thursday on washington journal, discussion of the plilt kal and military options for u.s. and iraq. and we'll take a look at the u.s. economy and the latest news coming out of the federal reserve with new york times senior economics correspondent neil irwin. you can join the conversation by phone, facebook and twitter. also thursday, live coverage

on c-span3, acting assistant administrator testifies live at 9:30 eastern. later, the faith and freedom coalitions road to majority conference with remarks from republican senators along with former florida congressman allen west. that gets underway live at 12:30 eastern here on c-span3. >> with live coverage of the u.s. house on c-span and the senate on c-span 2. here on c-span3, we compliment that with public affairs events. and then on weekends, american history tv including six unique seeshz. the civil war's 150th anniversary. american artifacts, historic museums and sites to discover what artifacts reveal about america's past.

history bookshelf with the best-known american history writers. lectures in history with top college professors delving into america's past. and our new series, real america, featuring educational films from the 1930s to the '70s. c-span3. watch us in hd, like us on facebook and follow us on twitter. >> senate finance committee chair ron widen of oregon discusses some of the on going fnt i financial issues in congress. he spoke at the wall street journal chief financial officer's network conference. it's 30 minutes. . >> thank you, john. thank you, senator.

two interesting factoids. one is i got to know the senator a long time ago in the 1990s when i wrote a column who had this great idea of how to solve the finances of medicare forever. here we are and you're here on medicare and it's still a mess. so i guess we didn't succeed. secondly, in an earlier life, senator widen played division i basketball. instead, you became chairman of the senate finance committee. i think you made the right choice. >> let me start where a topic that everybody loves to hate,

taxes. one of the anomalies the last few years is the broad bipartisan sen sense on tax reform. there ought to be a broad tax reform on the system and, yet, nothing seems to happen. tell me what your plan is to make it hatch. you and your republican colleague, senator hatch, have announced some hearings just last week. what's the road ahead for tax reform? >> first of all, our people deserve a tax code that gives all americans the opportunity to get ahead and not just those who have resources the fission your out how to get a brigade of lawyers and accountants and hot wire systems so they could take advantage of the latest loophole. and i developed the bipartisan proposal. the last few years first with mitch mcconnells economic attendants, the most recent, senator dan coach and essentially builds good work that a big batch of democrats did in the '80s, bill bradly,

another tall democrat on the finance committee which basically means you go in there and drain the slot. there have been something like 15,000 tax changes since that last tax reform. so you go in there, clean those out, use the money to hold down the rates and encourage progress. and when they did that in the first couple of years on the box, they created something like six million new jobs. nobody can say they're all new to tax reform, but it sure helped to set the climate and i think it can do so again. >> tell me the specifics. what would you do to the tax rate? perj rates? is it revenue neutral in your vision? >> first of all, i think pro-growth taxes, the right kind of bipartisan tax reform, is going to encourage job growth, economic growth and that will translate into revenue. and my top rate is 24%.

it is the lowest on offer. we've got a big group of cfos here. certainly, for the next two years, to pass these tax extender provisions, senator hatch and i have gotten through the committee on the bipartisan basis. and then help us pinpoint specific loopholes that can be closed in order to drive down rates which is the principle. the reality here is much of what we're seeing today means conversions, for example, which are very much in the news. stem from the fact that our corporate rate isn't really efficient.

it's putting us up there right in the top of a local economy. we need to have an efficient rate of business that's competitive. we need to find a way to expand marketings and, in our country, make things here, grow thichks here. >> those are the only two years we have. >> how do you -- >> how do you do this? >> by the way, 1986 was an election year. that was the year of the bipartisan tax reform. bob patten wasn't able to make a signing committee because he was at home getting a plaque from the citizens. i will tell you and those participating, i think that there is a prime 15-month window now. essentially from now until say

the august recess of 2015. that's why senator hatch and i have joined with three important hearings. i think we all understand that our students are getting smothered by debt. this is really harming their ability to be productive. and my focus there will be to consolidate these, this array, this welter of confusioning provisions into essentially a handful and, also, to create new incentives for everyone to say, right now, if you're with a modest income and you want to set a little bit of money aside, you bump up against these asset limits. so let's start with the education incentives.

>> one of the issue that is's paramou paramount, you mentioned that topic. what are the prospects for getting those done? it's late. some of them are going to expire. are the extenders going to be extended? >> yes, but the real priority is to do it quickly. the reality is so many of our businesses pay quarterly so they're having to pay higher estimates now. i met with small businesses in oregon recently. and one of the good parts of the extender bill, a bipartisan amendment, gears it more towards the small person, the person with a mirage, an innovation. but they said if we don't get this passed quickly, i'm going to be making estimated payments which takes money out of my pocket that i could other wise use to hire people. let's get this passed quickly.

it also gives us more time to move on to the next year, which is comprehensive. >> quickly, can you define? >> i thought that senator hatch and i produced a proposal to have strong bipart san support in the committee. we tried to bring it up. we made it clear that we would be open to amend this. that's a view that i don't happen to share, but it's a legitimate bipartisan amendment. let's offer those amend ms that are really relevant. get this enacted and move onto reform. >> you mentioned aversion. has this become increasingly relevant in an emotional topic who had a new one this week?

>> the rate is 12.5%. >> right. and you wanted to address that problem in our paper a couple weeks ago saying, essentially, we need to stop this and you wanted to take some steps to deal with inversions. what's your idea for dealing with inversions? >> well, first of all, i think we ought to understand what's at stake here. that is americans don't want the rates to bolt to want. what we want to do is having more efficient corporate system. 245's why i have this rate in a proposal that has been bipartisan for a number of years of 24. i think that is fair to all sides. clearly, to be competitive in these tough, global markets, there are a lot of pieces to the puzzle.

i was trying to put everybody on notice that that's what i was going to push for. that the new rules we would get to tax reform. the reality is that any time we have one of these kinds of approaches, in the long term, people pay more. what we need to do is create a system that gives everybody in america the opportunity to get ahead. i want to say whether you're a corporation or somebody just getting started, we flow that our system is about marketplace forces. right now, we don't have a system that equally gives everybody the opportunity to get ahead. that's what we're going to focus on starting next week with education. >> are you a tax reph ration fan? >> i have indicated in my last

bill, this is when senator coats stepped in after senator greg, that i am open particularly to the idea of doing it as a transition to a new system that creates new incentives specifically to create red, white and blue jobs. >> but is that a reason not to do it? or are you still in favor? >> what i'm in favor, we said from the transportation bill, from which it's being considered, that everything is on the table. i think transportation really comes in sort of two steps. the first is the short term. we've got three weeks,

essentially, before there goes belly up. this has got to be done before august or looxing at a vierts of ways to do it. for the longer term, what i want to do is encourage the private sector to come off the sidelines. this is part of that debate. >> and then, let's look at approaches particularly in my view, that encourage private capital to come off the sidelines. >> are you actually confident that the highway trust fund is about to run out of money?

there are projects shutting down across the country right now. are you absluptly confident that the highway trust fund is going to be replenished this summer? >> failure on this is not an option. with a fragile economy, we cannot take the kind of economic hit that you would have if transportation is pretty much vanished. so failure on this one isn't acceptable. senator hatch and i have had some very positive talks on it. and i anticipate our moving even during this work period advanced. >> a couple more topics. internet taxation and sales online. both of those questions very much up in the air right now. what do you want to happen? what do you think is the most likely outcome of the internet

taxation? >> what we wanted to do is, a, in those earliest, you know, days, we wouldn't see promising businesses, particularly small businesses. it has been a huge tool for innovation. so i want to see that reauthorize. i wrote the original bill and wrote the reauthorizations seen in the last decade. now u the marketplace fairness act goes in the other direction. and i have been oppose today that legislation. there may be some ways in which both sides can read. but my priority here -- this is seats tax on the internet?

well, what it is is discrimination that. 's exactly what congressman cox and i on a bipartisan basis deal with. >> you also deal with trade. your party is essentially moving in the opposite direction.

>> so i understand people have strong views on this. bill clinton and i and others were not talking about digital goods. this is an area where it is vantage america. so there are a whole host of new kinds of issues. to me, one of the priorities in building a new bipartisan coalition.

>> why are you talking about new agreements if you're not enforcing the laws on the books today. so, with respect to enforce. ment, with respect to digital goods, human rights, transparency, labor and environmental protections, i think there is an opportunity to build a new bipart san coalition. maybe we'll call it smart track that, in effect, ensure that is we can have these markets, in other words, my part of the world is very interested, of course, is a big growth market. northeast, maybe the european markets. the reality is this is a prime opportunity for us to create more good-paying jobs, the trade jobs often pay better than do the non-trade jobs. and i'm determined to find a way to a new bipartisan coalition for trade policy. >> but you are swimming upstream

against a pop ewe lus current in the country, i think it's fair to say. and that makes it even harder. it's never been easy to sell free trade. isn't it harder than it was than just a few years ago. >> i may call it smart trade. but the point really is if you have a new agenda that focuses on the concerns, middle class people are talking about, i mentioned enforcement. i mentioned labor matters. ensuring that environmental, you know, policy, whether it's illegal logging or over-fishing or not taking away american jobs. my determination is to get a significant block of democrats 234 the senate well over a majority of democrats to be part of a new focus on trade policy. this is not going to be your grandparents trade policy where it's all the policies in and a couple of men.

>> let me ask you one final thing and circle back to where we started to go back to tax reform for a second. do you think it is advisable to try to do corporate and personal tax reform simultaneously or is it wiser, as the white house seems to think, to just do the corporate part first, personal is too complicated. or should these be done together? >> i think they have to be done together, jerry. the tax system is like an ecosystem. you put pressure over here and it bumps up over here. and, of course, then there's politics. if the word goes out across and there's going to be business tax relief, we're going to have millions of businesses saying hey, that sounds pretty good. it applies to me. is then they may find out it doesn't apply to the sole proprietorship.

so you've got to make sure that these businesses that pay taxes as individuals are also part of the equation. and that, as i said, people will probably get sick of me saying it, but it very much embodies my philosophy. that's part of giving everybody the chance to get ahead. g . >> senator wyden, if you look at the revenues of this country, over 80% comes from individual taxes and less than 10% comes from corporate tax. so the real issue is a gap of about $800 million every year across 16 trillion. .

>> so it really comes down to the individual tax that's the issue. why is it that we're one of the handful of country ins the world that doesn institute a consumption tax. >> you had the american people and me at hello when it comes to simplifying the tax code. in fact, if you go online, you'll be able to see the 1040 form that i proposed as part of my bipartisan proposals. it's like 31 lines long. and the people at money magazine are prominent financial magazine, took a typical tax code under our legislation and they were able to complete the individual's taxes in under an hour.

with respect to revenue, you advanced that. certainly my colleagues will be interested 234 that. a number of them are looking at that and carbon taxes and the like. so that will be part of the debate. what i'm trying to do, and this is part of giving everybody the chance to get ahead, 1 recognizing the consumer driving 70% of the american congress. and the consumer right now does not have the kind of disposable income that we really need for those kinds of purchases. so the center piece is to triple the standard deduction. if you're making $70,000, we're going to put well over $30,000 worth of tax relief out there for you giving you more disposable income to go out there and buy those goods and

services that drive our economy. to some extent today, we have a dollar tree economy. we have purchases being made at these stores with very high-end goods. dollar tree, we have many of those and are always mobbed. but the places that are hurting are sears and penneys and the restaurants that cater to the middle class. clearly, when henry ford raised the wages of his workers, that was a key to helping the middle class drive economic growth for the long term in our country.

>> senator, what happens between now and the end of the year on fast track operations? it's giving the opportunity to speed negotiations with partners. the argument is all the parter ins abroad are holding the best offer off the negotiating table until they see that the negotiations are not going to be approved by congress that the administration does, in fact, have it. >> first of all, and it's hard to keep all of the acronyms together. the lines are just as much have in government today. you know, it used to be, and i have colleagues come up to me and say, hey, what are we talking about this tpa deal for? because i just read in the paper that tpp is almost finished. what's going on? i thought that the whole point, and when you read the text or the law, is tpa is supposed to define your negotiating objectives.

you do that first and then you come back and do your substantive agreements. now,obviously, this has sort of -- the yiddish word is vershmegle is come together. >> it covers a lot. >> yes, it does. i think that our trading partners know that clearly this is a matter of heated, doe mesic, you know, political debate. but we are intensely serious about both of these matters. i have sent, for example, my lead, a trade staff for the person handles, you know, trade matters finance committee to recent negotiations. i've had a number of discussions with officials including in the last couple of weeks, prime ministers are coming through washington. we are making it very clear that we are intensely interested in

getting this done. as i indicated, jerry, i've seen this as one in the past in generating more high-skill, high-wage jobs. >> you can get as close as you want to the finish line if you don't have fast track tpa in the president's hands. i don't think you can get across the finish line. >> my hope is this bipartisan coalition that i'm talking about jerry is going to be in place for the next few months.

>> certainly my hope. mike furman and i talked constantly. he is our leading -- certainly. my hope is i don't set the calendar in the united states senate. but it is my hope that in the next few months, we will have a new, bipartisan coalition for expanded trade that, for the first time in ri cent years, puts new focus on what i think is not just political issue. it's an economic issue. we need a trade policy that helps create more opportunities for middle class people who are legitimately very concerned about where our future is going. >> senator wyden, jerry, thank you very much. [ applause ]

>> good morning, everyone. thanks to you both for being here. during the session, we're going to ask for your participation on a couple questions. mr. furman, i'd like to start with you. talk about the u.s. economy. beyond a painful, long recovery. there's increasing concern that the long term growth rate is slower than we thought. over the past half century, we averaged about 3%. kwha's going on and has our future been darker than we thought? >> if you look at economic growth, you can look where we are right at this poemt. and we don't want to look at the rear-view mirror at the first quarter. we want to look at where things are right now.

job growth has actually picked up. we're adding about 220 jobs a month. adding jobs for the month of june, we'll have 52 consecutive job growth. but then you look forward. there's two components of growth. one is how much you're adding to your productivity. the second is how much you're adding to the work force. the first stashted rising in the mid '90s. it's continuing strongly. i think there's a lot of technology and growth in our future. the labor force, that's absolutely as the baby boomers are retiring. that does contribute to an overall slower growth rate. but i it highlights like immigration reform and doing what we can to go against those demographics.

>> but why are the predictions slowing. >> >> some of that seems to have been due to weather and long time factors. the half year before that was quite strong. >> i'd like to ask you about emerging economies. i was talking to some cfos last night and it seems to be the answer for growth. now, that's reversed almost completely. the world bank has a study of this and for the third year in a row, been able to deliver disappointing growth under 5%. what can be done to bring them on track and what do you predict? >> it's disappointing. disappointing by their own past performance. we're below 5%. 4.8% is our figure. that's still in the common

global area. and among the big countries there, china is still at over 7%. again, it's still 5, 6% have had some growth. india is dpoun to below 5%. again, poor compared to what they were doing eight years ago. brazil is the one that has gone down quite a bit. but we are keeping our fingers crossed on that. my own expectation is that there are sufficient tech tonic shifts to deal with the labor market. it never makes 2 headlines. but, because of those reasons, a lot of the growth leadership, absolutely both has no comparison. will the growth leadership go back to the developing economies, the few big one that is are managing to reform and do relatively better in terms of organization.

>> before we go on, i want to switch to our first question for the cfos. we'd like to know which country you think will deliver the biggest economic surprise over the next 12 months. does the success of the shale boom insulate us? >> if you look, eight years ago, we were reporting 12 million barrels a day of oil. we've cut that down to 6 million barrels per day. half of that production is extra production. we have discovered and increased our production of oil by as much in this country as iraq produces. and, about half of that production at imports is due to reduced use and fuel efficiency. we have the most fuel efficient fleet.

so we're more insulated than we were, but no one is fully insulated. in fact, even if we didn't import any oil. our global market is very much from around the world. we're in a lot better shape than we were 30 or 40 years ago in terms of the oil intensity of our overall economy. but there's no doubt it's a risk factor. and it's one that where he're taking very seriously. >> are you doing any modelling in terms of how long it will take? >> we certainly monitor the situation in oil markets. and, as the president said last week, would look at the range of responses that we could potentially take. >> the export debate in natural

gas, you're talking about building terminals three years from now. i don't think this changes that debate at all. >> you served as the economic advisor to india's government until 2012. with the election, there is incredible optimism now about india. are people getting ahead themselves? what should companies be thinking of when they're thinking of india. >> optimism is right. if you look at the last couple of years of the previous government, and i was actually in there, the reforms have slowed down clearly. from 2005 to 2008, india was growing. then, the last two years, it dropped down. there was also a slow down in reforms. there was an eminent election.

there was corruption scandals which were affecting the temperament and the mood in the country. civil society was very upset about this. so with the election, there comes an expectation. and if you look at the manifesto details, we do expect there will be some reforms that come in. and we don't have to think ooft next election that will happen for five years. so i actually expect that given that a couple of the fundamentals of the economy, like the savings rate and investment rate, india now, as countries used to do in the '70s and '80s and they were growing very fast. if the reforms get into action, i think within a year, a year and a half, the growth figures in india should become very clear. >> and you think, obviously, the past few years have been a real disapointment.

>> disa poipointment, but you k if you look at india's growth, it was 4.8 and 6%. i kept saying in india, one of the best signs was on one television interview, somebody said what's happening to the country? it's going to the dogs with india growing at 6 pnt. this changes is the great hope for india. that 6% is treated as disastrous for the economy. it did slow down the economy. but there was no doubt that there was a refund slow down over the last two years. and therein lies the main hope that our expectations will pick uch. >> i'd like to ask you both to weigh into the austerity debate. it was striking to see earlier this month that christine lagard actually apologized to george

osbourne for criticizing the cuts and saying the imf went too far. i'd also love your thoughts about europe, as well. >> i actually on balance feel that reactions were right. given that the world had changed over the last 7, 8 years, 23 you look at fiscal numbers, the rich countries look much worse than larger economies. that being so, fiscal e con mir is something they would have to go for. the question is the design of this austerity. britain did right. i feel that the costs that were

taking through the austerity are beginning to pay some dividends. there are some countries which vrnt done well. the figs kwaurter didn't do well because it was too hot. by euro zone on the whole, we're expecting, is going to cross 1% this year, which, given the performance of the euro zone is actually a very clear, good sign. >> mr. furman, does the u.k. hold any lessons for the u.s.? >> i think you want to look back a little bit further and ask where countries were today

compared to the crisis. >> that was actually a remarkably fast crisis. i think that was a combination of the extraordinary fiscal, monetary and financial housing across the board, aut-response. europe isn't back yet. the u.k. isn't back yet. france is not back yet. i think that tells you in some degree the european policies. they have a lot of structural chapgs going forward.

you're seeing some of that from the ecb. >> let's see what you all thought from the coming moment p months. 33% for india, very, very interesting. 16% for russia. how does russia play into your thoughts about the global economy and how significant of a shift do you think this is? russia has the great uncertainty. i forget what the worldback's forecast for russia is. but it's probably just a little

bit less than that. and it's with a big margin around that. ordinary investors begin to worry. >> an issue a bit closer to home, there has been a number of deals lately that involve a practice called tax inversion. electronic was just the latest. how concerned is the innovation that companies have to locate operations abroad. do you think this will be something that is an impetus to corporate tax reform? >> this is something that i'm more concerned at. that we are looking hard at.

wu this is also part of a broader problem with the corporate tax code that's deeply broken. with the united states having the highest corporate tax rate in the oecd with the united states having an international tax system that's broken and both allows substantial erosion and greatly interferes with the competitiveness of our countries. so, ultimately, the solution here is to reform our tax code. and i certainly think that's the lesson that you've heard from senator wydon and hatch and both sides of the aisle.

when we reform our tax code, part of it is making america more competitive. we need to take measures to reverse this. >> do you think it will drive the pressure up enough? >> i would have thought that the fact that the united states became the world record holder a little over two years ago would have put a ticking clock on our efforts and increased the pressure. and i think this just adds to it. i think the good news is there is an increased convergence of views 23 you look at what chairman camp and the ways and means committee has put forward.

so i think there is an increased agreement about what it is that needs to be done. we just now need to go ahead and do it. it's something the president would absolutely love to do. >> we've gone an exceptionally long time without talking about china. >> the purchasing power, not guilty minot mine, there's a hu national organization that come puts that. it's hosted by the world banks. but it was out in public domain. so china, corrected gdp. it's expected to overtake the u.s. sometime this year.

now, as this number is mine, so i haven't talk pd about it yet, but the overtaking is known. it's nowhere nearly as moe mentous as some media outlets have made it to be. also, purchasing power correction. it means that within china, you can buy its goods more cheap than you can american goods within the u.s. there, the purchasing power is unimportant because you have to pay the country's price. it's going to overcome on the 29th of september. i did a computation a few months ago. second of november. but after that, we've got the numbers, the u.s. growth in the first quarter having gone down.

>> what's the significance of this and how concerned is the administration that china is protecting its own kpaempbs. >> first of all, you should start monitoring gdp on a daily basis. what matters in the international arena is not that haircuts are cheaper, it's how much your money can buy in terms of financial power, in terms of foreign aid and military power. every one of those depends on the market exchange rate. the united states is enormously, you know, much larger than china is.

but china is playing a global role. it helps support u.s. and economic growth. it is something we are trying to engage with china and work our way through. >> between the spine issues and a sense that there's favoritism to soes, do you sense a shift in china towards their own versus the west? >> we tax something like the exchange rate. and there has been an increased number of concerns after there has been some progress made in that area. some of that is slipping. secretary lou went to china about a month ago to engage with the chinese in that issue.

a lot of them are in the interest of china's economy. they need to rebalance. they need to move away from a very heavily, real estate, construction credit, directed credit, driven exno, ma'amic expansion to credit-directed expansion to a more balanced one. >> can i put a second comment on this? there's a worry about that point focus, and for the reason that jason was just alluding to. china's financial expansion has been huge. in the last six, seven months, every time the economy slows down, there's a fresh stimulus. this is good for short-term

growth, but short of reconciling the financial burden. pushing that back a little bit more. there's a risk that china will find it very difficult to manage. there's no hard science of financial management. we saw that in the u.s. in 2008. and china may have to face that soon. >> we want to open this up for questions. we're asking where you think the u.s. economy is going to head in the next 12 months. less than 2.5%, 3% to 3.5%? the surprise, 3.5%, optimistic. do we have any questions to start it off?

>> you already have your response. >> looks like 2.5% to 3% wins. very interesting. >> and how does that compare to what the president's advisors are thinking? >> our last report was in february, obviously, we would update it in light of recent events. but it would be close to that. >> yes, please. >> i work with lee advisors. my question, brazil as been a bit of a head-scratcher in terms of growth. i would love to hear your perspective on growth in brazil and longer-term views on the

potentials in the african subcontinent. >> well, there are important reforms, fiscal policy measures that brazil needs to take. where hope lies, actually, it's africa. starting in a low base, but sub saharan africa -- if you take africa out of it, a big slow-growing region, the rest could grow 6%. so, the rest of africa is doing really well. the last ten years are good, poverty levels going down. but one caution, for its gdp base, more foreign flows than

its competitive region. if you get a slowdown in china, the's going to it africa very badly, immediately. it's doing well, done well over the last couple of years, but that's one big risk over africa. >> any further questions? i have one, we haven't spoken about japan. they're undergoing a lot of significant reforms there. are you predicting that it will be successful? >> japan, also, there are monetary reforms going on. one of which gave a big boost, people tried to get in before an increase. so, a big jump up.

and japan is starting to get into the tax competition, luring it to get it back up. and 1.3% growth in the coming year from japan. and one of the big strengths of the u.s. is that through it's policies in terms of labor, it manages to tap into labor, but that's one -- in large countries, rich countries giving the nature of globalization, they have to use the cheaper labor available in different parts of the world. some of the shallower reforms for japan, monetary policy has done well. and japan, back to 1.3% to 1.5%.

>> and i have a question. what do you recommend be done for the education system in the u.s. to grow the middle class and improve u.s. competitiveness? and this goes to the income inequality question that seems to loom over politics. >> well, with the inequality part, there's no debate that he should have equal opportunity as a base. so, that's the place to start, high-quality preschool for all. if you look at american 4-year-old enrollment in

preschool, we're 25th. that's pathetic, and we need to fix that. and the president has an initiative to do just that. and as we move on from there, from k through 12, the big issue is just how we're dealing with educational standards in common core. it's encountering some turbulence in a few of them. but the governors and the business community is behind it. and from that to college, we've been really successful to bring lower-income people into college, but we haven't been as

good at completion. the large increase in student debt, some of it, people having a hard time repaying, and del k delinquency going up. so, we need to improve everything, preschool, k through 12, college, and beyond that training. >> and what are the two or three economic initiatives for the obama administration? please be specific. you have a minute. >> okay, i'll confine myself to the ones that begin with the letter "i." immigration reform, number one. it's a major economic initiat e

initiative. would increase our labor force, innovativeness and raise what economistis economists call our productivity growth. people that face uncertainty, give them a path to citizenship, and give them a path to success. number two, investing in america's infrastructure. and number three, i'll cheat, business tax reform. the three of them together will have a significant impact today and in the medium and long run. >> and we'll have to leave it there. thanks very much.

>> thank you. federal reserve chair janet yellen talks about monetary policy. that's next. and paul bremer and jay carney. later, a senate hearing looks at stock practices and insider training. house republicans will meet tomorrow to elect a replacement for eric cantor. congressman kevin mccarthy of california and labrador of idaho will chair. next, the head of the

federal reserve is asked about the status of the federal reserve program. janet yellen spoke to reporters. good afternoon. the committee concluded its june meeting earlier today. as was indicated in our policy statement, we will make -- maintained its forward guidance

regarding the rate target, and -- remains appropriate. today's policy actions reflect the committee's assessment that the country is continuing to make progress toward maximum employment and price stability. the unemployment rate is four-tenths lower than at the time of our march 6th meeting. and -- those working part-time but preferring full-time work has fallen by a similar amount. unemployment remains elevated, and underutilization in the

labor market continues. and this appears to have resulted mainly from transitory factors. spending by domestic households and businesses continued to expand in the first quarter. and the limited set -- in the second quarter have picked up. the committee thus believes that economic activity is rebounding and will continue to expand at a moderate pace thereafter. overall, the committee continues to see sufficient underlying strength in the economy. and the committee remains mindful that inflation could

pose risks to performance. and expectations continue to be well-anchored. the committee continues to expect inflation to move gradually back. and the committee wants to ensure that the policy continues to reflect the longer-term objectives of employment and inflation rates of 1.2%. as always, each participant's projections are modeled on their own perspectives.

-- now stands at 6.0% to 6.1%. and we generally see the unemployment rate declining to the normal level by the end of the 2016. and -- 2.1% to 2.3% for 2014. down notably from the march projections. largely because of the unexpected contraction in the first quarter. finally, fomc participants continue to see inflation moving only gradually back to 2.3% over time as the economy expands.

the central tendency of the projections is 1.5% to 1.7%, ri rising in 2016. and the committee decided to make another measured reduction in asset purchases. and we will go down $10 billion from today's rate. and after, we will continue to expand our holdings of longer-term securities. and reinvest principal holdings of agency debt and agency mortgage-back securities. these sizable and still

increasing holdings will continue to put downward pressure and make financial conditions more accommodative. h today's announcements show that progress to the objectives will continue. -- on going improvement in labor markets and inflation moving back over time toward etc. longer run objective, the committee will likely continue to reduce objectives in measured steps in future meetings. but it is not a preset course and decisions remain contingent

on the outlook for jobs and inflation as well as the assessment of the likely success of these policies. and in determining how long to maintain the target rate for the federal funds rate, the committee will assess progress toward its objectives. this broad assessment will not hinge on any one or two indicators, but will take into account a large range of indications. based on its current assessment

of these factors, the committee anticipates that it will be appropriate to maintain the rate until the program ends, especially in continued inflation continues to run below the goal and longer-term expectations remain well-anchored. and it's the committee's current assessment that -- economic conditions may for some time warrant keeping the target federal funds rate below levels the committee regards as normal in the longer run. this is consistent with the policy as reported in the participant's projections.

which show the federal funds rate remaining below normal values in 2015. and although there are a number of explanations of the federal funds rate target remaining below its normal level, there are some reasons -- diminished expectations in future outcomes -- may be lower for some time. let me reiterate that the committee's expectations are contingent on the economic outlook. if it continues to be stronger

than the anticipation of the committee, then increases in the federal funds rate target are likely to occur sooner and be more rapid than currently envisaged. -- resulting in larger and significant increases, then the changes will takegradual. these represent prudent

planning, and the intention to communicate plans to the public. the committee is confident it has the tools it needs to raise short-term interest rates and to control the level of the interest rates thereafter. the committee's recent discussions have centered on the appropriate mix of tools to employ during the normalization process and the degree of control over short-term interest rates, the funding of the federal funds market, and the extent to which the federal reserve interacts outside of the

banking center. we will continue its discussions in upcoming meetings, with details coming later this year. thank you. i'd be happy to take your questions. >> is there every reason to expect that the pce inflation rate, followed by the fed, looks to exceed your forecast later this week. does this mean that the federal reserve is ahead of inflation? if it's above the 2% target, how is that not blowing through the target in the same way you blew

through the 6% target? thanks. >> thanks for the question. so, i think recent readings on, for example, the cpi index have been a bit on the high side. but i think it's, the data we're seeing in noisy. it's important to remember that inflation is evolving in line with the committee's expectations. the committee has expected a gradual return, and the evidence we've seen suggests that we're moving toward our 2% objective, and i see things roughly in line

with what we expected it to be. and looking at the projections we submitted this time, we see have little change with the projections of the committee. >> what about the tolerance for higher inflation? >> well, the committee has emphasized that we have the 2% objective as a longer-term -- for pce inflation. and we will not willingly see a period where inflation is above or below our objectives. and we continue to see the data coming in, abstracting from the

noise, in line with what we expected. and continue to see a gradual movement toward our expectations in the next two years. >> can you please talk about -- is that something more permanent about the economy? is this it, or is there potential to go lower yet? >> well, you do see a slightly higher decline in the committee's longer-term normal rate of interest projections. i would caution you, however. we've had turnover in the committee. two new participants that are

new and two who departed. and that can create changes in the projections. small changes that are difficult to interpret. and i think the most likely reason for that is, there's some slight decline of projections pertaining to longer-term growth. and particularly estimates of -- would move in line with growth projections. >> my question is the flip side of steve's. it's about your outlook for unemployment.

your predecessor said that -- today, you lowered your outlook again. how do you see the unemployment rate evolving? what might an unexpected drop mean for the first rate hike? >> it's true that unemployment has declined slower than the committee has expected. and you do see a slight lowering of expectations in terms of the unemployment rate. but i think we've seen continued job growth at a pace that is certainly better over the time. over the last three months, for example, employment, payroll

employment has been rising. around 230,000 jobs per month, and close to 200,000 over the last year. that said, many of my colleagues and i would see a portion of the decline in the unemployment rate is perhaps not representing a diminution of rate in the labor department. and i think most of us would agree that there has been and will continue to be decline for d demographic reasons. i think it probably reflects a kind of shadow unemployment or

discouragement. a cyclical part of labor force participation. if that's correct, we may see further recovery in the labor market. those, let call them, discouraged workers will return either to unemployment or employment. and as labor force participation begins to stabilize, the rate will come down less quickly. and i think for a number of people, that's a component of the forecast. you asked about implications for the path of policy. well, the forward guidance states that the timing of liftoff will depend on actual

progress we see, and the progress we expect going forward to achieve our goals. maximum employment and 2% inflati inflation. so, we're not going to look at any single indicator like the employment rate to assess how we're doing. we'll look at a broad range of indicators. but there is uncertainty about monetary policy. the timing and pace of interest rate increases. ought to, and i believe will, respond to independeicatorndica. but the opposite also holds true. if we don't see the improvement

that's projected in the baseline outlook, the opposite will be true in the case of the timing and interest rate increases will be later and more gradual. >> and some officials and commentators have noted to market conditions look like they did last spring before a period of volatility. risk premiums are low. and in particular, market expectations for short-term interest rates look below the fed's projections. i want to ask two questions about that. one, what is your read on market activity. and are you at all concerned about a sense of complacency in

markets? and two, what is your view on market expectations that the fed has laid out in its dot plot? is the market where the fed is on that? >> well, i'd start by saying that volatility, both actual and expected in markets is at low levels. the fomc has no target for what the right level of volatility should be. but to the extent that low levels of volatility may induce risk-taking behavior that entails buildup in leverage or extension of maturity, things

that can pose risks to financial stability later on, that is a concern for the committee. i don't know if overconfidence or complacency is one of those reasons, but i guess i would say it is important, as i emphasized in my opening statement, for market par tticipants that ther is uncertainty. and the adjustments to the policies will be adjusted over time, and that gives rise to a certain level of uncertainty about what the path of rates

will be. and that's important for market participants to factor into their decision making. you asked me about the dot plot, forecasts or projections for the fed funds rate. you do see a range of disagreement among the participants there. by 2016, there is a considerable range of disagreement. participants do see different rates of trajectories of inflation and recovery. and they adjust this to their own view of how the economy will evolve over time. and around each of these dots,

every participant has a considerable band of uncertainty around their own individual forecasts. >> you've spoken about the sense that the recession has done permanent damage of the economic output. i'm curious to know what you think stronger policy could reverse the trends. is there something we can do about it? and if not, why? >> well, i think part of the reason we're seeing slower growth may reflect the fact that capital investment has been slow in the recovery we're

experiencing. so it does make a negative contribution to growth. as the economy picks up, i certainly would hope to see that contribution restored. so, i think that's one of the factors that's been operative. of course, we've had unusually long duration, unemployment, a very large fraction of those unemployed for more than six months. there is the fear that those individuals find it harder to gain employment, that their attachment to the labor force may diminish over time. and the contacts that are helpful to gain employment could

erode over time, and -- because they haven't had jobs for a long time, they find themselves permanently outside the labor force. my hope and expectation is that as the economy recovers, we will see some repair of that. that many of the individuals where were long term employed would take jobs if the economy is stronger and would be drawn back in again. but it is conceivable that there is some permanent damage to them, their family's well-being and the economy's potential. >> thank you, madam chair. i believe you mentioned in our opening remarks, tighter credit. and i'm wondering if you think

the possibility of the federal reserve is partially responsible for them. and the litigation, i read something that where the three largest banks have paid millions of dollars in fines so far. if you look at federal reserve bank of new york research, and people below a fica of 500 are havie inine ining worse credit . banks just don't want to take the risk. so, what can you do to fix that? >> i would first start by saying i really think it's essential to

strengthen financial regulation and make it more robust and reduce risk. so, i think the regulations we've put in place, most of which follow from dodd-frank, are highly appropriate to create a more robust financial system which will be a safer one going forward. and i think we're making progress is doing that. putting regulations in place, we've tried to phase them in that gives long enough lead times to make sure that, in strengthening the system, we

don't produce a credit crunch. and my assessment is that credit is broadly available. but i do agree with what you said in terms of mortgage credit. banks are not as likely to lend to lower fica scores. and i think it is difficult for any homeowner who doesn't have pristine credit these days to get a mortgage. i think that's one of the factors causing the home market recovery to be slow. and of course, there are a lot of practices in connection with

mortgage lending that need to be changed. but we can clarify the rules to create an environment of greater certainty for lenders to be willing to extend mortgage credit. >> the fed has slashed expectations in lending for this year. and you said there is uncertainty in the path of recove recovery, but the expectations remain quite strong. are you quite certain that the united states will sustain a period of growth? >> well, there is uncertainty.

but i think there are many good reasons why we should see a period of sustained growth in excess of the economy's potential. we have a highly accommodative fiscal policy. easing credit conditions. we have households who are becoming more comfortable with their debt levels and more able to service debt, an improving job market. rising home and equity prices. an improving global economy. i think all of those things ought to be working together, and that's reflected in the

forecasts. but of course, there is uncertainty reflected in the projections. and over a number of years in which admittedly, growth has come slower than we'd like. but i think that we will broadly continue to improve. >> and -- i assume that involved some review, the third anniversary of the june 2011 exit principles. is the committee reaching a consensus about the reinvestment and rollover policiepolicies. i'd be interested in your personal view on that.

>> that was included in our principles. we've not yet reached -- we've made quite a lot of progress in our discussion, but haven't reached a conclusion. there are a couple of things chairman bernanke indicated in contrast to our 2011 principles. we would be very unlikely to be able to sell mortgage-backed securities. and some of the principles that were incorporated in that package, expecting our balance sheet to shrink back toward normal levels that would be

consistent with officially conducting monetary policy. that's still an expectation, and that eventually, our portfolio will consist largely of -- but there are a number of tools that we can continue to use. our rrp facility, term purchase agreements, and exactly how to deploy that set of tools to meet our objective of raising the general level of short-term rates when the time becomes appropriate. and how best to communicate to the public and to markets how we're conducting policy and what

our objectives are. we're hopeful to come back with a full description, or a revised set of principles later this year. >> madam chair, one of the outstanding reform issues on the plate of the fed is to handle the risk associated with short-term funding. can you please explain to us why it's taken so long to get this proposal out and where we may be in that process? thank you. >> i'm afraid i can't give you a

detailed timetable. we've been supportive of taking some action to diminish the incentives for heavy reliance on short-term funding. we still see that as one of the risks to the financial system. -- or in thely -- related to reliance on wholesale funding. i've been supportive, but i'm afraid, at this point, and this remains very much on the table. to address this, it remains on the table as an unfinished agenda item.

i'm just not certain. i just don't have the detailed timetable for you, i'm sorry. >> madam chair, this is partially a follow-up to the question, how would the administration move if the rates are above target? there has been some suggestion -- that may achieve a faster improvement to employment. >> so, with respect to the question of overshooting, let me start by saying that inflation continues to run well below our objective. and we're still some ways away

from maximum employment. for the moment, i don't see any tradeoff whatsoever in achieving our two objectives. they both call for the same policy, a highly accommodative monetary policy. so, overshooting inflation or the thought that we will reach it before attaining maximum employment, i see it as a risk we could face down the road. and it's a risk we could reach our maximum employment objective before we reach our inflation objective, so there are ways in which there could conceivably

reach -- a statement on our longer run goals and policy. what it said was, first of all, whenever inflation or unemployment are away from their desired levels, it will always be the policy to get back to the normal levels over the medium term. but in that statement, the committee will follow a so-called balanced approach with its policies. that means when we see some conflict between achieving the two objectives, we would consider deciding on a policy just how far we are from

achieving each of the objectives. and if the distance is particularly large, it would be consistent with the balanced approach that we would tolerate some movement in the opposite direction in the other objective. the balanced strategy is one we would follow. >> i'd like to ask you about your signaling mechanism going forward. you told people, don't pay attention to the dot plot. if something should surprise in the economy, with only four press conferences a year, how do you signal to the markets --

some sort of credibility problem where people feel you're falling behind the economy? >> well, again, we are very attentive to unfolding economic developments and understand that there can be surprises and twists and turns in the road. so, the forecasts we've made become no longer appropriate, and we need to respond to further developments. we have four press conferences, but i would feel it appropriate for me to either have additional communications, meetings with the press, to give speeches or in a variety of opportunities, i need to make clear what the

thinking of the committee, i would feel entirely appropriate to communicate changes in our views. >> thank you very much. since we're currently having the world cup, i think it would be valid to ask a question about the world. and looking at the darkening outlook over the world, in the ukraine, in iraq, problems with global impact. do you that the u.s. can be a

leader globally? and do you think that financial stability is making the fed be more accommodative than it would usually be? >> well, let me start -- with respect to financial stability, we monitor threats very carefully. and we have spoken about some, i've spoken in recent con aggressionle -- diminished risk spreads in lower-grade corporate

bonds. high-yield bonds have certainly caught our attention. this is some evidence of reach for yield behavior. that's one of the reasons i mentioned this environment of low volatility is very much on my radar screen and would -- that could unwind in a sharp way, and provoke a sharp raise in interest rates. that could impact the global economy, and it's something to avoid. but broadly speaking, if the question is, to what extent is policy being driven by financial stability concerns, i would say

i would never take off the table that policy should respond, but i don't see it shaping policy in an important way right now. i don't see a broad-based increase in leverage, rapid increase in credit growth, maturity transformation -- has risen above a moderate level. we're using tools and regulations to make the system more robust and to pay attention to areas where we've spotted concerns, like leveraged -- let's see, the first part of your question, about global risks.

and we always pay attention to global risks and the likely evolution of the global economy. you expressed pessimism, but i believe we'll more likely see growth there. of course, there are geopolitical risks. in iraq, not only a humanitarian concern, but also with energy supplies and prices. so, i would certainly list that in the category of risks to the outlook. >> peter barnes, fox business.

what about equity markets? right now, the s&p 500 is on track to close at another record high. you have said you haven't seen any evidence of bubbles, and trading within historic norms. have you seen anything like that today? >> well, we do certainly monitor a number of different metrics that give us a feel for where valuations are relative to things like earnings and dividends. and look at where the metrics stand in comparison with history, to get a sense of whether or not we're moving outside of historical norms. i still don't see that for equity prices broadly.

>> thank you, chair yellen. i'm growth this year and next year and if inflation outpaces wage growth, does that scenario make you more hesitant to raise the federal funds rate next year or if conversely wages rise just enough to keep up with inflation, moving in lockstep, let's say. is that enough to satisfy what you're looking for in the job market? >> well, thanks, that's a great question. you know, i see compensation growth broadly speaking and as having been very well contained. by most measures, compensation growth is running around 2%. so that's real wage growth, real

compensation growth is essentially flat rather than rising and real wage growth has not been rising in line with productivity. my own expectation is that as the labor market begins to tighten, we will see wage growth pick up some to the point where real wage growth, where compensation and nominal wages are rising more rapidly than inflation so households are getting a real increase in their take-home pay. and even limits that might be size of the tighter labor market, within limits it's not a threat to inflation because consistent with the level of inflation we have for our 2% inflation objective, we could see wages growing at a more rapid rate and -- a somewhat

more rapid rate and, indeed, that would be part of my forecast of what we would see as the labor market picks up. if we were fail to see that, frankly i would worry about downside risk to consumer spending. so i think part of my confidence that, in fact, we'll see a pickup in growth relates to the fact that i think consumer spending will continue to grow at a healthy rate and in part that's premised on some pickup in the rate of wage growth so that it's rising more than inflatio inflation. >> today's statement repeated a phrase that's been used -- that the committee has been using, that there's likely to be a considerable period between the end of the bond purchases and the first hike in the federal

funds rate. in march, you gave us some guidance trying to help us understand that by saying that that's hard to define but it could mean six months. is that a time frame that you feel comfortable with? and if you feel like it needs to be modified do you -- could you give us a an assessment of the -- the markets seem to expect the first rate hike in the second half of next year. is that a good assessment? >> so what i want to say, the guidance that i want to give you that there is no mechanical formula whatsoever for what a considerable time means. the answer as to what it means is it depends. it depends on how the economy progresses. the committee said very clearly in their statement that what they would be looking at and deciding on the timing of interest rate increases would be

the progress we're making in achieving our objectives, how far we are from achieving our labor market objective and our inflation objective and that we will be assessing that progress and that's the key determinant of when interest rate increases are likely to come. there is no mechanical formula. >> thank you, greg robb from market watch. there was a report this week in a salmon colored newspaper i won't mention that the fed is thinking about -- or regulators in washington are thinking about an exit fee for bond mutual funds. this has sparked a lot of comments. would you care to comment on this? >> i am not aware of any

discussion of that topic inside the federal reserve and my understanding is that that is a matter that is under the purview of the s.e.c. >> the epa proposed new rules recently to-to-reduce new greenhouse gas emissions from power plants. an epa official will take questions about the proposal before a house subcommittee hearing on energy and power. live coverage at 9:30 a.m. eastern here on c-span 3. and later in the day, republican senators ted cruz, mike lee and marco rubio deliver remarks at the faith and freedom coalition conference. the organization was founded by ralph reed and our live coverage begins at 12:30 eastern, also on

c-span 3. >> up next, former iraq administrator paul bremer talks about the current situation in iraq. he joined us on "washington journal." >> we are back with paul bremer. as many of you know, served as the administrator for the iraq coalition, provisional authority from 2003 to 2004, headed up the reconstruction of iraq and the setting up of its government back then. mr. bremer, let me begin w the hear and now in the situation in iraq. you've got the front page of the "wall street journal" saying that the president believes -- has ruled out air strikes for now but then you've got the "new york times" saying that he is eyeing limited strikes, drone strikes like we have done in yemen. what is your take? >> well, i think there are two problems that need to be addressed that affect the american interests here. there's the immediate problem of these terrorists moving into

iraq and there's a broader problem that we will eventually have to get to which is the collapse of the whole geopolitical structure that's been in place for a hundred years. on the first problem, the president identified a week ago in his statement on friday a week ago the interest the united states has in not allowing the isis terrorist group to gain foothold in iraq. i think that is a correct assessment of our immediate interest. my own view is that that will require military action by the united states. wlp t whether the president will come down on that or not is an open question because, as you point out, the papers are somewhat contradictory but i think it will require limited american military involvement which could have two military objectives -- one is to first stop the southward movement of the isis toward baghdad and the holy cities of karbala and najaf, which are south of baghdad. the second is then to help iraqi

forces recover the territory that's been lost, particularly the cities of fallujah, tikrit, mosul and tal afar. if you think about it from a military point of view, air strike cans matter. air strikes by the french basically changed the battlefield balance of forces in libya. it can work. not, obviously, without effective ground forces but it can work. i'm not talking about putting american combat forces in, by the way. i'm talking about a need for intelligence on the ground, help to plan and execute these operations which is exactly how it worked during the surge. >> president barack obama has sent a little over 200 troops to the area to help secure the situation. is that adequate? >> well, as i understand, what the white house has said about that first group, they are basically there to protect the american embassy. they are not there immediately anyway to coordinate with the iraqis on the broader problem. so i think we'll have to wait and see what the next announce

system from the white house on this subject. i'm obviously fully supportive of protecting the embassy since i worked in embassies myself for 25 or 30 years. but that doesn't solve -- doesn't address the question of what we're going do about keeping isis from establishing a base, which was the president's statement. >> how do you militarily hold back the isis from continuing their momentum while at the same time not alienating the sunni population in iraq? >> well, i think it's important to -- you know, people sort of divide this very quickly into a shi'a/sunni thing. it's a little more complicated than that. the sunnis, many, many, sunnis in iraq do not like al qaeda and these terrorists, as we saw during the program of the awakening, as it was called, when we were able to mobilize the tribes, particularly in the western al anbar province in 2007 and 2008 to fight against and defeat, in the end, al

qaeda. these -- the isis people are trying to establish a caliphate, they have already shown their colors by executing prisoners, by establishing sharia law in mosul. this is not going to be popular with the vast majority of sunnis so i don't think that is the problem. the problem is how do we do it in a way that doesn't make it look like we're siding only with al maliki and his rather narrowly based shi'a government? that's the problem. >> and how do you do that? >> it's going to be very hard. i think the president, again, is right to say that the level of our involvement should in some degree be conditioned by al maliki trying to broaden his government a bit. as soon as we withdrew he basically started an anti-sunni campaign, anti-kurdish campaign. he urged the army of the officers we had trained right down to the battalion level which is one reason the army has been collapsing so quic