company build security at the outset rather than as an afterthought. it also recommended they monitor devices throughout their expected life cycle to provide security patches where possible to cover known risks. in addition, they urged protection of consumer's privacy by engaging in data minimization and notices and choices to consumers as to how their data may be used. although the ftc did not make any specific legislative recommendations, we should consider whether it is appropriate to address privacy concerns. if so should we seek solutions to these or should they be addressed to broader legislation on these topics? the internet of things has led to important technological breakthroughs. our challenge is to promote the proper balance and making sure privacy is protect as this value

technology continues to grow. i look forward to hearing from our witnesses in how to address these challenges and i yield back the balance of my time. >> thank you, mr. adler. >> thank you, mr. chairman. today we're here to learning more about the internet of things. it has the ability to not only improve the more mundane aspects of our lives, but transform health care and information technology industries. this is of particular interest to the judiciary committee considering our longstanding jurisdiction when it comes to intellectual property cloud computing and digital trade. the internet of things refers to machines containing sensors that transmit data to other connected devices and the internet. dramatic in cloud computing the past several years has helped to

enable the technology to reach its full potential. without the ability for data from an enter is net of things device to be analyzed in real-time, the data itself would certain little valuable. the a ability to access through mobile apps or even our cars makes these internet of things devices a key tool to finding creative solutions for many of the problems of daily life in the 21st century. smart agriculture will help us grow more food and prevent waste. smart transportation will help prevent traffic jams but can also be used to monitor road conditions and structural components of bridges and overpass toss detect problems immediately. new wearables not only monitor the number of steps we take but can include sensors that can catch and alert taos potential medical emergencies before it actually becomes one. as this committee continues to study this new technology, it is important for us to keep in mind the full scope of the internet

of things and be cognizant of policies today and in the future. in particular, we need to examine the privacy and security implications of this technology and look into the security privacy measures they are building now and as they plan to implement as open standards are to develop. i am hoping it helps fuel prosperity and creativity. i think we have a fantastic panel assembled today. i know all the witnesses and i look forward to hearing from them about this exciting new area of technology. thank you, mr. chairman. >> on behalf of the ranking member, the gentlelady from washington first district will make a short opening statement. >> thank you. i want to thank my co-chair on internet of things caucus as well as the ranking member for calling this hearing on this important subject.

when we examine the way products and sensors are being used and what's called the internet of things from home appliances to personal wearables it might be easy to conclude it is only by american ingenuity. we have an emerging set of challenges for innovators and consumers. to start, we need to make sure we update existing laws to reflect the way the world works today and where we are headed in the future. that means, for example, updating the electronic communications privacy act to make sure data on a server is the same as the documents in the file cabinet. for the multibillion dollar internet of things to be successful, we need to be responsible stewards of policy. they must feel their devices can be secure and private, not vulnerable to hacking or spying. forging a path to adoption of uniform, preferably

international standards. regulatory agencies must find ways to strike the right balance between encouragingen know vacations and upholding their duty in the realm of protected cars. all of these collect unprecedented amounts of adult, they hold great things like health research. provide individuals with control over their own data. again, i want ta thank the chair and the ranking member for calling today's important hearing and setting the stage for a productive and informative series of hearings on the role that congress and our committee can play and create an environment where internet of things innovation can prosper and consumer protection is at the forefront. thank you, mr. chair. and i yield back. >> i thank you. and thank you for your leadership on this issue. it is now my pleasure to introduce our distinguished panel. the witnesses have written

statements and have been entered into the record and will be placed in their entirety. and i would ask witnesses to summarize in about five minutes. their statements so we can leave time for lots of questions. but before i introduce the witnesses formally pursuant to the committee rules, i ask that all witnesses stand to take the oath. customarily raising your right hand. do you solemnly swear or affirm that the testimony you are about to give will be the truth the whole truth and nothing but the truth. please be seated. let the record reflect that all witnesses answered in the affirmative. today our witnesses including mr. gary shapiro, president and ceo of consumer electronics association. mr. dean garfield, president and ceo of the technology industry council. baywall, president and ceo of a

alliance of automobile manufacturers. and mr. morgan reid, executive director of act, a.c.t., act association. before i go down the road for the witnesses, i have to a little bit of a personal privilege. the other three know it. mr. shapiro and i go back a long time. we were there at the berth of the modern consumer electronics association. and i once worked for him on an unpaid highly compensated by unpaid position as the chairman. so if today i rough him up, remember, get back. it takes a while. and with that, mr. shapiro. >> thank you, chairman. this is indeed a historic moment in my life. i have been referring to you as boss for 25 years. and you as chairman oversaw a good portion of our freedom and our growth.

and thank you ranking member adler, chairman goodin and other members as well. it represents 2,000 technology companies. we own and produce the ces which is held each january in las vegas and is the world's largest innovation event. the internet of things is a big part of the ces. it is so big that 900 of our 3,600 exhibitors had related products in our recent show. and the other thing you should know exist because of smartphones. over a billion smartphones have been sold. and they contain something called micro electronics mechanical systems mems. they measure things like pressure, temperature, location movement, and other valuable information. and because of the billions of these devices in phones they cost now just pennies to piece.

they use very little energy. they hook up the internet. from garden soil to baby monitors and wearables like smart catches thermostats and lights, household products. they are using them to stay healthy, increase efficiency to be secure. and to make better decisions. you have heard the estimate ises of how these are going to grow. and they are estimates. i swore to tell the truth so i can't say they're factual. there is definite growth. we grew 32% in the united states alone in terms of the connected home devices. it is almost a billion dollar marketplace in the united states. it allows consumers to mount security systems, manage heating and cooling and lighting systems. and they also increase home efficiency and cut bills. they can learn patterns over

time. they can adjust temperatures. and maximize efficiency even when no one is home. while they save time and money for ordinary americans, there is an opportunity here to care for our aging population, as well as the 56 million americans with disabilities. the technology has been customized and costly. and professional novel interface like voice control. smoke detectors can be through lighting control. it can light up the whole house for a safe excite. they are life changing and sustaining for many americans. think about our older loved ones. we have limited caregivers in an aging population. they will help seniors live independently and comfortably, maintain their quality of life and they can do this with remote, with caregivers watchly remotely at the same time older

americans will retain their privacy and share just what they are comfortable sharing is. it requires spectrum. wireless is the platform in which most connect. we need an additional licensed and unlicensed spectrum. it is changing what skills we need to maintain our competitive advantage. we don't have enough skilled workers. that's why we are pushing for highly skilled integration reform. third, it requires government restraint. it does require us to consider new challenges. legitimate concerns about safety privacy, security. who actually owns the data. stakeholders, including government can and should be discussing these today. as we said in our filing with the ftc it hinges on building trust. i just heard that again congresswoman.

it's up to manufacturers and manufacturing to make good decisions about privacy and security. we are a passion a doing our best to protect consumers. but we recognize and respect the legitimate role of transparency, clarity. 30 standard making operations, activities that produce anti certified standards. focusing on technical aspects of the internet of things. and of course it's just beginning. and we have to be careful of overprescripted because that could stimy the growth of things. any government action should be very now and focus on real harm. the internet things thing is huge. we will work together to make sure it supports growth in this dynamic sector. thank you. and i look forward to answering your questions. >> thank you, mr. shapiro. mr. garfield?

>> ranking member adler, members of the committee. on behalf of 61 of the most dynamic and innovative companies in the world, we thank you for hosting this hearing. we thank you as well for the context which is outside pending legislation. as well, mr. chairman and congresswoman for your leadership in creating the internet of things caucus. sit our firm view that the internet of things has the poe to be one of the most technological innovations in history. that is with the right policy involvement to make sure i am not accused of hyperbolic. our humble recommendations on how congress can be helpful. as to the first, the internet of things is the digitization of the connected world with computing systems. one may sound similar has the

potential to be seismic in the creation of new industries. whether we're talking about watches that have the potential to not only help you to be more fit, but as well to prevent catastrophic health incidence through monitoring your heart rate. or we're talking about windshield wipers that have the ability to communicate with other windshield wipers and alert your car to an impending storm or an autonomous vehicle to a construction zone soon arriving. there has been much discussion of the home and personal manifestations of things. it is important, however, not to ignore the commercial deployment. they are real, tangible, and have huge potential economic benefit. whether it is the demyment of centers in our energy grid to ensure greater resiliency and

reliance, the deployment of sensors in transportation systems to allow more efficient delivery. or to ensure safety for workers. the economic impact, much of the economic impact will come from the deployment which by 2030 is expected to be almost $7 trillion. so what are we doing to ensure that is the case? we're focused on a multi-faceted approach that is heavily emphasized security, privacy standards as well as investment in infrastructure. with regard to security and privacy or we are working innovating around those issues. making sure they are developed by design so they are part of our forethought rather than afterthought. we are developing solution toss ensure that both security and privacy are tailored to the particular environment. and as well we are investing in

innovation because consumers demand high security and privacy and increasing transparency. it's in our interest and it's the right thing to do to meet the consumer demand. as well we are moving forward on global standards that are really privately better driven by the sector. and as well that are open standards to ensure that we have high inter opability as well as scaleability. finally, we are invested in the infrastructure. mr. shapiro noted the need for broadband, band and wireless as well as ensuring that spectrum is available. the use of speck truck is growing on mobile date by 55% each year. with the internet of things and digitizization it will only grow

more expeditiously. so spectrum will be increasingly important. in addition to doing those things we intend and need to partner with congress and the administration to make sure that policy is smartly in focus. one is we need a national strategy around the internet of things. much in the same way that a broadband, having a natural strategy will be incredibly helpful. second, we need more spectrum as mr. shapiro and i pointed out earlier. the u.s. government is the largest holder of spectrum and has the greatest ability to impact spectrum and we hope to make it more efficient. finally, we need the exercise of restraint. it is in stages. in order to grow to reach its

full potential it is important that we avoid mandates that put the thumb on the scale of particular technologies versus others. i look forward to your questions and the testimony of my colleagues. thank you. >> thank you. you only have to deal with all the questions set up in the opening statements. so i look forward to your five minutes. a piece of cake. >> chairman, members of the committee, thank you for the opportunity to testify this morning. a wore a different hat the last time i was here. another industry that was engaging with the challenge of technology. during my time, it access began to replace ownership. the model transformed. now the last four years instead of fighting with gary shapiro, i mostly team up with him. it's easier. that's a good thing. >> only in washington.

>> yeah, right. >> i represent the detroit three, six major european manufacturers, and three major japanese manufacturers as well. for us the impact of technology is every bit of profound but not threatening. technology and connectivity are ushering in a new era. some may say a golden age of mobility. we have seen enormous safety and environmental gains. striking the numbers and emissions as well as increases in mpg. the next generation of progress will come from iot based technologies. ownership patterns may evolve somewhat as ride sharing becomes more prevalent. but the truly material impact of technology is the convergence of environmental safety productive and life quality benefits that arise from connectivity of an iot world. when it comes to cars, safety and objective conflicted. heavy and safe or light and

green. every parent struggled with the choice for their teenagers. strategies for safety centered on surviving crashes. it harmonizes safety in green, crash avoidance. manages the car better than a human can fosters more efficient mobility because there will be fewer crashes on congestion. it translates into more economic productivity, more personal time fewer injuries fewer fatalities and fewer emissions and less wasted fuel. getting to the future as fast as we can is critical. 95% of all traffic fatalities results in human error or environmental conditions. vehicle factors account for just a fraction. technology is so powerful because it offers the promise of mitt gating human error. as today's innovation automatic breaking adaptive lighting

blind spot warnings. and tomorrow's technology is going to be and ultimately self-driving vehicles. it must be embraced and seen as the answer, not the problem. that means working proactively with privacy and cyber security. last year auto manufacturers began the first in the iot, nonpure play internet sector to adopt a comprehensive set of policies and principles. the principles have a strong lineage. the consumer product bill of rights and suggestions from privacy advocates. transparency, respect for contacts. that is security. the most sensitive types of information needed for some technologies geo location where you're going. how fast you're going. biometrics. clear and prominent notice. the purposes of why it is

collected and the entity with which it can be shared. similarly, the industry is working to stay ahead of the threat posed by malicious hackers. we announced the formation of auto isac. for sharing information existing or potential cyber threats. the alliance security bills in the house that would facilitate the public and private sectors while protecting individual security. we hope the senate is acts soon to move the bill to the present. the next 20 years the evolution of the internet is enormously exciting. strengthening the quality of life, the environment and our economy. we look forward to working with you to realize the benefits of innovation and address the challenges that come along the way. >> thank you. mr. reid? >> chairman ranking member adler, distinguished members of the commute, i thank you for

holding this important hearing on the internet of things. it represents 5,000 companies and technology firms around the globe making the software and the a apps you love. we are spearheading an effort to clarify outdated health regulation and remote patient monitoring and ensuring in which patients and consumers can see an improvement in the health. key stakeholders in congress. fda, hhs to encourage and support health policy toss keep information priority and secure. i should talk about jobs created. but i would like to break from that a little bit. i want to tell you a story. it's one that i think is relevant to many of you and certainly to a huge chunk of your constituents. nearly everyone in this room caring for an aging parent or knows someone who is. now, imagine your parents are fortunate.

they are living in their own home but significant medical challenges are beginning to face them. the questions begin. do i get a home health ant? do we pay 12,000 a month to move them into assist said living facility? do they move into my basement? how do i deal with the fact that my parents don't want to move into my basement? what do i do to help them live at home with dignity. most of you remember life alert, help, i've fallen and i can't get up. well, that kind of device is a personal emergency response system. they are great devices but incredibly limited to what they can do. now, imagine a far more sophisticated that can track blood pressure blood sugar geo fencing for alzheimer's and much more. since they are small enough to fit in a watch like this one or maybe this one. and all of those devices i think everyone here has got one. all of them connect to a loved

ones phone alert service, physician tablet and medical record. suddenly mom can stay at home another year maybe to maybe three. a all while managing her health. and if mom allows the data to be sent to you, you can be part of the solution. staying in touch and on top of her needs. and not insignificantly, your basement gets to keep its big screen tv. by 2050 there will be 83.7 million americans over the age of 65. twice the amount from 2012. 80% will have at least one chronic condition. without question the age group's rapid growth will strain public and private health resources. the picture i painted is not a pipe dream but a cataclysmic outcome in aging adults. what is standing in the way of this dream. what is needed to make sure everyone can benefit from the new innovations. three quick messages.

one, innovation helps happening. it can lead to lower costs better case, and improve patient outcome. the future will be founded on trust. which requires strong security and privacy measures. three, regulatory barriers outdated laws and lack of clarity around reimbursement are a threat to the advancement of mobile health. congress can and in cases must play an important role in helping health outcomes. questions about privacy security reimbursement and government regulation have met to create an environment where they are work to go make them more medically relevant. patients and care providers but know their information is private and secure. industry best practices around sensitive health data to support these practices are important to establish trust and push the industry forward. clarifications on government access to data matter as well.

including expert reform and lees act. as most of this information will eventually end up in the cloud. and congress has been pushing back on any government pressure to weaken encryption. finally, ensuring that doctors are reimbursed will be essential. currently, cms is statutorily prevented from certain monitoring because of absurd geographic restrictions and ant acquitted requirements. successful technology trumps and means to pay for it all come together. i hope that happens now rather than see one more family member move out of the home they love because we failed to act. i look forward to your questions. >> on that note, i have questions. i recognize myself for a series of questions.

mr. shapiro, you're not an engineer. you're a long recovering lawyer. but i'll ask you this question because i think your industry is well aware of the answer. as we sit here in error what percentage more or less of the band width are we using in this room, of the speier spectrum. if we were to look at the radio waves being used, the a.m. the fm, the old band width from television, what percentage of the spectrum is being used as we hit here? >> well, it's all spoken for. it uses a small percent. >> less than 1% will actually be in these airways. i said i wasn't going to dwell too much on spectrum. if we are trying to create the a ability for an unlimited amount of communications between large and small devices, isn't one of our greatest tasks to recognize that we have allocated all the band width virtually and not

used hardly any of it in any given time, any given room stpwhrfplt. >> yes. now i realize you gave me a softball. >> now you can take advantage of the devices. >> thank you. we through the laws, categorize it differently. by whether it's licensed or unlicensed. they have gotten for free a broadcast license and unlicensed anyone can use it. it promotes innovation. we calculated in a study we did last year $62 billion of activity created by unlicensed spectrum. we are advocates for increasing the spectrum because it allows innovators to do cool things that will provide benefits. but there is a lot of spectrum that the government uses. what we are asking and there is

legislation pending the government can figure out what can be repurposed for commercial purposes. it would create a huge amount of economic activity. if so it will make a tremendous a amount of money for the treasury. there is technology being developed which allows it will be split finer and fighter and used. that's some of the issues involving going forward. we are passionate about driverless cars and all the benefits and all the great things that are there. but we think there is an opportunity there to look and test some of that being purposed for the area and split it up a little bit and share it. that's what mitch and i love to have wonderful conversations about. >> following up with mitch. mr. baywall there is going to be a lot of questions about obviously whether or not automobiles that are communicating with the internet are safe or not. and that's topical.

but would it be fair to say that whether or not you share the band width has virtually nothing to do with whether or not you're going to be effectively hacked on your en crypted signals? that's a softball. >> well, maybe. and sometimes i can't do soft balls. and i'm also not an engineer. i think i would say a few things. >> one is as it relates to spectrum, we have heard the message from congress. and the notion of sharing if we can make that work. it is something that we really want to do. and field testing is going to happen in '15. and the notion of finding a way to satisfy the spectrum but also meet safety is something that balance has to be struck and we are prepared to try to test to succeed rather than test to fail. so we are committed to that notion. i want to set the context in terms of v to v. this estimates that it could

mitigate or eliminate up to 80% of all crashes on the road. and so the promise is overwhelming. the implications for life for injuries, for productivity are enormous. so i think the predicate for moving forward has on to do no harm. find a way to share but no harm. >> i want to quickly follow up. the history of data in the automobile has been one in the automobile manufacturers having proprietary data buses keeping them closed not publishing. as a representative, is that going to be different in -- and it's a self-asking question -- answering question. in the vehicle to vehicle world it has to be an open standard that in fact is published so your windshield wipers on one vehicle talk efficiently to another. isn't that true? >> i think it is true. but i think it is also true that

in the world, dangerous world where you have malicious hackers that integrity matters a ton. and finding a balance for both is the test. >> i recognize the ranking member. i will tell you at least from this part of the day is working on legislation it makes the penalties specific, high and enforceable against those 2w0 try to maliciously attack automobiles is an area our jurisdiction is not only appropriate but our need for action is immediate. >> if i may. >> with mr. naber's permission yes. >> it's just a point that we have a history of driving open consensus standards that fully integrate privacy and security production and can do that in the context as well. >> thank you. >> thank you, mr. chairman. mr. shapiro, you argued through a market approach to addressing privacy and security concerns raised by the internet of things.

we all hope the companies will act responsibly and the market will punish. but suspect it clear the deposit sets clear rules as to what is and is not permissible? >> thank you. it is important i think that companies know what is legal and not legal. the company know what is legal and not legal, but there's something between the two and that's what is right and what will get customers and not. we've talked about trust for companies. brand and reputation relies entire on trust. hipaa was passed for medical privacy. there's different information and how far it goes. hipaa that ha down sides records have been lost, vice president been transferred easily because of hipaa. there is a tradeoff. if you put too much of a line behind privacy, you're trading off opportunities for new services customers will desire.

i think what companies have an obligation to provide is transparency and what they are offering and the consumers could be able to make a reasoned decision about what they are going to give up in turn for sharing their privacy. i think it's premature for congress to say this is the line we're drawing. having the discussion is important. this is a national consensus about what should be protect and what should not and what a consumer should be allowed to give up freely and make that choice. >> should there at least be notice to consumers required? >> in terms of giving up what you -- if you are sharing something which you shouldn't expect normally to share i think there should be notice and it should be clear and conspicuous. >> you do think government should mandate notice. >> the trade commission has significant jurisdiction in this area. there's a lot of private lawyers who will be happy to sue those that don't give sufficient notice. if the law is unclear which i

do not believe it is yet. >> so the law is clear enough the ftc should require notice and we should leave it at that for the time being. >> it has taken step by step approach to provide sufficient guidance. i don't think there's a need yet. >> there's not a need for congress to do anything because ftc should handle it so far. >> i think case by case is a good approach. this is a quickly evolving area. new information services all these things happening, rather than jump in we should take a breath -- >> let's assume congress chooses to disagree with what you said and chooses to north dakota privacy and security measures. in that case are there ways we should treat products connected to the internet differently from other companies that collect data or connect to the internet. >> i'd like to think about this answer and perhaps answer in writing. the internet does easy

connectivity quickly and rapidly. clearly there's sometimes when knowledge is appropriate and permission, sometimes there isn't. internet allows police forces to monitor crowds in a public area. it allows them to monitor conversations and see whether people are angry or not in a public area. it provides an opportunity to have video and see whether there's bad people fbi wants through identification of not only facial but voice. there's a tremendous opportunity here in many different areas. to me what's most important we let it play out. if we're going to legislate -- or you're going to legislate, i don't have that right -- that it be specific and narrow. >> thank you. in your testimony you referenced consumer privacy protection released by alliance of automobile manufacturers. can you briefly ski these in detail. briefly and in detail. >> it focuses on things like

transparencyish context, data minimization and clearly the notion of express consent for marketing. so we provide heightened protection for things like biometrics driving behavior, and geo location. we think it works. it's a floor we've provided to ftc so it is enforceable. i build on gary's point, it applies to privacy and everything else as we enter an era of massive innovation. >> we should be careful and wait for experience. >> i'm sorry? >> we should be careful and wait for experience. >> i think the fundamental challenge this i've got, the pace of innovation far outstrips the pace of regulation. that's just a fundamental truism. we're seeing that in the area of distraction at nhtsa. i'll give you a specific example. >> don't, given what said do you think principles you number

rated in privacy protection principles should provide to all things technology or uniquely relevant to the automobile industry? >> well, they are based on pretty generally accepted notions. they are more broadly applicable. my -- i'm testifying today on behalf of the auto industry and i'm reluctant to impose my judgment on others. >> i can give you my perspective on it. >> please. >> which is -- >> that saves me from answering other questions because my time is out. >> i'll be brief. we're talking about internet as if it's a single thing but it is not. what is the privacy or security regime we'd have in place for a windshield wiper versus a wash monitoring your closely. the s.e.c. torl approach we're taking is one that works. in addition we shouldn't assume this is a wild wild west and there's no one out there monitoring today. the ftc has been very engaged in this space and is actually taking action. >> i know you're out of time but

if the chairman will -- i want to point out something important. in the health context i think you're about to see significant best practices that rise up. ultimately what's happening is we aren't seeing the kind of growth. interesting study comes out only 15% of doctors are talking about wearable to their patients but 50% think they would benefit from those. >> why the difference? >> privacy. the question they have about privacy, how it will effect them when the data comes back. aging population concerned about how they might be used for marketing or other purposes. they hate those late night telephone calls. i think the industry is working -- i know. we are working closely with folks to come up with industry best practices that give some more brightline. we believe ftc will be a good enforcement but that's where we are today. >> thank you very much. my time has expired. >> thank you. you didn't even get to the question what does the garbage man say to the garbage can and

what does the garbage say back. i assume it's you stink. that's going to cost me. to that we go to the gentleman, mr. moreno for his questions. >> thank you, mr. chairman. mr. garfield, today is estimated the average home that ha 11 wi-fi deviceses. in my home with tech savvy kids it's triple that. i'll give you an example my children have a different taste in music than i do. so this just happened last week. i'm in the study listening to this music. the next thing i hear is captain john luc picard's voice saying this does not compute. my son found a way to get bought music and switch the music i'm

playing compared to what he wants to play and tell me he didn't like this music. it's fascinating what these kids can do with this equipment. be that as it may unprecedented boom provides significantly more wireless spectrum i think beyond what we realize at this point. that is commercially available today. can you expand on implication ss how this might impact consumers as well as the overall growth of the economy. >> both are significant. your household sounds a lot like mine so i emphasize with you. i agree with what my colleagues said about the need for more, licensure on license in this context wireless is particularly important. given the lack of optimization

in the spectrum and how much curtailed by the government there's a significant opportunity both in appointment of iot and economically as well to more efficiently use spectrum and make it more available. so i think there's a huge opportunity there. the reality is it's absolutely necessary. as we think about all of the physical world essentially being digitized, then the growth that we've experienced in the use of spectrum will explode. it's something we need to plan for participate and take action to deal with. >> thank you. we realize now that i can raise my garage door up and down from 2,000 miles away, turn my lights on. what is to prevent the hacker state-of-the-art thief from checking in on my software on my computer system in my house,

for example, when i go on vacation i will turn the heat down. so they can tap into my thermostat, read when the heat is reduced over a period of time, come to the conclusion even though there are lights going on and off all over the house that no one is there. this is open to anyone. what is the industry doing to protect us from that. >> first of all, thank you for your question and thank you for your work on a lot of encryption and privacy issues, congressman. first off, welcome to encryption. encryption is a critical element preventing that from happening. there's technological things can you do man in the middle, forms of attacks we can run. you know what once you get there it takes an enormous amount of power to break it. one of the questions the

consumer electronics side of the world as well as the cloud computing side of the world is looking at how do i put encryption and make it so no one can mess with the device other things that might have impact on people living there. first off we noticed to make sure the government doesn't weaken encryption. second of all we need to continue to see the growth in the kinds of research around encryption that is in some cases supported by the government. >> anyone else? >> i share his comments. also going back to the garage door opener. when that was introduced it was primitive, it was a fun thing to do to drive around the neighborhood and open up other people's garage doors or similarly other people's telephones. by today's standards it was relatively primitive even though novel then. as we've gotten more sophisticated, memory chips have grown, there's solutions and we don't hear about those problems

anymore. it hasn't been an issue. >> thank you. >> the reality is significant investment is made in innovating around privacy and security because it's the right thing to do and consumers are demanding it. there shapiro and reed have articulated it. >> let me know when you have a device to block my son from changing music. >> i can help you with that. >> did you get to the question of the launching of trade secrets bill today? you didn't. okay. mr. collins will be announcing so hopefully you'll get to talk on that next. i'm sorry, did i mention that there will be an announcement on the bill today? did anyone not hear that.

thank you. we go to the gentlelady from california. >> i recently read about two researchers able to wirelessly hack into a jeep cherokee, first the control system windshield wipers and then the accelerator. they were able to slow down the car to stop on a busy highway. this experience reminds us that connectedness flows in both directions and that hackers could actually manipulate these devices tore evil if they show chose. what specific best practices did the industry have to ensure something like this does not come about and how are automobiles being designed to prevent exactly this from happening and what role do you see the federal government playing in this scenario? >> can i have five minutes? great question. the jeep hack of a week or two ago received enormous national

attention. i'm struck with the need to take the threat seriously, and obviously we do but not to get caught up in sensationalism that sometimes accompanies a story like this. so both stories are true. our companies are designed in a building to meet security risks from the start. that's point one. working with government, academia third party security technologists to address the hack risk. we need to address seriously. we've performed and i-sack a year ago. this is a mechanism for the industry to voluntarily share risks and how to address those risks so there's a mechanism in formation specifically for this challenge. the risk here from a governmental side is one we touched on before.

that's what's the touch how heavy a touch. the world in this innovations happen so rapidly, how do you make it work so it's not rigid. that's the challenge. what you've done this far is to facilitate sharing of risk threat. that's great. we hope that moves forward. >> okay. mr. garfield. you stated connectivity between vehicles should be reliable especially for safety applications. that's something congress federal trade commission and other government stakeholders should oversee to protect consumers. you're referring there to the consumers' physical safety. when it comes to another kind of safety privacy and data security you urge the federal government to take a wait and see approach and asking we should only step in if industry fails at self-governance. so what in your mind is the

difference between these two kinds of safety that would warrant such a divergent approach? >> i guess two points. our suggestion is not that the government do nothing. our suggestion is that the government exercise restraint. the approach today sectorial driven, includes monitoring and enforcement by the ftc is working. in the first instance a significant market failure that may not be being met. so immediate action is clear. in the second instance less clear. the third and final point we've all made about the innovation taking place not only around iot but around ensure we're driving security and design at the beginning of these processes is making significant headway and we worry about the unintended consequences of legislation at

this stage. >> mr. shap ir okay you acknowledge several concerns about privacy and collection of data and go on to state industry solutions are the best way to promote innovation. how do we rely on the industry to self-govern and avoid the problems implicit in the fox in the henhouse. i ask the question particularly in the context to one concern you raise who owns the data electric these devices? isn't the industry incented to claim ownership over the data? >> thank you for that question. it is true a lot is going on vertically. we have our own wireless head company group that is focusing on creating rules that everyone can live by. in part because it's the right thing to do. in part because there's congress -- governance will do if they don't. there are already free market

solutions happening in different other verticals. for example, in the automobile, hundreds of thousands if not millions of consumers are already choosing to give up their data to insurance companies in turn for lower insurance rate. so insurance companies are monitoring how fast they drive, what kind of driving they do because consumers feel it valuable to give up that information, informed consent free market decision, et cetera. also solutions coming up for parents. if they want to give the kid the keys to the car, they have the ability to monitor their children now with plane different solutions coming out quickly. my point, it is not a legitimate area for government conversation. there's so much happening from innovation point of view that there's different directions we can go. if try goes in the wrong direction we're fully confident government will be, this is wrong, consumers will be there trial lawyers will be there even distracted driving area where

federal government stepped in vociferously and said you should do everything you can to ban a driving from using any product while in the driver's seat. there's at least 80 different solutions and more developing every day which basically cut down on distracted driving monitoring lanes, head falling asleep, watching your eyes or even technology produced locally which monitors your cell phone as a driver and figures out if you are not paying attention to the road. >> would the gentlelady yield for a follow-up question. >> certainly. >> the question, though who owns the data. wouldn't you agree that, in fact data which comes from an individual inherently government does have a roll in defining what rights they have to retrain, protect, retreat their own identifiable data i think was your question, wasn't it? >> that's true. >> then i blew the answer.

>> it was a good answer just wasn't quite the question. >> i would say in terms of obviously a consumer that cease creates data should have some rights. service provider. this goes into a lot of areas of the internet, not just internet of things. if there's apps et cetera, what is the tradeoff involved. i think it's fair to say there should be transparency as to who is using the data, as to who actually owns it and retains it, i would say that depends on the level of personal information and data. whether or not you're using windshield wipers for example is an example to provide the windshield whether it's raining. that's fine. something more personal with the health sphere where you should own and determine what happens with your data. >> thank you. i think that will at least start a dialogue that will continue.

the gentleman from texas. >> thank you, mr. chairman. gentlemen, thank you for being here. i'm going to try to break this down and keep what's complex very simple. the issue is privacy. the time of the dick tracy watch is here. in fact, the gentlemen has two dick tracy watches. i don't wear a watch. that will help you in the answer. >> what time is it? >> it's up there and i can't see the clock. so anyway, the data that is stored is stored by a provider and it's information about an individual. the privacy of that individual is paramount to me. i think the law, constitution right of privacy. it has to be protect bid congress because it's a constitutional right, privacy.

congress needs to set the expectation of privacy for individuals who have shared their information with different entities. i'm concerned about the privacy of the individual in two ways. one, the provider service provider sharing it with other nongovernment agencies. and the service provider providing that information to the government. especially the government. i think there should be -- we should update the law which right now information stored on the cloud for six months is private. but six months and one day the government can have it of there's no expectation of privacy. absurd protection of the constitutional right of privacy for 180 days only.

yompk h i don't think we should leave it to the ftc to set guidelines or fcc or fec or any other government agency to determine what the right of privacy should be. i'm not through asking the question yet. so how do you know the answer already already. anyway, should not we in congress update the epga law to provide whatever rules we think should be provided so that citizens know that the government to get this information, use geo information and all other information what got to have a certainly warrant paved on the 4th amendment of the constitution before they can order to you give the government that information about the citizen out there in the fruited plane

plane. shouldn't we be proactive to do that or are you waiting for different things to happen out there, solve them get the lawyers to sue all these things, before we get right of privacy or should congress be proactive? i've been working on this for years. we haven't been able to get anywhere updating the law so people know the expectation of privacy that the government knows you can not get that information without a search warrant, should not we do that, congress do that? it's kind of like a yes or no answer on that. >> the reason i was coming in there, i wanted to say amen. yes, the reality is reform is critical, 280 co-sponsors this is something the committee has to do. congressman mareno is here with the leads act you co-sponsor. we absolutely need these kinds of legislation to move forward so we know what we can tell our cusses what i will protected how i will protect it and when i will be forced to share it. >> a person may not be a customer for this very reason.

well, i like all this stuff out there, this is wonderful, but i don't want the government getting. >> how about the rest of you. >> amen on the right. >> we strongly support -- >> i think you're totally right to distinguish what government is a private party to. we've been burned as an industry seriously to the tune of billions of dollars in sales europe and other countries are using the the fact the government took information as total competitive does advantage to say cloud service should not be based in the united states. they are not secure. it can be harmful with technology industry and used against us. under the 4th amendment yes, about as clear as you can get

the government must have not unreasonable searches and seizures. i agree with that. the reasonable expectation of privacy as set by the supreme court is almost like the definition of obscenity, changes with time, changes with community and changes with technology will i think your reasonable expectation of privacy in some data out in public, use a windshield wiper again is not as much as other data. >> in the privacy era goes with whether it's voluntary you volunteer to give that to another person. i'm interested about the government, federal government, local government which all now can seize that information in the cloud without a warrant and the person involved doesn't have notice about it. one more comment. >> on the government side, as gary indicated on the nongovernmental side that data is necessary to provide services consumers want.

so whether it's the insurance example we plug in, i'm one of those consumers. i know exactly how my kids drive because i get a report from the insurance company that tells me how fast they are driving how much they are breaking, as a parent that's a good thing, a disincentive for them to drive poorly. i wouldn't want to get in the way pro consumer. >> i yield back. >> i thank the gentleman. i go to the gentlelady from the first district. >> thanks all of you for being here. i want to follow up a little on the electronic privacy communications here. myself and congressman poe have sponsored legislation that would create a warrant standard for geo location information as well as electronic communications and when we talk about issues making sure there's a legal framework to protect information so consumers understand what's

happening with information and law enforcement is cloer on how they would access information, what do you think about expanding that to include geo location and international issues we face in terms of access to information. anyone. i guess i'll start with mr. reed. >> first of all, thank you for your support. thank you for your introduction. it's a very valuable thing to figure out how to move forward. i know we're all americans here. one of the things for my members developing applications just how much our opportunities overseas. the issues you raise about u.s. government access to that data start harping our sales it hurts jobs in the united states. i think you're precisely right. it's an issue congress has to step in. can't be done on industry best practices or standards. the question of geo location is something we'll have to work both with you and law enforcement because law enforcement does have a duty to work and protect the citizenry.

the problem comes when i have to tell a customer i don't know about the answer to the question of when i have to hand over the information. the difference between the 6th circuit and 9th circuit and this idea i have to tell my customer i don't know is enormous. the other element that should be raised, how countries are looking at bhaes happening. if united states government says we have access any time any person, please, regardless of where the data is store or where it's on, we have to expect russia will want the same privileges from our companies. that china will want the same privileges from our companies. so legislation like what you're proposing is what we need because we need to have a strong stance that we can look at that company and say, no i won't hand over that information without some better legal authority. thank you very much. >> mr. garfield.

>> your question gives an opportunity to raise something in the air legal redress. lack of legal redress rights in the united states is something that creates great challenges internationally and this committee has opportunity to do something. these another step to be taken that would help internationally. >> folks earlier talking about encryption and we've been having a conversation recently whether or not there should be back door for law enforcement to encrypt data and whether that should be mandated. if such a policy were mandated, what would the impact be on consumer data and what would the impact be for your customers? >> i think the impact would be quite negative both here and internationally for a host of reasons. it's important to keep in mind security is a part of advancing privacy. if you create any kind of door

it won't only be used by those you intend it to be used by. so i think in many respects you create a pandora's box of changes that would be highly problematic for privacy and security interest and something that should absolutely not be done. we both worked in the recording industry years ago and one of the things we realized rather than fighting technology the best solution is to coin the use of technology. i would suggest for federal agencies in this context those answers may hold some merit in this context as well. >> we learned hard lessons. i feel like we're a little bit of deja vu with clipper chip redux here we're facing. the reality is over 40 of the leading security experts have come out and said the idea of the government mandating or creating a front door into devices an systems is anathema

to the idea we want to create telling our customers and users we have secure systems. so we've done this dance before. it was already figured out to be a mistake. i'm disappointed we have to revisit again when we know the answer. that is encryption with as few openings as possible is the best solution we can provide to all citizens in every country. >> as you may know we have a piece of legislation to prevent there from being a back door. mr. shapiro, did you want to add something? >> i think we're all americans. we sympathize with law enforcement and what they are trying to do. it's a difficult question, not that black and white. history has shown having given government a back door is not the best approach as technologies evolve quickly. on the other hand as americans when a super crisis evolves, i think you'll see companies step up and try to help government. ening we saw it in boston in the bombing where technology companies work closely to try to

find out who it was that did this dastardly act. i think we have to recognize there are some that don't require of congress onhave a back door. if there is a back door, everyone has to have it. it makes not only technology uncomfortable but consumers uncomfortable. >> thank you. time expired. i yield back to chair. >> i thank the gentlelady forrer questions. with that we go to the gentleman from georgia. >> thank you mr. chairman. thank you for hosting this very important hearing. mr. garfield, your testimony mentioned the desire of the industry to be free from new regulation without becoming a wild west of privacy. earlier this year federal trade commission reinforced the message staff internet on things where it recommended among other things that companies build privacy and security into the designs of their connected devices.

last congress i introduced the apps act a common sense approach to an urge enproblem that would protect consumers without disrupting functionality or innovation through a safe harbor and other mechanism for trust in regulation. i view these as reinforcing of ftc staff recommendations on privacy and security for connected devices and i plan to reintroduce the apps at this current session of congress. privacy is an issue that should unite us not drive us apart. in annals on echo system where over 25 billion connected devices store and transmit information about consumers it's time we have rules of the road. what steps will private industry take to keep congress informed and address legislative concerns

regarding security and privacy of these emerging temperatures. >> thank you for your question, congressman johnson. the point you made at the beginning about the ftc's recommendations particularly around privacy and security by design i think are, in fact is occurring. the industry is spending billions to invest around privacy and security. it the right thing to do but will because consumers are demanding it. as well, we are advancing as pointed out sector specific principals around privacy and security as well. so there is much action happening right now in this space. we're committed to make sure congress is fully aware of the steps the private sector is taking to advance those issues. the in our best interest to be aligned with both you and

consumer interests around these issues issues. >> thank you. mr. bainwohl, i understand the benefits you're explaining about the systems systems that provide breaking assist and adaptive cruise control. i understand newer software will go far beyond just those actions. my concern resolves around the encryption of this technology. if these systems are operated on a broad range of wireless communication technologies between vehicles how are these frequencies being protected? >> i will give you an answer and then come back to you with a vetted engineer's answer. b 2 b on src, technology built for the purposes of

communications between vehicles. i will come back to you again with the specifics of the security that's embedded in that. we're obviously not at a point of full deployment. this is being tested. there's been an expansive test in ann arbor tested abroad. and the fundamental point i would make if you do a cost benefit analysis here, the benefit stream is absolutely enormous. yes, we've got to address cyber risks and security ricks and they are being dealt with from the design phase on up. but in term of the security src. >> okay. if end to end encryption is utilized how will law enforcement access information stored within a vehicle? do you have an answer to that question? >> so we would require a warrant of some sort.

this is again -- this is the point mr. poe was making. >> okay. i'm sorry. go ahead. >> and so we're very careful and principles are specifically that the information will not be shared with any of these unless there's a compelling and specific reason. >> but there will be an ability to counter the encryption or to -- kind of a back door, if you will for -- >> i'm not an engineer. this is a zone that i'm not going to give you a great specific answer on so i'll come back and write it in shortly. >> thank you. >> i thank the gentleman. i've had two of you gentlemen tell me about how you're not engineers. i want to talk about something

for a moment that's a little complex and then make it simple. in the aviation space collision avoidance of all sorts has been around for a long time. it started with the large commercial scheduled aircraft and then little by little has come down. one of those technologies adsd is, in fact, mandated now in just a few years for all aircraft. and it's a cute name. i've said it forever. now i have to say it's automatic dependent surveillance broadcast, adsb or adsb out. that delegate in support says here is where i am and sends it out to everybody. the faa regulates it. other aircraft where they are sending out where they are makes for a very exact gps-based, within a few feet of knowing exactly where you are and, of

course, which way you're going, how fast. making a collision almost an impossible thing to do if you're simply monitoring the product which has alerts. the question, and i want to make sure i asked mr. bainwol and others. the faa having jurisdiction over this, they made a decision only those who send out a signal can, in fact, receive a signal. so today systems that cost anywhere from 6 at the low end plus installation to hundreds of thousands of dollars equipped in aircraft, they communicate by sending out and receiving information where others are. mobile devices devices that can be bought for a matter of a few hundred dollars that only receive are blocked from receiving that information meaning that as you roll out a new technology mr. bainwol, clearly these kinds of

technologies is what big auto is looking at rolling out, countly millions of automobiles will not be equipped with those systems for decades to come. the '65 mustang or any classic cars congressman vargas has will not ever be equipped with them. can you comment on the need to make sure any standard allows for after market retrofitting of products that to the greatest extent possible enjoy the benefits of newer technology brought to market in new automobiles purchase i have to comment. there is a challenge in the auto space with penetration average age of a car is 11 years old. when you introduce a new technology it takes an average way to wind its way through a fleet. >> not with mr. shapiro's after market products. >> analog breaking. it took 30 years to go from introduction to 95% penetration.

your point about fleet penetration, i think, is a valid one. the case of technologies that offer such value to society, i think you raise a legitimate point to fill the gap now. truth of the matter is in part that gap is filled with this phone phone. just to give an example. >> i'm not sure gary wants to be called a peddler but appreciates calling many of his members. >> so waves is a wonderful app, crowd source-based and provides many of the benefits it provides but not with the same absolute standard of certainty. so we've got to find a way to fulfill the marketplace. i think the app world does a good job of bridge thanksgiving and ultimately fill the fleet. i think your point is a valid one and we've got to find a way to make it work. >> thank you.

gary, mr. shapiro, the question more was as new innovative items come out of the oem market and new fleet, there's an ability to get perhaps some but not all of those benefits government at least in the age of aviation has blocked the ability of thousands of small pilots pilots with a piper cub made before you and eye were born in which a mobile device can be put on board today are blocked from knowing there's a fast mover heading for them because the faa has seen fit to block it, unless you're sending a signal. that's really the question of enabling as much benefit from potentially low cost hand-held devices. >> mr. chairman, as a member of the flying public, i never quite understood that decision and i'm glad it's being rectified albeit after dozens of years. >> it is being rectified all

aircraft in the matter of a few years will have abs -- i'm sorry, abs out. however, today somebody can carry a few hundred dollar product. if it were allowed to receive the signal they would be part of knowing where a fast mover is and avoiding it even if they aren't putting out that signal. >> i'm thrilled to hear you as i fly everybody needs to know. >> the reason i've been so excited for years about driverless cars, the level of death and industry caused by cars is so huge. we all drive. it can be avoided. this technology. it would be an absolute tragedy if it was delayed in any way because an after market was not allowed to develop to move it along. i think you are absolutely correct in indicating that we'll get there in two different ways. one, the car manufacturers themselves will do everything

they can to get this technology in public hands along the way as we've seen with almost every other technology including security the after market is quicker. they can get greater penetration and provide competition. my concerns about some of the privacy discussions when it comes to matters of losing your limb and losing your life which is what we're talking about with collisions in cars, it's a little less important to have privacy than it is in some other areas. so the privacy discussion is important. i don't want to denigrate it but when it comes to our physical safety it takes a back seat. >> mr. bainwol remember, you two did take a picture earlier smiling. >> this not to contradict gary but just to clarify. so you saw the words about fatalities and cars, cars are killing people. just want to clarify 95%, 98%, maybe 99% of fatalities on the road are the result of

environmental challenges and human error. the car itself works rather beautifully. and the critical point that we would both embrace -- >> i certainly think mr. shapiro was talking about anti-lock brakes traction control all the items that have come out and reduced the death rate in all too flawed drivers. >> we are very proud of those technologies, we want to see them move in as rapidly as possible. those technologies are the answer to human error which is a huge problem. >> thank you. >> mr. reed since you were given credit for these apps your men's wanting to develop apps depend on either an open standard or in the alternative being able to hack in order to create

interfaces. in other words you're locked out of interfaces with automobiles and other products. isn't that true? >> open standards is a significant part of how this moves forward. >> published standards. >> i think you'll end up with published standards and what i believe will be interfaces where i won't have to hack it. a little odd. published by car manufacturers that will allow me to tie into the existing system or i'll do it through the phone and phone manufacturer has done a deal with auto deal because secure safe apl platform i can build apps on. i'm hopeful about the connected car. i think that's a place where you'll see an explosion of apps that will be helpful and beneficial especially for those of us with kids in the back seat. >> in this study jurisdiction over bandwidth necessary for any of your products. we do have mandated seat at the

table and consultation with the ways and means sometime and administration in trade under trade promotion authority for both european trade and tpp and pacific. i'd like any of you that want to comment on the importance of global standards of getting the internet of things to in fact be embraced in a way around the world that allows either for economy of scale or consistency of service. i'll go right down the line on that mr. shapiro. >> global centers are nice but not essential. we've seen in technology politico and ego play to whose countries standards. >> wasn't necessarily only talking about standards. i was talking about the access, trade promotion intended to have. the acceptance without terror for barrier of american

products. >> okay. standards is one issue. trade promotion is good. ita is great, the mast lont, it's positive. obviously to the extent these devices get out there and are saving lives is an important thing. if there is an intention approach that's always referred to one country by country high tariff. >> i think the opportunity that you highlighted that trade agreements provide for driving global consensus-based standards that help to advance scalability and interoperability are net positive. hence, our stlong support for trade promotion authority and ultimately trade deals that will emanate as a result of that. >> with the complex blend of memberships sometimes trade gets tricky for me. >> some of your members are for it and some are against it. are you with your members?

>> it's more complicated than that. >> it's been around 100 years as a concept but we're building the different standards all around the globe. that ends up in the cost of products for consumers all over. a new car is safer than an old car. we can reduce cost of products getting more people in newer cars. that's safer and good for everybody. >> two quick points. every single member of this community has a district selling apps overseas. we see 20% of all the apps in china were actually from u.s. companies, which is huge if you pay attention to the china market. it's hard which brings me to the second part. our one concern about standards we are finding some countries are dipping their toe into the yfd creating quote, unquote, domestic open standards that are slightly tweaked from the united states and these are strictly barriers they are putting up to protect domestic developers, app

developers. we've seen it in the wi-fi space around the globe. tweet standards protect domestic production. we would support your perspective on improving trade and improving standards so they are available to all. >> thank you. on that note, with no further questions, this will conclude today's hearing. i want to thank all our witnesses. without obltion members will have five additional days to submit questions for witnesses, additional materials for the record. that also leaves our witnesses five days if you could please to provide additional material including that which some of you promised to give to our members. with that we stand adjourned. >> on the next washington journal, senator tom udall of new mexico on efforts to overhaul toxic chemical regulations. narcotic senator hoeven on energy and climate change and

reports the administration will reject proposed keystone pipeline. washington journal live each morning at 7:00 a.m. eastern on c-span. phone into the program or connect with us on twitter or facebook. this week owned c-span networks politics looks and american history saturday night 8:00 eastern on c-span, a discussion on illegal immigrants and enforcement of arizona's immigration laws. sunday evening at 6:30. new jersey governor and republican presidential candidate chris christie on national security. he speaks at the university of new hampshire at manchester. c-span 2 saturday night 6:00 eastern on book tv's afterwards, michael tanner talks about the growing national debt and looks at reinstructuring entitlement programs as a solution. and saturday afternoon at 3:00 glenn beck presents his thoughts on islamic extremism.

american history tv on c-span3 saturday morning at 10:00 eastern, commemorate the 50th anniversary of lyndon johnson's signing of the 1965 voting rights act. our coverage includes white house phone conversations between johnson and his aides civil rights leader martin luther king jr. and civil rights leaders about strategy how to enact and enforce the law and the signing of the bill. this weekend saturday night at 7:10 berkeley history professor brian delay looks at the history of gun production in europe and arms trading contributed to victory during the american revolution. get our complete schedule at c-span.org. >> massachusetts senator and maryland congressman cummings host a forum on federal investments and scientific research. we'll hear from former house speaker newt gingrich and panel

of academics. part of a group, middle class prosperity project. >> middle class project forum. so why is the middle school prosperity project holding a hearing on the importance of federal funding for research? the reasons are three and deeply interrelated and related to the future of america's middle class. investments in research produce good jobs right here in america. breakthroughs in research are our best chance to keep from bankrupting our country and from bankrupting the entire middle

class. keeping us from going broke over alzheimer's, diabetes and all of the other costs of medical care. and research will give us a chance to live better lives. american innovation has changed the world. scientific advances like super computers, internet sequencing the human genome and treatments for polio, cancer and hiv have saved lives and created good jobs for middle class america. economists agree that advances in science and technology have been, quote, the predominant driver of gdp growth over the past half century. today 2.7 million americans work in jobs focused on scientific research. many many more on companies new discoveries and technological innovations. companies like google and facebook. for every dollar enforced in national institutes of health for example, $2.20

back in immediate economic activity. private industry is great generating new development based on scientific developments that have a clear application but basic research, the kind whose applications aren't clear yet doesn't get so much investment. that's where we need government. government provides patient capital, the kind that can wait for long-term results. an american president once said quote, although basic research does not begin with a particular practical goal when you look at the results over the years it turns out being one of the most practical thing government does. that president was ronald reagan, a fiscal conservative who understood the value of investing in american in vagz. for decades investing in science has been a bipartisan priority. today washington has lost sight

of that priority. everyone, republicans and democrats say investing in science and innovation is a good idea but talk is cheap. we need action and we haven't had any in a very long time. one proposal moving through congress is 20th century cures act which includes $1.9 billion a year for five years in new funding for nih. now, that sounds like a good start and it is but not enough. today's nih budget adjusted for inflation is 12.5 billion less than it was in 2003. that is a 25% reduction in federal investment in nih alone. even worse the bill doesn't include maintenance of effort provision which means there's nothing to stop congress from cutting nih's base budget at the same time that it adds new money

on top. if that happened instead of expanding our investment in the nih under this bill could actually shrink. earlier this year i introduced medical innovation act which would help rebuild nih budget. it could boost nih funding by 20%. it achieves the increase without raising taxes without gutting vital programs and without adding to the deficit. dozens of doctor organizations of patient groups and scientific associations have supported it and there's no reason that every republican, every democrat and every independent in congress couldn't support it too. members of congress are responsible deciding whether to make these investments in our future or whether we just talk, talk, talk about them of the

american people deserve better from congress. that's why we're holding this forum today, to have a real discussion about what we can and should do to get money into research. i'm very pleased we have speaker beginning rich here to talk about his work and help science research and talk about what it takes to make real effective bipartisan progress. there are many things the speaker and i disagree on but we strongly agree investment and research is fundamental responsibility of our elected leaders and it is long pastime to meet that responsibility. we also have a distinguished panel of researchers, economists and innovators who will talk about how increased funding creates jobs and strengthens the economy and how congress can do a better job prioritizing federal investment in science. dr. wilson, doctors thank you, i'm very good you are here and i

look forward to today's conversation. congressman cummings, would you like to make some remarks? >> thank you very much. it an honor to join this six forum part of the middle class prosperity project. today we will for the middle class prospect. today we'll talk about how research and development have chartered the path for progress for our economy over several decades since the end of world war ii creating jobs in the pros e. we'll examine how cuts to the process and research and development threaten our future progress. american ingenuity is unmatched in the history of the world. the united states harness creativity and we help discoveries leap from the lab to the market place in a way that is the envy of countries all over the globe. according to the congressional

research service the federal government is the nation's largest supporter of basic research. funded more than half of basic research in the united states in 2012. as a result of funding appropriated by congress the national science foundation, the national institutes of health the department of energy and the department of defense and other agencies award tens of thousands of research grants every year. the federal funding through programs like the small business innovation research, the programs have been critical to help researchers and entrepreneurs convert basic scientific research into new products and technologies that improve the lives of millions of people while creating entirely new industries and jobs that come with them. in 1961 president kennedy called money americans to make a major national commitm of scientific

and man power and facility and material and as a result of that commitment the united states became the first and only nation to put astronauts on the moon. we reap the benefits of the discoveries made through the space program in the form of technologies and products that were never imagined when we began the lunar exploration effort. similarly our nation's leading role in the 13-year effort to decode the human genome has led to new treatments for some of the most devastating diseases. this advancement also created enormous benefits. according to battal memorial institute, our government's investment in $3.8 billion in the human genome project helped generate economic impact of $796 billion between 1998 and 2010. this is a massive return on investment of 14 to 1.

the question before our nation now is what story will we write in the 21st century? will it be one of studying new accomplishment? scientific progress and continued economic growth or one which we decide we can no longer afford the next big discovery? will we remain the world's leader in scientific research and development or will we summock to a culture of mediocrity and watch as other nations out pace our investments, our discoveries and our progress. in 2009 the american recovery and reinvestment act contributed $213 million to the budget but sequestration held steep cuts after it was passed. according to the advancement of science our nation's federal research and development budget

declined by more than $26 billion from 2010 to 2015. that is a drop of 16%. these cuts in the uncertainty in the research institutions face have had deaf tating impact on research initiatives. these cuts are shrinking the pipeline from which discoveries and inventions will emerge 10 or even 20 years from now. the decisions we are making from the short-term perspective from the annual budget cycle are shaping the nation and the economy, we will leave to our children. we need to make sure that they inherit a country that continues to lead in scientific innovation that creates a better world and a stronger economy and that promotes a broad and prosperous middle class. i'm pleased to join senator warren in welcoming speaker gingrich to today's forum. i serve with speaker gingrich during my first terms in congress and i thank him for his leadership on the issue of in

vesting in biomedical research. i also welcome our distinguish members of the second panel. we have an extraordinary group of experts aseambled today and it is an honor to have this opportunity to hear from each of you. i yield back. >> thank you, congressman. we are honored to welcome the former speaker of the house of representatives newt gingrich to today's forum. please come down. congressman gingrich. [ applause ] it is good to see you here. congressman gingrich represents georgia's sixth congressional district from 1979 to 1999. from 1995 to 1999 he was the 58th speaker of the house of representatives. >> madam, i just want to make one note, i join you senator warren in welcoming speaker gingrich to today's forum. not only did i serve with speaker gingrich but i failed to say that he gave my parents one

of the greatest thrills of their life. both of my parents having less than a sixth grade education having been forrer share croppers from manning south carolina, you speaker gingrich, swore me in in a special election and you took a moment after the swearing in to speak to my parents and i will -- shall forever forever be grateful. thank you and welcome. >> would you like to start. >> he's going to start. >> he's going to start. >> good. speaker gingrich. >> well, let me thank both of you. and let me say. as a fellow member of the house congressman cummings, i'm delighted to have had the opportunity and i appreciate your bringing your parents. i think it is one of those magic moments, the first time you get sworn in and the whole family is there. it means a whole lot. and thank you senator warren and thank you for rushing back. i can appreciate how hectic your

schedule is. when you first called me i was frankly surprised and delighted and i'm glad to be here. i'm really delighted to be here to discuss federal funding for research and development. a topic that has the potential to transform the lives of millions of americans of all backgrounds and clearly to bring together liberal democrats and conservative republicans. before i offer a few general principals for how to think about federal research and development funding let me start with something close to my heart and that is finding cures for the most common and serious health problems. this is a challenge important, urgent and now there is great hope it is doable. it is important because every one of us has been touched by the devastating effects of problems like alzheimer's disease, dementia, cancer kidney disease and parkinsons. we know how debilitating they can be how they absorb the energy of family members and

caretakers, how they strain the finances of even well off families. from a fiscal as well as a human perspective, funding -- finding cures for these diseases is urgent urgent. bob kerry and i chaired the alzheimer's study group for three years and learned over the next four decades americans will spend $20 trillion on always and other dementias. that is more than a full year's gross domestic product. so imagine all of the money in a year would go just to this. the taxpayers are on the hook for much of it, including an estimated 420% increase in costs to medicare and 330% increase in cost to medicaid and these of course are just two out manufacture programs. the federal funding for research to cure alzheimer's is only a tiny fraction of the money the government is already spending

to treat alzheimer's every year. the nih spent $731 million on dementia research this year, less than one half of 1% of the $154 billion medicare and medicaid are spending to treat it in the same period. part of the reason for the imbalance is that national institute of health funding has been cut more than 20% in real terms since 2003, the end of the five-year doubling of the nih budget which we achieved in a bipartisan basis in the 1990s. given the cost are coming boosting research funding may be the most fiscally responsible step we can take. and i want to emphasis this for a second. this is where i do bring a unique back ground. we balanced the federal budget for four straight years. the only time in your lifetime the federal budget has been balanced for four straight years and we did it by doubling the

nih budget. because we set priorities. but with the baby boomers aging, if we do not find a research-based solution, we will never balance the federal budget because we will never impose the level of regulatory pain it would take to balance the budget which means people not getting treated, people being in miserable circumstances. and remember with alzheimer's, caretakers are twice as likely to be sick as noncaretakers. so you have the always population and the caretaker population both at risk because of this. and the good news is curing alzheimer's and other diseases appears more doable today than at any other time in history based to funding by the government and break throughs in biology, genetics and computation and materials. the national institute and tom

in general have shown initiative with the brain initiative and today nih is pioneering therapies that are spurring patients immune systems to attack diseases like cancer rather than relying on surgery chemotherapy or radiation. to allow research funding to languish at a time of historic opportunity when we could be saving lives and saving money takes a special kind of stupidity that is reserved for the city. i should note as an exception of this criticism the work of chairman upton, and congresswoman degget and those in the house whose cured initiative is one of the most important and bipartisan efforts in congress in recent years and over here in addition to senate warren and ron johnson and others are working hard in the same direction. in addition to the drastic increases in research funding, i've called for doubling the nih budget and i would by the way include a substantial increase in the national science foundation which i think was the

one mistake we made in research funding. we should have tripled at nsf when we doubled nih. let me quickly offer two bold big ideas for research at the federal level. the first is research bonds. for a large, very expensive projects with the potential to generate huge savings if they work, it is worth exploring issuing bonds to finance the research which would then pay out some fraction of the savings. this would have the benefit of taking important projects off budget and raising much larger sums of money than the federal government is likely to appropriate. we are developing this idea for brain research bonds with gar an stag lan and pete correlly at one mine and steve high man at harvard. they have proposed a version of the idea with the mind act for alzheimer's research bonds. similar models could apply to

large infrastructure investments as governors daniels, schwarzenegger and levity has demonstrates with innovative for financing major roadways in their state. philip howard has argued if we rationalize the infrastructure we could create 3 million more jobs with the same appropriation. finally. for research and development, the return is less obvious savings to the taxpayer but might be worthwhile. i'm a big supporter of surprises. first taxpayers don't pay a thing until the goal is achieved and they never pay more than the prize amount. second you get a lot of competing strategies for solving the problem when you have multiple groups workingin independently to get the prize and you get better results far more efficient and you may end up with several working designs. i would radically reorient our

efforts in space and transportation and procurement around prizes to celebrate competition and procurement. with that sweeping over view i look forward to your questions. >> speaker gingrich i want to thank you for your insightful presentation. you know you argue and i quote that this irresponsible and short sighted not prudent to let financing for basic research dwindle. what do you think are the main reasons we have let financing for basic research dwindle? >> well i think there are probably two or three big reasons. one is the past has lobbyist and the future has publicists and in this city lobbyists beat publicists. so resource allocation, some jobs not as important have better lobbying and they survive

and that is a subjective fact. and second i think there are those fiscal conservatives who are anti-government in a way that makes no sense. it is like the woman who once wrote verner von brown and said quit trying to go to the moon and stay home and watch television the way god intended. there is people who have no notion of the government. whether it is the passenger train ride or the internet or a thought different things. government investment from the very beginning, we created a patent office in the constitution. we were founded by people who believe in the future and there is a branch of government that doesn't get it. and third to be candid, i think we have allowed welfare and bureaucratic spending to crowd out investment. if you go back and look at the percent of the size of the government that we were spending on investment and research and investment and infrastructure,

30 or 40 years ago it was bigger than now. all of this has to be changed and one of the reasons i'm for alzheimer's bonds is i don't think we're going to win the fight -- we'll make some incremental progress but compared to the size of the title wave of illness coming down the road as people age we are not going to get ahead of it within the traditional incremental appropriations process and that is why i've looked for ways to break out as i suggested with taking it off budget and issuing bond that's would be retired as we gain the savings of people not getting sick. >> i want to come back to alzheimer's in a minute. but didn't some of the things that you just stated exist back then when you were able to double the -- the budget with regard to research? i mean, just some significant thing to change. the reason i'm asking is how i can get back to where you want us to get back to. >> i think something sort of magic happened.

when we were in the first stages of trying to balance the budget and john kasich had the lead on the project and john porter who spent his career on nih problems and senator connie mack who had a family based concern with cancer through his entire family history both came to see us and they brought with them every vice president for research of every pharmaceutical in the country. and we had a meeting of about 70 people. and they said look, this is a function of jobs, as senator warren said. you want high value american jobs, you invest in basic research. you want a really have the most competitive economy in the planet, you invest in basic research. you want the best security, you invest in basic research. these things have carried us for 150 years and it is a period of utter foolishness to walk away from the things that have walked

and that also means candidly, those who are conservative as i am have to win the argument with other conservatives about the centralize of government investment. i point out to people that the transcontinental railroad was built with a huge government incentive. and it didn't happen randomly. and even adam smith and the wealth of nations argues there are times and places for national security reasons when government should be basically shaping the market and i would argue that the areas you and you are talking about are a key part of that. and i begin john parter and connie mack a great deal of credit for making it possible to build the momentum to double nih budget. >> as federal funding has dwindled, has private sector funding increases to fill the gap. sometimes you hear that argument, that private sector should be doing more. >> look, there are some areas of private sector activity that you

can see where there has been an investment but there are two things that operate against that. the first is the -- that wall street is very very one quarter at a time minded. so the analysts don't look at the grade age of bell labs, the analysts would not look at a 20 year investment strategy and give you a good mark. so most ceos are driven by the finance system toward short-term optimization in a way that undermines the investment you are describing. but there is a second part to this. and most economist agrees with this, i don't think there is much doubt when you are talking about fundamental break-throughs, everybody has an in sentive to hope somebody else will pay for it. that is just an objective of reality. and frankly, if it is a break through, the jet engine is as good of an example as any. and they were complicated and

experimental in 1949 to 45. you wouldn't get them. once we built good enough jet engines for the b 47 and the b-52 it was easy to build the boeing. but without that capability, you couldn't have the transfer into commercial activities. sow have to be honest about what will the private sector really invest in and when you start to think long-term things -- and by the way we've had a wonderful history of philanthropy founded by private citizens and still funded by private citizens and that is terrific but if you are talking about the scale of science that we need particularly in national security and in dealing with health, you're not going to get that either from philanthropy or from for-profit companies. >> just one more question.

i was stunned to read in the m.i.t. report in the past two years the fda has approved 19 new cancer drugs but over the past decade and i quote, not a single new drug for alzheimer's degrees has been approved. and i guess i would -- based on what you just said, i guess it would be almost impossible for the private sector to make that break-through with regard to alzheimer's without a lot of government help is that a -- >> that is partially true. the other thing i would say to go out on a limb here for a second, is i think we need to rethink how the fda works. example. if you are dealing with a lifetime condition you can't afford to test the drug that takes 20 years to figure out whether or not you're going to legalize it. you never raise the capital to investment in a drug that has a -- invest in a drug with a 20 or 30 year horizon to be

approved and in brian science, the fda is not today scientifically prepared to deal with the complexities and this is true for regenerative medicine that we are not prepared to understand. so it is a dual thing. the government has to make the investment but candidly we could accelerate getting investment in new drugs and accelerate in getting particularly alzheimer's related things many of which will have to be conditional. if you are dealing with a 20 or 30 year process, you have to say we don't see any immediate safety problem, those of you who want to have informed consent do it because the truth is we aren't going to know for a generation whether or not it works. >> thank you very much. senator warren. >> thank you congressman cummings and thank you speaker gingrich for being here thank you for your remarks. i could have given your testimony on the importance of public support for basic research and i'm delighted to hear you talk about tripling the

nih budget and i strongly agree with you. but i want to focus on the national institute of health. this is the crown jewel of medical research supporting the work of more than 300,000 researchers, including 145 nobel prize winners at more than 2500 institutions. this work expands our understanding of biomedical science, leads to new drugs, new technologies saves money and saves lives. for decades congress increases the nih budget year over year over year and then in the late 1990s both parties worked together to double that budget. you were the architect of that historic achievement. now i think it should be a lesson for today as congress. a lot of people think that we are far too partisan to get anything done but i don't think anybody would describe the 1990s as the golden age of

nonpartisanship. but despite that you supported nih funding and you got it done and that is what i want to ask about. despite the deep divides why was it that both members of parties decided that nih funding was so important in the late 1990s? >> i think there were three things involved. partially thinking through it is a good question. first thing as hillary clinton said on the campaign trail, her husband and i had a technique where we could fight all morning and negotiate all evening. and i think it is really important. it is not that you get to a nonpartisan perfect world but you have to place the country above whatever your fights are and -- and reagan and o'neill did this perfectly. now that we've gotten it out of our system, what can we do.

let's not talk about what we condition do, but what can we do. and clinton and i had a buy as in favor of finding solutions. second, we did have remarkably strong corporate support. and that allowed us to overcome a lot of the conservator bias -- conservative bias against government. can you imagine today if you took the biological companies in san diego and around harvard and every one of the ceo's showed up around here and forget big pharma for a second but you would have so many hundred ceo's with ph.d's or md's and you want us to solve problems, we have to do this. so we brought prief sector energy to get more money for the sector. an the third thing was we were able to engage the constituency groups that have a direct

immediate interest. i remember when bob kerry and i spent the three years on a bipartisan basis on the alzheimer's study group and we were here in the senate, we had 15 or 18 senators come to a hearing and i think all but two of them had a personal relationship with alzheimer's. wul suddenly -- well suddenly people said let me get this straight. it is going to create jobs, it is the right thing to do for disease and the only possible treat to balance the federal budget and somehow that conversation broke through. i'm frankly trying to figure out how we get it into the presidential campaign next year because i would love the candidates to have to answer the question are you going to try to get to a balanced budget by bureaucratically depriving people of goods and services or are you going to try to invest in the research that lets us break free because the truth is it -- if you postpone alzheimer's on set by five years you cut the