emerged in washington by the year 2000 was the way to avert a hostile eurasian hegemon was for the united states to become the hegemon. it had to be the hegemon of europe, of the middle east and it had to be the hegemon of east asia. and it would thereby repeat the formation of any kind of hostile power, but also it would prevent balance of power struggles within these three critical regions, which if they were left to fester, would draw the united

states in. and so the conversion of the u.s. from one super power in a bipolar world in which europe, the middle east and east asia were contested into the hegemon of europe, the middle east and east asia took place gradually as a result of various conflicts. the u.s. expanded into the vacuum made possible by the collapse of soef outpower in the middle east with the gulf war. in europe, although the presidency of george herbert walker bush had promised gorbachev as that the nato would not expand natoeer eastward, the clinton administration reneged on this promise and did so. and finally, in asia, the united states simply kept its cold war

alliances in place with no practical plan for revising them or incorporating china into some kind of new regional order. although china was invited to join the world economy. if there is a single statement of the bipartisan hegemony strategy that sums it up, i think it would be george w. bush's speech at west point in 2002, where he said competition between great nations is inevitable, but armed conflict in our world is not. america has and intends to keep military strengths beyond challenge, making the destabilizing arms races of other eras pointless, in limiting rivalries to trade and other pursuits of peace. and if you parse this, what he's actually saying is that the united states will be unique in being the supreme military overlord of the world. other great powers, voluntarily america hopes, will cede the

responsibility for attaining their security interests in their own regions to washington, and they will specialize in trade and other pursuits of peace. in effect, what this was doing was offering all of the existing and rising great powers in the world the deal which had been offered to defeated japan and west germany after world war ii. that is in return for becoming u.s. military protectorates you can concentrate on trade and foreign markets within a rule govern system that is established and supported and policed by the united states, so that to the extent that there was a logic to this strategy and it wasn't simply response to opportunistic exploitation of power vacuums after the soviet decline, the idea was that the united states as this kind of

hobbsian sovereign would create a world in which really there would not need to be any other great powers because the united states would be doing the policing everywhere in every region. and the other great powers would be one-dimensional powers. they would be economic powers. and china's incorporation into the world order in this american view would take place under these circumstances. it would be kind of a bigger version of japan or of first west germany and then united germany. the u.s. encouraged china to join the wto, to become integrated in the world economy. at the same time the u.s. insisted on maintaining its cold war alliances in east asia. so that was the hard military underpinnings. the united states would conclude these three 20th century struggles to prevent eurasian hegemony by establishing eurasian hegemony for the indefinite future.

the rules of world order that it would promote in recent years have been come to known as the liberal world order. the term is bandied about as though there is some consensus about it. i think the liberal world order in the sense in which the bipartisan u.s. foreign policy elite has used the term since the 2000s began actually is a fairly novel thing. it's not the old 1945 united nations charter world order. it's something new. it has two components. this is the new liberal world order, if you want. instead of the old world order. the new liberal world order de -- redefines sovereignty and weakens it compared to the 1945 u.n. charter. which the u.n. charter recognized basic human rights and it also made genocide a crime of universal jurisdiction. but other than that, both in practice and in theory, the

united states accepted a high degree of sovereignty for most of the other states in the world and beginning more with the europeans than the americans in the early 21st century, the idea of the responsibility to protect justified interventions by outside powers, particularly in the united states, in countries which were not actually guilty of genocide, as i say, that has always been an exception in the u.n. charter, but for various lesser offense, including simply suppressing rebels, massacres, ethnic cleansing, all of which are terrible things, but were seen as internal events for the most part in the post-1945 era, but now were seen as proposed exceptions to the rule of sovereignty along with actual genocide. the other part of the liberal world order as it was pushed by washington was a kind of economic liberalism which was much more thorough going than anything that washington had

promoted after world war ii. after 1945, the u.s. tried to create an integrated world economy so you wouldn't have rival imperial blocks. and particularly among the industrial nations through the general agreement on trade and tariff, the u.s. led an effort successfully to pretty much reduce or eliminate tariffs on exports and imports. but what was called the washington consensus was much more radical in the 1990s and the 2000s. it required that all countries adopt a particular model of capitalism associated with reagan and clinton america and with thatcher's and britain's -- blair's britain. you would have deregulation of finance. most forms of pro industry support would be delegitimatized including tariffs.

and most radical of all, you would have regulatory harmization of countries. that digs into basic economic policy sovereignty it if your rules are removed from national particle i ments and transferred to an international legal regime, but that was the consensus in the united states until recently and i think among foreign policy leaders in both parties that remains the consensus. now, in practice, the washington consensus was observed more by the u.s. and a few other countries, including britain than by the other leading industrial economies and america's major allies, japan and germany, particularly japan which like south korea, taiwan and other american protect rats in east asia have followed a

highly successful and fairly ruthless version of clean air act classic mercantilism in industry promotion at the expense in some cases the industries of their trading partners. that was america's vision of hegemony. the u.s. would be the dominant military power in europe, the middle east and asia, and it would promote a new world order based on weakened sovereignty in the name of human rights and responsibility to protect, and also a much more thorough going version of economic liberalism than had earlier been the case. now, skeptics throughout this quarter century period, since this hegemony trat strategy coalesced, and i'm one of them, have long thought it would fail for three reasons. first, other powers, particularly other great powers

would reject u.s. hegemony in their regions. second, the united states would not adequately resource its own strategy. and third, the u.s. public would rebel. all three of these have now come to pass in 2014. to begin with the rejection of u.s. hegemony in these eurasian regions, it was clearly the plan of the architects of the iraq and afghan wars that iraq and afghanistan and perhaps some other middle eastern central asian states would become permanent bases for u.s. power projection in the way that japan and south korea have done in east asia. this was not to be. the united states so alienated the iraqi people and the afghan people that there is some question as to whether we'll remain in afghanistan and under what circumstances. and in iraq the refusal to do a

status of forces agreements has essentially led to u.s. departure. so this is an enormous blow to this project of establishing u.s. hegemony in the middle east. other blows include the increasing independence of the u.s. from turkey, and now egypt where advocates of american hegemony in the middle east had initially welcomed the democratic revolution in tahrir square. we now have an egyptian strong man, general al sisi who was elected by 93% of the vote, something democratic politicians can only envy who was quoted in "the new york times" as saying, and i quote, sisi is suffering and torture. uand the general made one of his first foreign policy trips before he became president to meet with vladimir putin in russia, so u.s. hegemony in the middle east looks fairly

insecure. in europe, as we know from the news, russia first pushed back against the expansion of u.s. military force and influence in its neighborhood with its short war in georgia in 2008, and then in this year, 2014, its seizure of ukraine, and fomenting of trouble in eastern ukraine shows that russia is not satisfied with u.s. hegemony in europe. and in china, as we know from the news, has been steadily pushing back against american power in its region, east asia. so how does the hegemony strategy stand now on the software, the rules of world order, all right, now that the hard military underpinning of it is under assault or under question in the middle east and europe and in east asia? well, the liberal world order is not doing very well either.

the so-called brics, a useful but somewhat misleading term for rising powers, brazil, russia, india and china, are now associated with something which liberal critics call sovereigntism, that is they're pushing back against the north atlantic's idea, that sovereignty needs to be weakened. many of these countries were former european colonies. and see this as a new form of western imperialism. the western consensus is widely rejected among developing countries, including brazil, and even india under its new premier modhi, to read the western press you would think he's like margaret thatcher, ronald rea n reagan. in fact, india will continue to

more statist and nationalist in its areas. finally there's the possibility of anti-american balancing something which proponents of the hegemony strategy had dismissed a decade or two ago, but with increasingly close alignment of russia and china, and even india whose premier was blacklisted as a supporter of anti-muslim riots and has vowed that he will not set foot in the u.s. except to attend the united nations. you do have the major population centers of the old world, the two biggest countries, china and india, in terms of population, in the largest country, in terms of geography, russia, alienated from the united states. and it's very difficult to see american hegemony surviving that. finally two other factors, inadequate resources, including

to projections of the results of the budget guest they're was recently agreed upon in congress, u.s. defense spend willing go down to more than slightly more than 2% of gdp in the 2020s, which is probably adequate for most of our actual defense needs, but i would suggest it's woefully inadequate if you wish to be the eurasian hegemon if perpetuity. you would need to spend more money. finally, public support, the public rebelled against the costs of the wars, that was the main reasons for the return of the democrats to power in congress in 2008. barack obama became the democratic nominee largely because unlike hillary clinton, he had opposed the iraq war and most recently we've seen first the british public and then the american congress rebelled preemptively against the idea of deeper nato military involvement in syria.

so inertia counts for a lot in politics and it will take some time to go from one paradigm in strategy to another, but i think that if this is not the beginning of the end for the hegemony strategy, at least we can begin to go back to where we were at the end of the cold war and discuss what would alternatives be like. i discussed that in my article for the national interest. i won't go into detail except to make a couple of points. the last time there was a real serious attempt by american leaders to think through what u.s. strategy would be in a multipolar world i think of the nixon administration. you could argue that the presidency of george herbert walker bush envisioned something

like this. but because of the loss of 1992, it was never clearly developed. clearly the second bush went quite a different direction. so you really have to go back to richard nixon, who said in the interview with "time" magazine in 1971 "i believe in a world in which the united states is powerful. i think it will be a safer world and better world if we have a strong, healthy united states, europe, soviet union, china, japan, each balancing the other, not playing one against the other, an even balance." now thanks to the influence of the hegemony strategy, even in a democratic primary, any presidential candidate who said that the united states itself should be balanced by other great powers would be considered, you know, just beyond the scope of reasonable discussion. and yet this was the hawk richard nixon in the 1970s. and what's more, nixon arguably

was in the mainstream tradition of 20th century american foreign policy. in his 1910 nobel prize lecture, theodore roosevelt said it would be a master stroke if those great powers honestly bent on peace would form a league of peace, not only to keep the peace among themselves, but to prevent by force if necessary, its been broken by others. this view was shared by woodrow wilson, who was sometimes caricatured, and he made many mistakes. but the actual plan for the league of nations was that there would be a great power directorate or concert, that it wasn't a purely utopian experiment. franklin roosevelt was as much of a realist as his cousin theodore. he mocked the kellogg briand pact of 1928 trying to outlaw war, saying war cannot be outlawed by resolution alone.

roosevelt who came up with the phrase of united nations and didn't put a whole lot of stock in the actual details of what became the u.n. world organization, he left that to secretary of state kordell hall. he even envisioned great power concert with the regional hegemons policing the world, keeping the peace after the end of the war against germany and japan. he said the real decisions should be made by the united states, great britain, russia and china who would be the powers for many years to come, and it would have to police the world. so in different ways, in different decades, what theodore roosevelt, franklin roosevelt and richard nixon and perhaps the first bush shared in common was the assumption that if you want world peace, it has to primarily be peace among the great powers. and that means that their legitimate prerogatives as great powers, including their prerogatives in their own regions will be recognized by the others, including the united states.

so it's a completely different perspective from the bipartisan policy we have followed since the 1990s of trying to encircle and pin down all of the great powers in their own regions. i call it quadruple containment. that phrase is a development of the phrase dual containment from the cold war. quadruple containment means that we contain our allies as well as our enemies. if you look at four major powers, the two major powers of europe, germany and russia, and the two major powers of east asia, japan and china, we contain germany and japan by keeping them as militarily weak, dependent protect rats indefinitely. and at the same time we encircle the other powers in those regions, russia and china on their own borders. now, the problem with the strategy is quite apart from their pushing back and the unwillingness of the american

people to pay for this is it requires american leaders to engage in a orwellian kind of new speak so that if any power anywhere in the world, no matter how remote from north america objects to being encircled by american military forces or allies on its own borders, that power is guilty of aggression and trying to overturn the world order. this would have seemed crazy, i think, not only to richard nixon, but to fdr and tr and to most american statesmen through most of american history. so i don't want to go on too long. we can have a conversation. just a few final thoughts about beyond the hegemony strategy and i developed this at more length in my national interest essay, the promise of american nationalism. i think the brics are going to

win the debate about the rules of world order. that is, if we have not persuaded china, india, brazil, russia, you know, russia is a somewhat second tier country, but china and india at any rate are going to be two of the three major nation states along with the united states in the 21st century. if we've not persuaded them to abandon economic nationalism and we've not persuaded them to water down their sovereign claims and claims against foreign intervention, then the fact that we've went over the support of members of the european union, you know, europe is not the world. the north atlantic is not the world in the 21st century. so -- and i think we should consider, if you can't beat them, join them. in fact much of the american public and at least half of the american political spectrum is on the side of the so-called brics when it comes to this new

sovereign. tism. the united states did not ratify the international criminal court. the bush administration withdrew the u.s. the united states did not ratify the law of the sea treaty. we are in the somewhat orwellian position of denouncing china for not observing the norms of the law of the sea treaty which the american congress rejected. so in a way, backing way from the more extreme versions of what is being called the liberal world order is actually a return to america's practice. and i would argue it's not a matter of liberal democracy versus authoritarian states. it's largely a matter of large populous countries which tend to be the great economic and military powers versus small countries. small countries, including the united states when it was in its very origins have a much deeper stake in a rule governed world order than large countries do.

and this is true even when it comes to globalization. and i'll just end with a few remarks about trade. the fact is the countries that are the most dependent on the global economy are not the ones that prosper from it the most. the united states, germany, and japan. the larger the country is in general, the smaller the share of its economy that is involved in international trade. whereas if you're a singapore or finland, you have much higher share and you're much more dependent on foreign trade. when it comes to multilateral regimes, if you are china, india, and united states, which according to most projections in the year 2050 will be the three largest economies by gdp, a trilateral deal among them will open up more trade and investment, you know, than any kind of doja round. or anything like that where you have to line up dozens or hundreds of lesser states. so while it's the conventional

wisdom that we want a rules based international trading system, the fact is a results-based system in which a few large economies, including the european union just cuts deals with each other can accomplish a great deal of economic integration by a less involved bureaucratic means. let me finish by quoting ambassador jean kirkpatrick whom i quote in my article. by the way, it's my privilege to know jean kirkpatrick fairly well, and one thing that she returned to again and again and again was something she had learned from one of her mentors, the political scientist at yale, harold laswell. and she often repeated this, and i've never forgotten it. she said when you're designing a constitution, imagine that your worst enemies are in power, and she applied this to rules for world order, and i think one of things we've done is we've designed a constitution that

empowers the temporarily dominant nation, the united states and we have not thought about what this means for us in the future when we may no longer have that position of dominance. but what i want to quote is from kirkpatrick's fall 1990 article in "the national interest" entitled "a normal country in a normal time." she wrote, the united states performed heroically in a time term when heroism was required. altruistically during a time when freedom was endangered. it is now time for the u.s. to adapt to a multipolar world. she said with a return to normal times, we can again become a normal nation and take care of pressing problems of education, family, and industry and technology. we can be an independent nation in a world of independent nations. thank you. [ applause ]

>> well, thank you. for anyone who is just tuning in, that was michael lind of the new america foundation, talking about his new article, the promise of american nationalism. now i would like to ask anyone in the audience who wants to a ask a question to raise their hand and to identify themselves please for our television audience as well. >> jim. >> i'm jim pinkerton with fox news. >> hold on one second. they need to get you a microphone. >> jim pinkerton with fox. mike, that was really really interesting. i did not, however, hear very much about the obama administration and where they fit in this. and furthermore, it seems to me that while you are quite right about a quadruple containment being very ambitious, it seems to me that the obama administration has made a

quintuple containment if you add carbon dioxide which appears to be among the most important domestic and international initiatives that they have. >> in my view, the obama administration continues the hegemony strategy that was settled on as the consensus in the clinton and george w. bush administrations. it has changed its tactical and operational approach. but has not changed the strategy. it does not question the basic premise that the u.s. will continue to be the military hegemon of europe and the middle east and of east asia. but because of the public backlash against the cost of the iraq war, and also because of genuine concerns about the costs in blood and treasure, it has tried to achieve what david caleo once called hegemony on the cheap so that we will continue to intervene in the

middle east, but we will do so by sending drones to extra judicially assassinate criminal suspects, rather than to invade countries and try to remake them. the united states will reaffirm its alliances in east asia, the so-called pivot to -- the so-called pivot to asia. but it will not offer china any vision of an integrated security system other than perpetual subordination to the united states in its own region, so i think it's a difference of tactics, and it's an important difference. but it's not a fundamental difference of strategy. in terms of carbon, the obama administration i think is following the lead of germany and some other industrial countries in thinking that the great economic challenge is to promote rapid decarbonization of energy supplies, to avert the

consequences of global warming. now, at the same time if you look at the world outside of the north atlantic democracies, this project is not being carried out by the countries that would have to carry it out for it really to be effective. that is, india and china in particular. and, of course, china has just signed the biggest trade deal in human history with russia to import natural gas which many environmentalists are trying to prevent from being produced at all by fraccing in the united states. what everyone thinks about the severity and urgency of global warming, it's clear that if you fairly rapidly moved to replace coal as the source of energy and electricity generation with natural gas, you would slash the amount of greenhouse gases, even though you would continue to have some slower growth. so it's also clear that if you

really, really are serious about combatting global warming, as a result of greenhouse gases, you would favor nuclear energy, which is expensive in the initial investment, but once it's up and running, it's much cheaper than renewable energy sources, like hydro and solar power and wind power. so i just kind of wonder about the logic of people who purport to want to decarbonize the energy mix of the global economy as quickly as possible but reject the two most practical ways of doing it which is replacing coal with natural gas and with ramping up nuclear energy. >> ambassador burton? >> i very much agree with your answer just now on describing maybe the obama administration's strategy as fine-tuning the

prevailing foreign policy strategy, but i want to raise the question and really maybe challenge you on the point you were making originally in your remarks that maybe we're at a moment where we're beginning to see this consensus collapse. you mentioned the nixon-kissinger period, there, i think, you're correct but it was a pretty unique moment in the sense that there were real challenges at the end of the -- in the course of the vietnam war, protests here in the united states, a real sense that united states needed a new strategy, and there was a willingness, perhaps, of a very experienced president with strong advisers around him to think about alternatives. in looking ahead, i just don't

see that emerging in washington. jacob, you called michael one of the most creative people in washington, but, you know, creative in washington is sort of an oxy moron and if i look ahead and look at both republican and presidential candidates for 2016, i don't see the likelihood of somebody necessarily challenging that consensus. so how realistic is it to argue or believe that we're likely short of another kind of iraq-style debacle to see a new strategy emerge in the near future? and i just simply say it's striking to me so soon after that iraq experience and afghanistan that you have an administration that's pursuing the same strategy as you argue it is, that it's coming under

real criticism from both parties as being too weak, too prudent, and not strong enough. >> you put your finger on the basic problem which it's very difficult for great powers to retrench for both external and domestic political reasons domestically, any retrenchment no matter how prescribed is attacked as weakness. backing down carefully from over exposed positions than aut tack crow siz do, you can turn on a dime, who's going question the authoritarian government. that is kind of a trap. that is as i said, if a candidate in the republican or democratic presidential primaries use the kind of language about the u.s. in a

multipolar world that the well-known hawks would be attacked, either from within their own party or by the other party. and other concern which does bother me because i want the united states to be as secure and as respected as possible is, even if you are engaged in prudent retrenchment, will other countries view this as weakness? so even if you were overexposed in the first place, how do you back down? so there's an enormous temptation simply to maintain the overexposed position and you don't have to worry about sending signals of weakness to your opponents or being attacked at home, but the actual economic and political underpinnings of your power are eroded and eroded. essentially you could argue this is what what happened in britain and france after world war ii. in the '70s britain was sending

troops into the yemen and the persian gulf. france is still sending troops to malli. at some point, someone needs to tap a country on the shoulder and say well, you should think about scaling back if not retiring. the concern would be that you need to have an exit strategy. that's just the way i would put it. we needed an exit strategy from the cold war in the 1990s, which at which point we could say that germany and japan and south korea are not going to be our protector to rates for the next hundred years and russia and china, given, you know, the appropriate decisions on their part can become if not allies, at least other great powers and there will be some kind of system of order which is not america's allies versus america's enemies with these trip wires drawn between them. we missed the opportunity to do that in the 1990s, and i don't know really how you can do it at

this point without it seeming weakness. if president george herbert walker bush had proposed turning the organization for security and cooperation in europe into a larger structure and then gradually letting the warsaw pact and nato dissolve, that would have been bargaining from a position of strength. if the next president proposes this following ukraine, following the south china sea incidents, it will look like weakness on america's part, and having said that, that's the situation we are in and i do think that the face-saving way to back down from what i do think is an overextended strategy is to propose some kind of regional security structures in which all regional powers and the united states as an extra regional power, if we have interests in these regions, and i think we do, can participate as respected equals, instead of on an ally-enemy basis, and you

are quite right. this is still completely provocative idea in washington and you are not going to hear it in 2016. maybe you won't hear it in 2020, but at some point, i think we have to think of what is the exit strategy from this permanent cold war alliance system, which has now gone on a generation after the cold war. >> mike mesetic, pbs news hours. >> you just alluded to this, but you are a fan of t.r., who is very much in the hamilton school of realism. t.r. was a great advocate of mahan, whom you criticize. we have the specific situation now in the south china sea, east china sea, in which beijing is extending its per rim way, way, beyond its borders. how specifically is the united

states, if they stick to the principle of free navigation, open access, maritime access, how is the united states supposed to deal with this? >> well, that's a very good question. i criticize mahan because i think his view of world power is depending on control of sea lanes was already obsolete in his own period. if you look at leo amery, who was a british strategist of this period, in responding to the theory of euro asia being the center of everything, he famously said, i paraphrase, it doesn't really matter where the country is located. the country that has the power of science, technology and engineering is goading to the leading military power. if we're going to have a rivalry with china, it's not going to be decided by whose navy controls which sea linesen it's going to

be decided by whose factories, whose credit systems, who infrastructure, who r&d is more fundamental in the long run. particularly if it seems likely it would be a cold war in which just as in the soviet-american cold war, the navy has to plan for these naval confrontations, but frankly, i don't think it's a great investment of effort on the part of the u.s. military to plan for limited naval wars with the people's republic of china. on the assumption sthooes these would not turn into all-out war very, very quickly. if we have a sustained confrontation with china and we may well have one, it's more likely to take the form of a cold war with arms races, proxy battles in areas remote possibly from china, such as africa, such as central america, again. we tend to forget about our own neighborhood but that's always contested in great power struggles. so i just think that this -- and

one more point about the south china sea. during world war ii, the united states proposed to give the islands to china, our ally during the war. it would give them responsibility for it. franklin roosevelt hoped that china would be the hegemony of east asia and part of his plan for the four policemen, russia, the british empire, china and u.s. policing the post 1945 war, was china would be the hegemon of indoe china than by the french. since fdr thought american interests would be better served by hegemonic china. the let's be clear, rose very roosevelt was a realist. the china he was talking about, it was an authoritarian state.

it was an authoritarian state. i read the book "the chinese economy." it's pretty much like at modern economy. t a plan for a state-driven industrialization, which violates all the rules of neoclassical economics and is a developmental state. so that's just one of the paradoxes of our time. the china we're afraid of, a developmental capitalist state that dominates east asia, is what we actually wanted during world war ii, when it was simply not considered by anyone, i think, in the 1940s or even during the cold war, that the united states would permanently be not a major power with interests within asia. time to go to neoclassical economics which michael just derived. >> thank you, jacob. thank you, michael. as you know, michael, i hope you're right that we are at an inflection point, but i agree

with ambassador burton, that i'm afraid you're not. maybe it's because i'm too busy listen to robert kagen and krauthammer saying no, we're not. we're doing fine the question is, what piece of evidence would convince them that the time has come to change course? you cite resistance from others, other great powers, the unwillingness to resources at home, and resistance to the public at large. there are still some that say we can clearly resource it. sfrply raise taxes or cut other spending. where is the u.s. public resistance. we don't have people in marching in the street as we did after vietnam. where is the evidence of balancing by other great powers? can you point to something there? it seems we don't have sufficient evidence to convince the other side that it's time to change course. >> well, that's a good point, particularly about the other great powers. now, it was one observed to me

that in one of the crises over in north korea, the closer you got to north korea, the more relaxed everyone was about it. it was actually in washington people were more exercised than in south korea. and i think that's the case with russia. the germans have made it clear that they're dubious about another cold war with russia. i've read that the czechs are debating raising their military spending, i believe, to 1.5% of gdp. if this is a moment and russia is a great threat that it's being portrayed as, i assume the czechs would be debating maybe 15% of gdp, you know? we had 50% of the gdp during world war ii. they seem fairly relaxed. if we look at the neighbors of the china that we're supposed to be so frightened by, china is now the number one trading partner of south korea, and it's

up there among the -- japan is increasing trade integration. so i think we have to take all of this with a grain of salt. one of the dangers of our alliance system is that it enables irresponsible behavior for domestic political reasons. on the part of nationalists in japan, south korea, and not so much in germany at this point. but it allows the leaders to talk tough and to, you know, poke either russia or china. at the same time, while profiting from their increasing economic integration. and that's fine. it's sort of a game. i'm from texas, you know, we have a rivalry with oklahoma. oklahoma calls texas baja oklahoma. so, you know, we know it's not a serious security threat. so now terms behalf pieces of evidence would convince the hard

lined neo conservatives that the united states does not have a stake in global hegemony, i gave up trying to analyze it. i think even they would say at some point that it's clear that the united states is not pursuing of policy they favor. it would probably have to do with the defense budget. in the 1990s, robert kagan and bill crystal published an article, 4% or 6% of gdp being spent on defense. the u.s. is now -- at the end of the cold war, we went down to about 3% of gdp, which is respectable. it's a little more than britain and france. which have the greatest spending in western europe. it's a lot more now. and it shot up again after 9/11. under current budget plans, as i

understand it -- it's arcing downwards to even bow low 3% in the 20s, it ebbs and changes. so i think even the supporters of the hegemony strategy would say at some point it cannot be carried out realistically. now that doesn't mean you won't still nominally have the alliances with japan or china think may last indefinitely. the other thing that may mark a clear break from the present period is if there are enough challenges to u.s. hegemony and the u.s. backs down enough, it will create a new situation. new facts on the ground and that -- remember, a lot of foreign policy is psychological. it's intimidation. and this is why i'm concerned. that is, i think it's very likely the u.s. will back down again and again and again

because of what the australian diplomat calls asymmetry of resolve, that is something that is very important for them. like crimea to russia. it's just not that important for the united states. it's not worth going to war about. that's why we need an exit strategy, or we need to say here is our american vision of a europe that is not divided between american allies and american enemies. and in asia it's not divided between american protectorates and outsiders. and i think that's how we -- so it's not seen as backing down or unilateral retreat but building a new border with former enemies. >> the next question from james mann, who has written several books on the realists and neocons and on the obama administration, and told me he just completed a

short biography on george w. bush. >> michael, thanks for this. i have one question you haven't mentioned but i read is in our article, which is immigration. i would be curious to know how it fits in your thinking and article. both -- and maybe it applies equally -- as to low skilled immigration, paradigm central america, and high-skilled paradigm i guess, india. >> i approach this from the view of strategy in general. if you have a rule governed global market with relatively free flows of capital and of labor, then you can have a shrinking population, and you're -- as long as per capita gdp is going up, then your country can get richer and richer. you know, so that japan, say, could shrink.

fewer and fewer people every decade but the fewer people would be richer because the productivity growth is going up and they're better off. in a mercantilist world, in a world where some or most powers are treating economics as an instrument of state craft rather than a rule governed zerosome game, then the logic is different because the high degree of overlap between population and military power. it's not perfect overlap. you have large countries like india which are relatively weak. you have small companies britain has done since the industrial revolution, but in the long term, as productivity defuses and converges among country, all things being equal, a country with a larger population is going to be more powerful both

in trade and the military than a smaller country. that's the geopolitics of it. what you see happening in the countries of the developed world is a very deep backlash against immigration the united states on the right and in europe even more so. now partly this is a backlash against a particular kind of immigration, muslim immigrants, rather than necessarily against ohs. but in the european case, it's against eastern european immigrants, too. you know, having said that, even though this will be my most visionary counterintuitive prediction of this talk, i think that in the 21st century, this defensiveness is going to be replaced among many nations, if not all, by competition for immigrants, which will be seen as a source

of gdp growth, and also of military power, frankly, and the revenue base. right now, only a minority of countries have population rates above the replacement level. most countries are scheduled to stabilize and then start declining. largely parts of africa, central and south asia, even china is beyond the demographic transition. now seems inconceivable at this point that you could have the major nations of europe and east asia become relatively immigrant-friendly. obviously there's tensions in the united states. relatively immigrant-friendly nations. the way the united states and some other western hemisphere countries are. if the alternative is loss of military security as well as economic clout, then you're going to see a shift. this will be really, the most

radical changes in world society in centuries. the pattern until recently was that the major countries of europe and asia sent people. they didn't import them. now birthrights are so low the only way they can stabilize the population is by importing people. at the same time, it raises question, okay, if you're going to bring in people merely to stabilize the population, much less to expand, in order not to deepen divides or ethnic lines within your territory, you need to have assimilation and integration of immigrants. this is a place where maybe i'm showing my biases here, i think the united states, you know, can had a pretty good model, at least until recently, both economic integration and cultural integration of immigrants. economically, if you have a

booming economy and jobs for the middle class and so on, it's easier for outsider to get a stake in society. at the same time, the melting pot idea did not require immigrants to cut off all sub- national identities. but we had the hyphenated america. you were irish-american, you were greek-american. you were jewish-american. sweden-american. you could have both identities. this is still quite alien to most of the industrial nations. and i don't know which way they'll go. >> what would you say make senses for the news i have a hard time seeing japan in this -- which for a long time, has had low growth and you don't see the impact of changing immigration policies at all. >> to the extent that population is a basis for power, they will slip down the world power rankings as well as the gdp rankings, which is not to say they will be poor. you know, luxemburg, i think,

has the highest per capita living standard in western europe. so countries may make the choice. >> michael, i wanted to ask you about something very contemporary now, which is we've had bob kagan's essay in the "new republic." declaring that superpowers can't go on vacation. today there was an op-ed by walter russell immediate, whom you know well in the "wall street journal" declaring that america can't go on break and we're seeing the dangerous consequences of a lack of resolve in american foreign policy in failing to stand up to vladmir putin. and the thesis was that putin, in a sense, is rescuing us from our own sins, awakening us to

our bad behavior that we need to reform, and buck up, start exercising more vigorously, take a much harder stance toward foreign foes. even though president obama, whether you think he's a realist or not, he certainly enunciates realists -- some realist themes. this is a real pushback, i think, in washington against the notion of realism in american foreign policy. there's a very explicit denunciation in kagan's piece and walter russell meade's piece and by charles krauthammer of the idea that america can in fact act more prudently abroad.

they would characterize it as cowardice and defeatism. many of the things you're talking about in your earlier really date back to the paul wolf wit wolfowitzs document in the george h.w. administration when he slapped down for espousing a strategy for the cold war in which the united states would retain hegemony in all parts of the world. it seems to me that the consensus may not consist in the american public. and the obama administration, as i see it at least, is waffling. but the consensus among elite -- i'm also -- this is also coming to mind because strobe tal bet introduced the other day and no one disagreed with what kagan

was saying. it seems you have a consensus at the elite level that whether we call it liberal internationalism or neoconservative or some hybrid really is still dominance, at least among the foreign policy elite. would you disagree with that? >> no. i think there's a bipartisan consensus. it will start showing cracks. but the problem now -- it's not that it's fishering. it's still a solid consensus. the problem is the enormous gap between the claim we need to show resolve and the actual actions we will take. so, you know, we have to stand up to russia over crimea and ukraine. okay. so we might send some advisers to a baltic republic, right? putin retaliates by eliminating american-manned space flight for a decade. it's amazing. it's amazing. the united states no longer has

manned space flight capability. we were hitching rides to the international space station on russian rockets. oh, and it gets better. the united states doesn't make many of rocket engines it needs for our own spy satellites, which is just as well, because the spy satellite the u.s. is temporarily using to communicate with the african forces is a chinese satellite. right? so on the one hand, we have the leaders of the foreign policy intelligence saying we must rule, we must stand up to russia and china. and at the same time, they is spent a generation dismantling the american military industrial complex. the united states does not build a single civilian ocean-going ship. thanks to president ronald reagan, from 1930s under franklin roosevelt all the way up to the reagan administration, the united states government had a simple policy. whatever subsidizes are offered

to civilian shipmakers by other countries, the federal government will match. no questions asked. the reagan administration came in, we're stronger. number one, we're going to win the cold war. they decided this was a waste of money, so we would get rid of the subsidizes. consequently, the united states, apart from specialized navy ships and domestic barges protected by the jones ability on inland waterways, we have to borrow all of our ships, all right? that's my answer to all of these triumphialists. teddy roosevelt said "speak softly and carry a big stick." he didn't say denounce your rivals and ask if you can borrow or buy a stick. >> from much of what you have said it seems to me that the best friend a neoconcould ask

for is mr. putin, because there was sort of a natural withering away of the overblown role that we were playing toward the end of the cold war. in fact, there have a conversation between senior bush vice president or just after becoming president where bush is meandering around talking about we have -- he says it would help if you could explain what this new role for nato is that you're talking about. # and bush starts saying we have to think in political terms about a new role in the period. he doesn't know. while we dope have an enemy. and he says, yes, isn't it inconvenient not having an enemy in putin has basically come forward. as a answer to every neocon's dream. he changed the rule of the game at least rhetorically. and made it much more difficult for anyone to talk about the standing down of american power. >> i think that's right. again, the question is what are

the concrete actions if the united states is going to respond? now, it would not a bad thing if it were a sputnik moment and the response was, as it was to sputnik, let's upgrade our education, invest in infrastructure, redouble for r&d. as i suggested earlier, if you're going to have a genuine great power riv rlryes, but we may end up being on rival sides but at end of the day couldn't tri wntry with the bes technological base will hold out longer particularly if you have cold wars, wars of economic attrition. with the neoconservatives, and i think many of the neoliberal hawks have forgotten is that foreign policy has more than one instrument. the military is not the only instrument. and we have allowed our other instruments to decay by focusing

on having marines in australia to contain china or, you know, putting some nato troops in estonia or something like that. i'll give you an example. the united states during the cold war, competed with the soviet union in terms of foreign aid and lending. africa is going to have 2 billion people by the year 2100. those are 2 billion. enormous needs for infrastructure. the chinese are building highways and ports and railroads in africa around the indian ocean and so on. while we have people on the left and the right in the u.s. congress trying to abolish the export-import bank. which on a mump, much, smaller scale helps to finance infrastructure and manufacturing with inputs from u.s. exporters in the rest of the world, right? as, you know, if you look at what is going on in eurasia now

it's one of the greatest periods of infrastructure construction in history. pipelines, high-speed rail from china potentially 0 europe. and congress cannot agree to come up even with a tiny, modest pilot program nation of a national infrastructure bank. much smaller than the european investment bank or the state development banks that are possessed by brazil, india, russia, china, by all of these other countries. so i don't want to suggest by any means that we should relax and that we won't have great power conflicts, but we need to stop thinking in terms of sending divisions here and submarines there. the cold war was first and foremost an economic struggle. the reason the soviets cracked was their economy cracked. we were rich, prosperous, and

innovative for a fraction of the money they spend on the military we could outspend them. that's how britain won the knee poll onic wars. it was much smaller than france. but it had better credit and more prosperous economy. it's the example in the world. it's ideological war. it's propaganda. even in the past of a few months, the revelation now about the nsa. taking faces from the internet. the revolution that the cia and afghanistan and pakistan was using hospital operations as a cover for getting dna from potential terrorist suspect. including bin laden's family. this is enormously damaging. you know, to america's image in the world.

i share some of the concern of main stream foreign policy establishment with america's power and resolve. they're thinking in this kind of board game manner where it's just like moving troops here and there. and we need is a conversation assuming we face great power challenges, let's look at every dimension of power, including power and the power of influence and example. and not simply think it's a matter of sending an increasingly whittled down military ace symbolic presence here or there. >> michael, as a final question, let's test those powers of creativity i mentioned in ambassador burt commented on. it's 2015 what does america look like domestically and what is its standing in the world?

>> well, there's been a number of studies of what the would will look like in terms of gdp in 2015. they tend to agree that the four major economies will be the united states, india, china, at least in terms of gdp, and the european union. and if we're looking at the middle of the 21st century, it's only a few decades from now, the united states will still be in an enviable position. it will be the only big country that is rich and vice versa. unlike robert kagan and the many of the neoconservatives. i think we're in a fairly secure world. the united states does not really have to control the south china sea or the marshes of prussia in order to be a world power. the source of our world power is we're the only first-world country that is only the scale of india and china. they would be big and important but they're going to be poorer per capita and have less

disposable power. on the fourth area of major wealth, the european union, i think, will be some mix of cooperation and local sovereignty. it will not act as an entity in world affairs. probably by that time you will have a somewhat more liberalized mellowed russian nation. russia is part of europe. it's always been part of europe. the idea that russia is not a european country. the next time i hear them say germany is europe's largest country, no, russia is europe's large effort country. and interestingly enough by 2015, absence of major change in british immigration policy britain will have more people than germany. these things can change as a result of policy. if you look at the large, rich europe, in which the two largest nation states are russia and britain, that's somewhat different, you know, from the

german dominated eurozone. i think there's reason for cautious optimism. and the fact is this is the world that we sought to create and the world conflict of the 21st century. we wanted china to be free from colonial domination. we wanted india to be independent. we wanted a whole europe that wasn't divided by an iron curtain. having achieved it, we're now saying it's so dangerous that we can't demobilize, we can't pull back, you know, we can't abandon anything. so, you know, maybe what we should do is declare a victory in the world wars. >> well, thank you, michael. having known him for many years, i was able to assure my colleague, paul saunders here, that in some meetings, you know, you get these air gaps where the room sort of goes silent. i assured him that with michael,