strength there. so when we put it all together, we're still seeing an overall picture of splilt above trend growth, ongoing improvements in the labor market. you know, obviously there are risks there. there are risks that come from the global environment that we have monitored carefully, and recognize. but overall, i would say that the total, while -- where this foreign weakness overall we're on a solid course. >> thank you. >> senator peters. >> thank you, mr. chairman, and thank you chair yellen for your testimony here today and the wonderful work that you do. >> thank you. >> i want to pick up on some of the comments you made on income and equality and i realize the fed doesn't have the ability to alter that, but certainly you have to respond to that in terms

of your policy making and the effectiveness on your policy may be really regarding some structural changes that may be occurring in the result of the fact the result of the majority has been stagnant. and it seems to be a disconnect from some of the policy or the theory i remember learning years ago in economics that normally when you have increases in productivity, that productivity translates into higher wage levels. we have not seen that in recent years. we have seen productivity has gone up significantly more than wage levels. and if you're looking at formulating monetary policy, you're looking at aggregate demand and how you get that demand is income in the economy and wages. you mention that consumers are 80-plus percent of it. so the more money consumers have, the stronger the economy is. and yet if it is not growing from wages, then it has to grow from them taking on debt. and yet if we look at the fact

that wages have been stagnant, we're seeing consumers are starting to deleverage which is a different trend from what we saw before. you don't have those engines of growth. in your testimony there is a 3% increase in consumer spending. but i believe that is down from previous years as well where we saw 3.5% or more in consumer spending per year which led to higher gdp growth. we're seeing this long-term many year trend of lower wages, deleveraging of debt and the fact that most of all of the economic gains are only going to the very top of the income ladder. and the folks at the very top don't spend as much consumer wise as folks in the middle class. there may be more resources in terms of other uses of that cash. but how do you see this long-term trend of income equality. how is that going to impact the fed to be as effective as it may have been in past years using

these tools when those things were in balance a lot more than what we're seeing right now? >> that's a great question. and you introduced a lot of different elements into it. clearly the trends in income and -- having our disposal income for households are one of the most important factors determining consumer spending. and the fact that wages have been pretty stagnant for a number of years, i guess -- compensation has been growing in the 2 or 2.5% range. that, you know -- that is something we have had to take account of in forecasting what the strength of the overall u.s. economy has been and it's integral to our forecasts. but i guess i would -- i would say that job growth has been solid for a number of years. so disposal income, in spite of

the fact that wage growth has remained in that 2, 2.5% range, there's been a lot of job growth that's added to disposable income. so the raving rate moved up after the financial crisis, and it remains in positive territory and has been pretty stable. so the consumer spending we're seeing isn't largely being supported by taking on additional debt. it is being supported by income that households are earning. as the economy progresses, as the labor market strengthens further, i would expect to see some upward pressure on wage growth.

recently in issues of compensation and average hourly earnings, i think we have seen some welcome hints. it's hinted of evidence. we don't know if it will last. but at least recent data does suggest some upward movement in wage increases. but over the last couple of years, the spending we have seen has been supported by income growth. so inequality definitely plays a role here, and, of course, we need to see sufficient wherewithal for households to spend in a way that generates forecast of continuing growth. >> all right. thank you. >> senator casey? >> mr. chairman, thank you. madam chair, we're grateful for your testimony today, your presence and your public service. i'll have just one question,

i'll submit a second for the record. because of the limitations on time that we have today, and we have in the senate, as well. i wanted to say first that i was heartened by some of the numbers in the -- i guess the first page of your testimony that we -- we all have heard, i guess here or there but we don't emphasize enough. the statement you made that the economy has created about 13 million jobs since the low point for employment in early 2010, that's good news. good news on the unemployment rate itself, which as you note, peaked at 10% in october 2009, declined at 5% this october. so literally cut in that. that's good news and even as we emphasize as we highlight some of the challenges with labor force participation rate or folks not -- not -- folks really discourage from seeking employment. the question i had is more long-term and steps we should be taking and steps that you might recommend for long-term competitiveness. one of the policy steps that i hope we could take and we had a

step in the right direction on early learning -- a couple months ago when we voted in connection with an education bill on an amendment that was my amendment, which was the first time in a decade, really, where the senate was on record voting on a substantial early learning commitment for the country. just to summarize it, if every state signed up, and it would be optional, if every state participated, we could have provided early learning to children at 2% of the poverty level and lower. so a substantial in new investment. we didn't win, we didn't prevail on that vote, but it was to have a clarifying sense of where people stood. but i guess just my basic question is that. what would you hope it would do on taking steps on long-term investments in a more

competitive work force. >> so let me say i think that one of the most disappointing aspects of u.s. economic performance is that the pace of growth and the pace of productivity growth have been very depressed. they have fallen very substantially from what we saw in precrisis times. now the good side of it is, it hasn't taken very much growth to see a substantial improvement in the labor market. the bad way to read that complex of facts, namely not a lot of growth, quite a lot of jobs is that productivity growth has been very slow. and ultimately, long term living standards, how well our children will do and whether or not

they'll have better lives than we have, really do depend on productivity growth and thinking then, i would say that congress should put considerable tension into thinking about how policies that could serve to speed the productivity growth in the economy and education is one of the things that would head my list. the fact that we have seen such a large gap between the wages of more educated and less educated workers, that is a signal that there is a high return to investment and education. and making it more available. i know there are studies with -- many studies with respect to early childhood education that have particularly pointed to the importance of that in creating skills and better performance. but at all levels -- at all

levels, education is important. in addition to that, i would say it's well documented that support for basic research and development is an important foundation for economic growth. and i would say policies to make entrepreneurship easier and to encourage it. all of those are the kinds of things that are important to long range trends in economic growth. >> thank you very much. thank you, mr. chairman. >> i'm told the house of representatives is ready to take up its voting and members may be coming back. with that gives us more time here. not to -- we know you have a cutoff time, and we'll make sure we hit that. but if you're willing to stay a bit to see if members come back. >> yes. >> i know senator cassidy would like to -- speaking of coming back. >> yes. congressman delaney, thank you.

you're up. >> okay. good timing indeed. thank you, chair yellen, for the quality of your testimony, but more important for your comparable leadership in the federal reserve during this obviously particularly important time. i wanted to focus on your view as to the effect higher interest rates -- or let's say it differently. the first step towards raising interest rates will have on borrowing. because the conventional wisdom is always that lower interest rates encourages more borrowing. because credit costs are cheaper. but we have had interest rates at such unusually low levels for such a sustained period of time that that's obviously been a bit of an anomaly in terms of historical rate patterns. and i wondered if that has kind of psychologically changed people's perspective on borrowing.

and if a return to a view that things are more normal, which is what i think many people would interpret an increase in rates would certainly signal that. at the levels we're at now, modest increase in rates will have largely an inconsequential effect. you talked about how corporate investment is kind of moderate. new home construction is still below standard or below where you would like it to be. so you know, you worry that those -- a lot of those decision makers have viewed the zero interest rates as kind of a free option. well, you know, i don't have to do anything because they're so low and seem to be low for a long period of time. i guess my question is, as you

look at a day when rates do go up, and that day is clear. exactly when, none of us know yet of course. but do you think that will encourage more credit formation, more borrowing, by i personally think will be good for the economy. because of some of these -- that people will start looking at rates differently. >> so a few things i'd like to say. when the fed takes its initial step in raising the target for the federal funds rate, it's important to understand that that doesn't mean that there is some predetermined -- >> no -- >> -- path to historically normal rates. so the notion that it should be -- something that will be gradual. i mean, in general, higher levels of interest rates, i think, do tend to make borrowing more expensive and discourage it. but it will occur in the context

of a stronger economy with higher income where people are doing better. it's not the only thing that affects investment decisions or borrowing or spending decisions. so i would not expect to see borrowing go down or lending go down when we raised rates modestly. >> do you think it might encourage more borrowing? >> well, one does often hear, especially anecdotal evidence that i hear, along the lines that you're suggesting, that there are people who do feel i have a free option. >> yeah. >> rates will stay low for a long time. and if they see rates going up, there may be people who are on the fence, who may decide now's the hour to act. so -- >> so that wouldn't surprise you as an outcome from this decision. >> it wouldn't surprise me as an outcome, but it would not be -- that's a temporary effect. >> sure. and you're not making a

decision -- >> borrowing from the future. so i don't want to encourage the idea that i believe that higher rates in and of themselves would permanently tend to boost borrowing and spending. >> right. one other quick question. if i can. governor -- switching gears, governor carney gave a speech two months ago where he talked about one of the long-term risks being climate change being a repricing of assets and potentially the reinsurance industry around risk related to weather. do you share some of those concerns? i know you don't have much time. >> i thought it was an extremely interesting speech. i cannot say that i'm aware of work that we have done looking at that. but i think it's something that is worth -- certainly worth considering. >> do you think you'll be doing some work in that area?

>> i will -- it's something we can get back to you on, and have a look on. >> great. thank you, chair. >> thank you. senator cruz. >> thank you, mr. chairman. chair yellen, welcome. in the summer of 2008, responding to rising consumer prices, the federal reserve told markets that it was shifting to a tighter monetary policy. this in turn set off a scramble for cash, which caused the dollar to soar, asset prices to collapse, and cpi to fall below zero. which set the stage for the financial crisis. in his recent memoir, former fed chairman ben bernanke said the decision not to ease monetary policy was, quote, in retrospect certainly a mistake. do you agree with chairman

bernanke that the fed should have eased in september of 2008 or earlier? >> you're talking about 2008 or 2007? >> 2008. >> i mean, i think the fed responded pretty promptly in easing monetary policy to the pressures that were emerging. and i mean, i don't -- i don't disagree about -- with his analysis of a particular decision. but i -- i certainly wouldn't say that that decision is what caused the financial crisis. and by december of 2008, the federal funds rate had been lower to zero. >> so when you say you don't disagree, does that mean you agree with chairman bernanke that it was a mistake? >> so i can't recall the exact

passage that you're referring to. so before i say if i would agree, i would like to have a chance to review exactly what he said. >> well, i would be very interested if you would have the opportunity to review the passage, and let the committee know whether you agree with his assessment. >> okay. >> i want to shift to a different fed chairman, which is paul volcker. who said in a stage before the bretton woods committee last year, quote, by now i think we can agree that the absence of an official rules-based cooperatively managed monetary system has not been a great success. in fact, international financial crises seem at least as frequent

and more destructive in impeding economic stability and growth. chairman volcker went on to say, the united states in particular had in the 1970s an unhappy decade of inflation ending in stagflation. the major latin america debt crisis followed in the 1980s. there was a serious new mexican crisis and the big and damaging asian crisis. less than a decade later, it was capped by the financial crisis of the 2007 through 2009 period, and the great recession. not a pretty picture. now you have said, quote, it would be a grave mistake for the fed to commit to conduct monetary policy according to a mathematical rule. do you agree with chairman volcker's characterization that, quote, the absence of an official rules-based cooperatively managed monetary system has not been a great success and not been a pretty picture? >> well, you have pointed to a large number of very damaging financial crises, and in that

sense, i do believe it was very important for us to take steps to have a stronger financial system, and one that's less crisis-prone. i don't think that former chairman volcker was proposing a rule-based monetary policy in the sense of following a simple mechanical rule. and i guess i would argue that many countries do have in essence a rule-based monetary policy in the sense that most countries have inflation targeting regimes. and transparent monetary policies where the central banks are independent and spell out and are accountable to achieve an inflation objective. and the federal reserve has very much strengthened its transparency as to what our goals are, what our strategy is for trying to achieve those goals.

and provided the public with very detailed forecasts of what policies we think are appropriate to achieve the goals of the congress is assigned to us, including a 2% inflation objective. and over the last 20 years, inflation has been highly stable around 2%. so in that sense, even though we may not follow the rule or some simple mathematical formula, i believe we do have a rules-based monetary policy in the united states, or at least a systemic policy in the united states, and many other countries, most other countries do as well. >> and one final question. in 2008, the fed began paying interest on reserves.

in the seven years since then, do you know how much in interest the fed has paid to banks under that policy? >> it's been set at 25 basis points, and i don't have the exact numbers. at my fingertips. but i want to say, it is a critically important tool of monetary policy. it's a tool that almost all, most certainly advanced countries, central banks have and rely on as a key tool of monetary policy. >> so what has the impact been of paying billions of dollars to those banks in the last seven years. >> it's helped us to set interest rates at levels that we thought were appropriate for economic growth and price stability in this country. >> thank you. >> senator? >> madam chair, i getting to again.

a lot of turmoil in china. there was an earlier discussion about how obviously foreign markets are part of how we, a judge, are growth. china may be devaluing their currency. it seems they have weakened their currency. i could go on on things you know better than i. what do you see as the stability of the chinese market and how does that impact us? >> so china has grown, obviously, very rapidly for a very long period of time. and in recent years, has been on a general slowing trend for reasons that are entirely understandable. namely slower labor force growth, a reduction in the pace

of investment growth. a desire that they have, which is in their own interest and one that we share, that their economy rebalanced from such heavy dependence on trade as a source of growth to domestic consumption. and as they have moved toward the technological frontier, further progress in adopting technological -- >> can i interrupt for a second? >> changes tend to slow. >> are they truly attempting to increase domestic consumption? i always had a sense the way they encourage savings, and use those savings to among other things prop up their stock market, their rhetoric says they are increasing domestic consumption. but their policies do not seem to reflect that rhetoric. >> my impression is they are trying to rebalance their economy. consumer spending is a smaller

share, a far smaller their of their economy than consumer spending is of ours. and it has been growing rapidly. there are challenges that they have faced in trying to boost it. but i believe that that is, a course they're on that is in their own best interest. and we would agree. >> okay. the change in subjects. by the way, so you feel the turmoil we're currently seeing, the threat they might devalue their currency, just to be specific, you don't feel like that threatens our economy, nor that -- and let me ask a secondary question. are they attempting to, if you will, game it by increasing their exports by devaluing their currency, et cetera, et cetera. >> well, there was disruption last summer in financial markets when they made a decision to devalue the remnant by a couple of percent.

i think to put that in context, remember that the u.s. dollar has been rising, has been appreciating significantly over the last year-and-a-half. and the chinese currency has been linked to the u.s. dollar, and so during that period, the chinese currency had been strengthening rather substantially relative to many of its trade partners. and they made a modest adjustment of their exchange rate, but in a way that was arguably not well-communicated and proved disruptive. and then they saw very large capital outflows. i think they recognize that stability of their exchange rate is probably in their best interest. but ultimately, would like to move to a more market-based and flexible system of exchange rate determination.

>> i wish you were their central banker. i'm not sure -- but that said, i hope you're right. secondly in january of this year, the economy actually slowed, growth became negative. at the time it was attributed to the slow down in the energy market because oil prices had fallen so produced a lot of jobs. and by the way, jobs for less skilled workers which we have spoken of here today. now it seems as if that fell or production rose a little bit for a variety of reasons. and now it appears that oil production is decreasing once more and the rig counts are falling. my state is impacted by this. any comments upon how this shedding of jobs and the exploration and production component of the energy industry is going to impact our economy? >> well, we have seen a huge decline in oil prices.

for reasons pertaining to both huge increases in supply and perhaps some slowing in demand. it has had an enormous impact on drilling activity, on jobs in that sector. and that has been one of the things that has been holding back growth. >> so even though we have gotten some benefit for consumer spending in terms of employment, now going forward, as those jobs are further shed, what impact do you feel that has upon our growth? i'm struck that your forecast is that the economy is going to continue to grow at this kind of 2.5% rate. not under reagan and clinton, but this 2.5%. but if we're shedding all these jobs in the industry, which provides such a tremendous number of jobs for less skilled workers, it seems as if that endangers even this 2.5% growth we have. >> well, remember that we have

been creating roughly 200,000 jobs a month for the entire year. >> no, i was told once that it actually takes about 270,000 jobs a month to both bring back into employment those who are currently unemployed, to take care of those -- but who would prefer to work. because their labor participation market is so low. for newer workers entering the market, to employ them, as well as to maintain full employment for those currently. i'm struck that something i read speaks of those 20 to 25-year-old workers being underemployed. higher rate of unemployment among those. so all of this is to say 210,000 a month, is that adequate to -- to both increase job participation, but also to account those who are newly entering. >> so to simply provide jobs for those who are newly entering the labor force probably requires under 100,000 jobs per month. and there's a downward trend in the labor force, due to its aging. if labor force participation is stable, that helps to absorb people who are discouraged and have dropped out. but that still requires quite a

bit less than the 200,000 or so jobs -- we have had. >> in terms of increasing back up to full employment -- excuse me, full -- our labor market participation is the lowest since jimmy carter. so when the president speaks about how great the unemployment rate is, i think our labor participation is as low as jimmy carter. so i guess my question is, how do we increase our labor participation, as well as take care of those entering now. because we don't seem to be accomplishing that with even a 210,000 per month labor growth. >> well, we are on a path of declining labor force participation due to the aging work force of the population. so i don't think that we should expect to see labor force participation move up a great deal over time. if it were simply stable over time, rather than on that declining trend, i think we would be absorbing people who are perhaps discouraged, and in

a stronger job market would move back. but 200,000 jobs a month is enough to make progress on those dimensions. >> i yield back. thank you. >> thank you, senator. we have had the return now of two of our key members of the committee. and so we have a little bit of time. we have a hard 12:00 stop so we have time for both of you to ask questions. >> thank you, chairman. thank you, chair yellen. sorry about the vote. so in your comments, when i was here earlier, you mentioned

moderate growth within the economy. but yet earlier this week, economists at citigroup predicted that -- not only a tightening of the u.s. labor market will force the fed to increase short term market or interest rates more rapidly than was anticipated. they said it would result in a inverted yield curve, which typically precedes a recession and actually, they -- they said -- the economists said they would assign a 65% likelihood of a recession in the united states in 2016. now 65% seems high to me. but i'm not an economist and not the fed chair. but zero risk may be too low, as well. so what would you assign a risk level of a recession next year?

>> so i don't have a number for you. but a decision on the part of the fomc to increase rates would only occur in the context where the committee believe that we were going to enjoy at least somewhat above trend growth, so we would see an improvement in the labor market. and, of course, there's always uncertainty that pertains to the economic outlook. there are always shocks that occur. the risks -- the risks are on both sides. they're to faster growth and also slower growth. i can't -- i can't put a number on the risk of a recession. but i absolutely wouldn't see it as anything approaching 65%. >> okay. so assuming that you either do something or don't do something with respect to interest rates, i think everybody would probably agree that regardless of what you do, historically speaking, interest may -- interest rates

would still remain at a historically lower level. what tools would you have? what tools would the fed have, if indeed the economists at citi were right and the u.s. did go into a recession? what would you have to mitigate the effects of such a problem? >> so we have all of the tools that we previously used to try to combat a recession. first of all, if we had raised rates, we would have the possibility of lowering rates. important to markets in setting or determining longer-term yields is expectations about the future path of policy. for a number of years, when we had -- after rates had hit zero, we discussed the reasons that we thought it would be appropriate to keep rates at low levels. as it turned out, seven years almost now at zero rates, we discussed why we thought we would be keeping rates at low levels for a long time. and as the market absorbed the notion that they will stay low for a long time, longer-term yields came down. of course, we had asset purchases. we undertook substantial asset purchases in order to stimulate the economy.

i think those purchases were successful, as well. in conjunction with that forward guidance in bringing down longer-term rates and those tools are still available. >> last question. and real quick, i met with a group of ohio bankers yesterday. and in december, they brought up to me the basel committee on banking supervision as planning to finalize new rules for the amount of capital. the banks are required to hold against their trading book assets.

we understand the current proposal could have a negative impact on the liquidity in significantly increased borrowing costs for americans and american businesses. they told me the regulatory changes proposed by the committee would increase mortgage and auto loans by 1.5% and home loans by as much as 6.3%. i'm a former realtor so that number popped out to me as a huge, huge problem. so there are real concerns in the lending community in ohio that the basel committee's rules would borrowing more expensive and hinder growth in ohio and as well as across the country. does the fed support the basel committee finalizing the proposal before these concerns are addressed and will you be conducting your own cost benefit analysis of what impact the rules would have in our country? >> i believe the fed is taking part in those discussions, along with other regulators. but i am not aware there is any

thought, capital requirements on those positions did go up previously. i'm not aware there is any thought of changing those requirements in the manner that would have the kind of impact that you're discussing. but we can try to get back to you on this. >> thank you, chairman. my time has expired. >> councilman swaggert. >> thank you, chairman coats. madam chair, how are you? first, because i promised my team, we wanted to extend a thank you for your staff for tolerating our technical written questions and some of the responses. >> thank you. >> it's appreciated. because some of them are lengthy in nature. >> thank you. >> can i take a slightly different direction? and i'm blessed to sit on financial services so we get to cross each other's paths quite obvious. often. as mr. tiberi was discussing, some of the indexes and economist who are saying look

there is storm clouds in the horizon. our team -- we have been collecting information about worldwide debt and does that cause any fragility to us in north america and, you know when i'm seeing numbers in the last nine years, what developing countries, 57 trillion new debt, double their gdp growth. worldwide debt is, what, 300% of gdp. how do you from a policy standpoint, as you're looking at an environment of possibly future interest rate adjustments and the effects that will have on u.s. currency. at the same time with -- let's face it, a developing country debt -- i won't call it crisis, but debt stress on the horizon. a., how does that affect your decision making. but b., does that provide us any fragility to our economic growth, our even potential

recession threats? >> well, it's certainly something we take account of as we try to evaluate the global environment and the likely impact it could have on the united states. and it's something we look at as well as part of our financial monitoring to try to determine whether there are risks that could impact financial stability in the united states. >> but -- will the fed engage in certainly bilateral agreements or swap agreements with some of the -- we'll call them developing countries or reserve banks to actually help wall off a cascade effect and those of us who remember the tequila crisis and the others. what inoculations, what indemnification does the fed engage from a policy set? >> the fed has swap agreements with a very small number of

advanced countries' central banks where we think it's important to make sure that banks doing dollar-based business have access to adequate liquidity. we have no swap arrangements with emerging market countries, and the only reason that we engage in those swap market arrangements is to essentially protect financial stability in the united states. so there is no -- i don't know the word you use, indemnification. >> yeah, i was trying to find a way -- or inoculation. we could pick a few of them. >> these are risks we consider in looking at u.s. financial markets. when you talk about debts, i think what we -- what's been discussed over the last year or so is the fact that private

companies in many emerging markets have taken on dollar denominated debt. >> yes. >> i think my sense is that the banking systems and the financial sectors of those emerging markets have been much more carefully regulated in recent years and are less vulnerable. they have themselves less dollar denominated and short-term debts. but the companies' corporations in these countries do -- have taken on a large quantity of debt. >> do you see cascade risks in developing companies from both sovereign debt loads and private debt loads in those countries that would affect our economy? >> i -- it is a risk that we monitor. i would not at this point say that it's very serious risk to the u.s. financial system. >> okay. and this is not meant to be sort

of a one-off -- another one-off question. but we were looking at some data about a month ago. and we'll call it dollar euro contracts. and the movement away from their being settled in new york, and some of that i did not know was because of a regulatory or cost situation. they were not being settled under our regulatory environment. does that movement of dollar denominated contracts being settled overseas have any threat or difficulty to the federal reserve's ability to both see data but also influence regulatory and even movement of those resources? >> so i'm not aware that there is such a trend. but i will try to look at that and get back to you. >> okay. that's one of those technical

written questions we have submitted. mr. chairman, i yield back. thank you. >> thank you. i just want to inform members here, the chair has a need to leave at noon. and we want to honor that. i've just talked to the vice chair and she agrees. which means maybe what we can do, i want to give everybody a chance to get a question in. but could we limit it to one question and maybe keep it to two to three minutes so that everybody has an opportunity to do that before we run out of time? dr. adams, you're the next on the line here. >> thank you, mr. speaker. mr. chair and thank you ranking member maloney for hosting the hearing and chair yellen, thank you for being here. based on the commentary i've heard from some of my colleagues and the media claiming that the federal reserve overreaches in its ability to adjust interest rates, it may not be clear that one of the most important factors impacting how the federal reserve will set this space is based on what's called the equilibrium real interest rate which has been consistently low or even below zero. given that the equilibrium rate is low, close to zero. what has not been receiving

enough attention is how fiscal policy should play an increasing role in stimulating demand and providing an uptick to the economy. since the federal reserve has limited tools on how it can impact economic recovery through monetary policy, including adjusting interest rates and implementing quantitative easing or forward guidance, can you speak to the impact that fiscal policy, particularly sequestration and the lack of support and certainty for certain tax expenditures, even financial tools has had on the rate of over for our economy? >> let me say generally there is evidence that the so-called equilibrium rate -- this is a real rate of interest or inflation adjusted rate of interest, fell sharply after the financial crisis and remains quite depressed. and it is a factor that leads us to believe that even when we

start raising rates that those rate increases will be gradual. now, in general, when this rate comes down, it means that rates are likely to be lower than the historical norm. and to the extent that we are operating in a low, even if positive interest rate environment, if the economy is hit by negative shots, well, we do have tools that we can use. our most sure and certain instrument of policy is the fed funds rate. so when the average level of the fed funds rate is low, we have less room to respond to negative shocks. so it would be helpful to be an environment and give us more scope to be stimulating the economy and responding to adverse shocks if the average

level of interest rates were somewhat higher. and i don't want to give you advice on fiscal policy that's up to you. but a more stimulative fiscal policy is something that would in a sense enable the fed on average to have somewhat higher level of rates and then to have more scope to respond to negative shocks. >> thank you very much. mr. chair, i'm going to yield back. >> congressman. >> thank you, mr. chairman. and madam chair, thanks so much. the recent fomc projections have a rate of 4.9%, close to what we always taught was maximum unemployment. but the broad market, who have given up looking for work or employed part time for economic reasons and the u-6 to 9.9% in october. during the last economic

expansion from 2001 to 2007. this is maybe still considerable slack in the labor market. so how important is the u 6 and other labor tools? and basically, given the considerable slack suggested, this could be the right time to raise rates. >> so i would agree with you that u-6 remains elevated relative to its historic norms. it is higher than i would have expected, based on our historical experience, given the standard and it's one of the things that leads me to believe that even though we're close to that 4.9% immediamedian, there remain a margin of slack in labor market.

while that's come down substantially, it's still, it's hard to tell for sure because there is a trend over time toward more part time employment in the u.s. economy, but i believe it remains higher than it ought to be in a so-called full employment economy. in addition, there are also discouraged detached workers and a fair number of them, again, that's come down, too, again, i see margins of slack and i think they're flekted. >> thank you. >> thank you, mr. chair and thank you, chair jeyellin, for being here. i'm going to follow up. it's more along the cumulative impact that i have concerns with from the regulatory perspective,

that financial institutions in the financial sectors had to deal with. i'm thinking of the recent adoption of capital surcharges, this tlac proposal. can you describe a little bit what these changes mean on an accumulative bases, on the industry and economy and in particular, this cost benefit analysis. have you done or has it been talked about doing a more comprehensive cost benefit analysis of what the cumulative effect of these regulations have on the industry and the economy and i'm just thinking about this regulatory rule book has been a constant state of revision for the last six years. maybe describe that a little bit and i'm going ask, can you see any benefit of pausing the process just to assess that accumulative impact on regulations on the economy. >> so, i think it's the regulation is having an important impact on the economy in my assessment would be the most important impact it's had

is to make the banking system and the financial system more broadly far safer and sounder and less krcrisis prone than it was prior to the financial crisis. you described two regulations, the so-called tlac or long-term debt requirement we proposed recently and i believe you also mentioned capital surcharges. now it's important to understand that those regulations only apply to the eight largest systemically important banks. in our regulations, we are trying to make sure that community banks that are not systemic are not responsible for the financial crisis, are not going to be hit with all of those regulations, but i do

think it is critically important that the very largest and most systemic organizations need to be safer and sounder. they need to have more capital. they need to have more liquidity. and congress told us that they need -- in the event they encounter difficulties or insolvency, we need to be able to resolve those institutions. we don't want the taxpayer bailing out those institutions again. and the surcharges or higher capital standards means that they're much less likely to fail. it gives an advantage to medium and smaller size institutions to the extent it burdens them in competing away their business and that's safer and if they did need to be resolved, that absorbancy is going to be something that is very important that would enable their

resolution either under title 2 or under the bankruptcy code, so i do think that, yes, there are some costs associated with these regulations. certainly on parts of it we have done significant cost-benefit analysis, but really there is a huge benefit. according to one estimate, the cost to the united states of the financial crisis probably amounted to 16 trillion. i've seen one estimate that puts it $16 trillion. so having a safer and sounder financial system by having more capital and liquidity and resolveability is a net benefit. >> thank you. >> thank you. i hope this question hasn't been asked before.

your two publicly statements -- i want you to remember we have a lot of safety net programs and a lot of people we're not going tto achieve better than 4.9 now because the safety nets are so generous. at least right now price stability and full employment are supposedly where you want them to be. so given that we're in a period of price stability, full employment, and the banking system is recovered, can you explain to all us saveour saver you continue to maintain a 0% interest rate given that it appears we're at full employment, given it appears that our banks are stable, and given it appears that we have no

inflation? >> i would say inflation is running -- i think we're pretty close to maximum employment. inflation is below our 2% objective. the economy is in the sense you've described doing well, and that is the reason that it is a live option for us at our december meeting to discuss as we indicated with whether or not it is appropriate to raise rates. but we do have to ask the question what is a so-called neutral rate at which the economy would continue to operate near full employment and approach price stability. and a good deal of research -- and i discuss some of this in a speech i gave yesterday -- suggests that the neutral rate of interest is very much lower

than it's been historical. in real or inflation adjusted times perhaps closer to zero. the level of interest rates that would support a continuation of these desirable trends is probably low. of course, when we were recovering from the great recession with high unemployment to stimulate all the job creation we had, we had to keep interest rates at very low levels, zero. we're contemplating raising them, but we've said that we expect that process to be gradual and we want to make sure that having achieved this progress in the labor market we maintain it and don't put it in danger. >> you mean my whole lifetime when older people were putting money in the bank we were

putting an unnecessary drag on the economy. >> we had a different economy then and many things are different domestically and globally then. the rates of return that savers are able to get depend on the strength of investment demand, the strength of demand for borrowing the funds that savers are trying to provide, and we live in an economy globally as well as domestically where in some sense there is a great deal of savings relative to the demand for those funds. and that's a market force that shapes the reality that the federal reserve operates in and conditions our ability to set rates that will be consistent with the objectives. >> so people are saving more money now, so we can't give them as much interest rates.

they're saving more than they used to. >> interest rates would be up to the levels that we're more accustomed to having experienced historically, but the demand for those funds is simply not strong enough to generate a level of interest rates that's more historically normal. >> thank you, congressman. i want to say, chair, i think this has been a very instructive and timely hearing. we deeply appreciate your willingness to be with us. we have a common goal. those of us on both ends of constitution avenue. the congress of the united states along with the executive branch but also the federal reserve. i think that common goal is to enact and implement safe policies that provides

meaningful employment not only for our generation, but meaningful employment for future generations. the more we can work together and the more we can share how we get to those common goals and pass that on to future generations, that clearly is a goal that has to be pursued with a lot of passion and a lot of intellect and you provide both, so we thank you for that. with that, the hearing is adjourned.

[ chatter ] c-span presents "landmark cases, the book, a guide to our "landmark cases" series which explores 12 historic supreme court decisions, including

marbury versus madison, korematsu versus united states, brown versus the board of education, miranda versus arizona, and roe versus wade. "landmark cases" features introductions and the impact of each case written by tony morrow and published by c-span in cooperation with cq press. "landmark cases" is available for 8.95 plus shipping. get your copy today at c-sp c-span.org. last week, russian president vladimir putin delivered his annual state of the nation address to lawmakers at the kremlin in moscow. he spoke about the fight against terrorism and russia's relations with turkey after the recent downing of a russian military jet. it's courtesy of rt.

>> translator: members of the federation council, deputies of the duma, citizens of russia, first of all, i would like to thank russian servicemen who fight international terrorism. today, here in this george's hall, this historic hall of russian military glory, we have our pilots, our servicemen, participating in anti-terrorist operation in syria. we have the family of the pilots

here with us. they lost their husbands in this war on terror. we are really grateful to you and to the parents of our heroes. let's honor the memory of our servicemen who gave their lives to fulfill their duty, the memory of all russian citizens murdered at the hands of terrorists. thank you. colleagues, russia has long been fighting at the forefront of the war on terror. we are fighting for justice, happiness, the future of our people and entire civilization.

we are familiar with the aggression of international terrorism. russia first faced it in the mid '90s, and the people of russia, when the people of russia were a target of terrorist attacks, we remember terrorist attacks in moscow, express bombing, terrorist attacks at the airport and in the moscow natural. those attacks took away thousands of lives and we will always remember what happened back then. it took us almost ten years to defeat terrorists. we basically forced them to leave russia. we drove them out of our country, but we are still fighting some remaining cells and still from time to time we

face terrorism. we had terrorist attacks in belgrade and just recently a plane was bombed over the sinai peninsula. it is impossible to defeat international terrorism alone, especially when borders are open and the world is witnessing mass movements of population from country to country. and in a situation where terrorists receive financial support on a massive scale -- we haven't resolved the issue of afghanistan. the situation in afghanistan is far from promising and countries in the middle east like iraq, libya, and syria who looked actually quite good recently are now areas of anarchy, posing a threat to the whole world and we know why that happened.

we know who it was who decided to change the regimes in those countries and impose their own rules so they got us into this mess. they destroyed those states and then they distanced themselves away from the situation there, opening the way for terrorists and extremists. terrorists in syria pose a special threat. many people there from russia and other countries, they receive money and weapons. they build up their forces. and if they win there in syria, sooner or later they will come to russia as well and will continue with their terrorist activities here. we have to be prepared and we have to defeat and eliminate them before they get here. this is why we made a decision to launch this military operation based on the request from the legitimate government

of syria. our forces fight in syria for russia. they fight for the security of our people, first and foremost. our army and our air force have demonstrated their efficiency. russian armed forces are effective and we will use this experience to further enhance our military capabilities. we are grateful to our engineers, our workers, everybody who works at our defense factories. in fighting terrorism, russia acting with extreme responsibility. our decisive action was supported by the people of russia. our people understand the total

threat that comes from terrorism. their position is patriotic and moral. i strongly believe that we need to protect our heritage, our culture, our history. we need to learn from the lessons of the past and we see historic perils in the 20th century. when people were not willing to join their forces to fight nazis and they had to pay in lives of tens of millions of innocent people. for that, today we face this new barbaric ideology, and we cannot allow these people to achieve their goals. we should set aside all our differences and join our forces

in one united anti-terrorist front that would act based on international law and under the united nations. every civilized nation today has to make a contribution to defeating terrorism. we don't need declarations. we need specific action. this means there should be no safe havens for terrorists. no double standard. no contact with any terrorist organization. no attempt to play them, to use them to achieve your purposes. we know who it is that profits in turkey by letting terrorists sell the oil they stole. the terrorists used this money to recruit new members, to plan new terrorist attacks against our people, people of france, mali, and other countries. it was in turkey that terrorists

from the north caucuses is to find safe havens and some of them are still there. yet the people of turkey are kind and talented. they like to work. we have a lot of good friends in turkey. and they should know that we do not equate those people and some of the ruling elite in turkey, who are directly responsible for the deaths of our servicemen in turkey. we will never remember what they did, how they helped terrorists. we have always considered betrayal the most ignoble act. those who back stabbed our pilots in turkey should right about that, those who tried to justify terrorists should

remember about that. i don't even understand why they did it. any questions, any problems, any differences, maybe we were not even aware of them. but there were other ways to resolve them. we were open to cooperate with turkey on the -- on most sensitive issues. we were ready to go as far as their allies even were not willing to do. only allah knows why they did it, i guess. i guess allah decided to punish the ruling in turkey by stripping it of their sanity. but we will not respond in a nervous and a dangerous way. our reaction will not aim to achieve short-term political

goals or anything like that. no. our actions will be based on responsibility before our people, our country. we don't want any saber rattling, but if somebody thinks that by committing this vile crime they can get away with tomatoes or some restrictions on construction workers, something like that, they're wrong. we will long remember what they did and they will long regret what they did. we know what needs to be done. we've mobilized our law enforcement. our security agencies, our law

enforcement, but everybody should realize their responsibility, the government, political party, mass media, everybody. what makes russia strong is that all ethnic groups should develop freely here. our diversity, our cultures, our languages, our mutual respect, our dialogue between russian orthodox church, judaism, islam, buddhism. we should confront terrorism in all forms. we should treasure our harmony, our accord, between all the ethnic and religious groups. this is the core. this is the strong foundation of the russian state. in 2016 we'll have a parliamentary election. so i would like to address the leaders of all political

parties, everybody who will be involved in the electoral process. i would like to quote an historian. this is what he wrote. if you don't respect yourself, others will not respect you either. love for your country should not make you blind. you shouldn't tell people that you are best than everybody else. but we russians should also be aware of where we stand. yes, we should be aware of all of our problems but we should remain a single nation. we should remember that our russia is above all for us. competition should be fair and equal, should follow all the rules. we should respect the electorate

and respect the outcome of the results. the election should be fully legitimate. colleagues, i believe that everybody involved will pay special attention to corruption in their platforms and corruption is really a big factor that deters russia from developing properly today. today government official, judges, and so on have to report their incomes, their tax declarations, also construction contracts, other kinds of contracts, if they involve relatives or close family. all of this will have to be reported if there is some conflict of interest. this should immediately attract the attention of overseeing and the law enforcement agencies and society as well, of course. just recently members of the peoples front reported me about some cases they uncovered where

there were some violations. so i would ask the prosecution service and law enforcement in general to respond to such cases promptly. law should be hard on those who cause the damage -- of course, it should also be humane to those who just made a mistake. today every other criminal case that goes to court involves some insignificant petty crimes and peop people, some of them very young, go to prison. when they stay in prison, it has a negative effect usually on their future lives and cause them to commit more crimes. i would ask you to decriminalize

some of the crimes, reclassifying them as administrative offenses, but -- there's an important but here. if they commit the same offense again, this will be regarded as a criminal offense now. our courts should be more objective. i suggest we strengthen the institution of a jury and expand the list of cases that a jury court can review. and i know that human rights activists insist that we should have 12 members of the jury, but it is not always easy to come up with 12 people and this is actually quite expensive, so we could consider reducing the number of members to five or seven members of the jury, but

they should be fully independent in making their decision. colleagues, last year we faced serious economic challenges. oil prices dropped. prices for other export commodities dropped, and russian financial institutions no longer have access to international markets. i know that we are facing difficult times today. this affects our economy and living standards of our people in general. i realize that many people ask these questions. when will we be able to overcome the current difficulties and what needs to be done to get there? the situation is difficult, but like i said earlier it's not critical. even today we see some positive trends. the exchange rate has stabilized. inflation rate is decreasing compared to 2014.

capital has been reduced, but this doesn't mean we should relax, sit back, and just wait for the situation to improve miraculously. such an approach is unacceptable. we should be ready that commodity prices and external restrictions will continue for a long period of time. without changing anything, we'll have spent all of our reserves and our economic rate will fl fluctuate around zero. today, countries secure their

niches in international division of labor. russia should not be vulnerable. we should do what we need to get done today. we should use our competencies and advantages which may not be there tomorrow. of course, the government should listen to people, should explain to people what's happening today, why we're doing what we're doing. we should regard people as our equal partners. what should be our key priorities? first, competitive production is still concentrated in commodity producing industries. if we change the structure of our economy, this will allow us to address different social issues, create jobs, and improve the living standards of our people. it's very important that we have success stories in agriculture, industry, and smes and

small-medium enterprises. but the most important issue is to increase the number of such enterprises in every sector. our programs must achieve -- must work hard to achieve this goal. number two, a number of industries are now at risk. construction in particular, automobile industry, light industry, and railroad construction. the government needs to provide specific target programs and the financing has been allocated. we need to support low-income people, the most vulnerable groups of our population, and certainly we need to make benefit programs more targeted. we need to take into account the

needs of people with disabilities, need to focus on their vocational support and training. we have done a lot to improve demographics in health care and education, the main benchmarks for these sectors have been set in the may documents of 2012. certainly, we need to adjust those documents, but the level of responsibility in the standards must be increased. and i'd like you to focus on them and focus on improving and fulfilling these targets. certainly, we need to focus on fiscal sustainability. now, if you'll look at 2016, the deficit should not be higher than 3%, even if our revenues are lower than expected.

and i'd like you to take this into account and to focus on it. overall, i urge all of you, the members of the federation council, and the deputies of the state duma, you need to focus on this, fiscal sustainability. so think of this. budget planning. now, every cycle of budget planning should start with priorities. we need to toughen control over the movement of state funds, including federal and regional subsidies to agriculture and specific industries. they need to be transferred to the end users treasury accounts, so there should be no misappropriation.

very often we lose billions of rubels due to misappropriations on products. there are various options. we have discussed them, so i'm expecting the government will submit their proposals. in the coming years, the tax environment should not change for the business community. number five, we need to bolster, build confidence and trust within the business community and authority. this year we have completed the plans that were set forth for our initiative to improve the business climate. we see there are good trends, but we should need to move

forward together. and business organizations need to make sure that the appropriate laws are enforced. i believe that the freedom of partnership is a major economic and social issue. we need to expand those liberties, and this is our solution to any restrictions that someone is trying to place on us. that's why we have now set out the corporation on the development of small-medium enterprises, and i urge the governors and state companies and banks to provide any kind of assistance to these corporations. we don't see any significant progress in terms of supervision and control. well, we've been talking about that for a long time. we've been cutting supervision

and barriers, but we may cut them in one area, but there are a bigger number in other areas. there's a whole army of comptrollers. it does not mean we should oversee the business community, but i expect by july 2016 the government will submit a list of functions that could be removed. one of our business communities have prepared at least for 2016. the law enforcement have opened almost 200,000 cases on economic crim crimes. and out of 200,000, 46,000 were brought to court.

some of the cases collapsed during the court proceedings, so only 15% were proven. that means that 83% of business owners have lost their business. it means they were cornered and they were pressurized and then they were let go. certainly we don't need this to improve the business climate. it only undermines the business climate and i'd like the law enforcement to focus on this. the prosecutor offices should use all of its tools to make sure the investigation is appropriate. there has been long debate on it that certainly the prosecutors office needs additional tools, additional functions. that's what they're trying to do. as you know, we've tried to separate the prosecutors office and the investigative committee. and certainly the prosecutors

office has additional functions. they can discard certain cases. but we need to analyze the practice. now, if we talk about economic crimes, arrests should only be used in extreme cases. we can use home arrest, house arrest, or any other restrictions like a travel ban. we need to protect our citizens from fraudsters, and we need to respect and protect the right of those who deal with their business in a proper way. last year we declared an amnesty of capitals that were supposed to come back to russia, but the business community is reluctant to return the capitals, which means there's not enough guarantees. i see there are a lot of debates in the community right now, and

what is being said is that some of the decisions were better than previous decisions, but that's still not enough. so the government needs to consult the supreme court, law enforcement agencies, and the business community and to adjust the decisions. and i would like to extend to the amnesty for another six months. colleagues, the government will provide as much support as possible to those who want to move forward and be leaders. and that's what we're doing together with the business community based on the needs and the goals that our country is facing. we will provide -- we are providing support a substitution program. we have found support in the industry. we need to provide another 20 billion rubels to support this

program. we've also ensured a tax and other kinds of support and benefits for the business owners who want to take part of the substitution program. there's a mechanism of special investment program. regions can increase down to zero the revenues tax, so that investors could have a payback period as soon as possible. certainly, regions are very concerned with their revenues, but they need to have an incentive to bolster their economic base. certainly, even if the economies of the regions grow, federal subsidies should not decrease.

the government needs to have the right to buy up to 30% of the products created as part of special investment contracts. as for the rest, this has to be exported to external markets. so the companies still have the stimulus and the need to cut their costs. when similar programs were introduced in other countries in order to get support from the state, they had to meet tougher conditions. a certain portion of the output should be sold, was supposed to be sold at external markets. why? well, that's an incentive for a manufacturer to produce high-quality products. we say that we will have bit

different conditions than other countries that produce tougher measures, but we need to proceed from the premise that the products produced should be at the top international level in terms of quality, so we will support competitive industries and enterprises. certainly no one should think they could be able to sell substandard products for three times the price to the state. russia must be winning international markets. those who want to take part in this effort will get support from the russian export center. we need to make this one of the major key performance indicators. the business community asked us to set up an agency for technology development and we

should do this. it will assist in purchasing licenses, technologies, and engineering services. russian products and services must be sold to international market. this must be the foundation for the russian economy. certainly, we need to dispel stereotypes. and certainly, if we believe in ourselves, we will achieve a great result. and the very last example is our agriculture. ten years ago, half of the food was imported from abroad. we critically depended on imports. right now russia is among the exporters. last year, the total amount of exports was $20 billion, and

that's a quarter higher than our arms sales or a third higher than our gas exports, so i would like to thank the agricultural producers for this achievement. we need to set a nationwide task and by 2020 provide russia with all of the food made by domestic producers, so we have vast water and land resources. and this is the foundation for us to become the biggest organic high-quality products and foods. some western producers have long forgotten how to produce there. we well know the demand for these kind of products is steadily increasing, but in order to ensure this we need to target those farms and enterprises that have a high level of efficiency.

now that's the foundation for the support of the agriculture, and i'm referring to medium and small enterprises. everyone should be efficiency. we need to cultivate millions of acres that are currently idle. many farms and many regions are not doing anything. we've been talking about that for decades, but nothing has been changed. so if there is no owner of a land that doesn't use this land, this land should be sold. so we need to take back the land and sell off this land at an auction to those who have the desire and the capability to cultivate the land. so by june 1st, 2016, the

government should provide at least a proposal including the necessary legislation, and i call upon the members of the federation council and the deputy of the state duma to introduce amendments to the appropriate legislation. we need to have our own technology of cultivating and harvesting crops. certainly, we need to breed cattle. we need to tap the business community, the russian academy of sciences, and russian business institutions. in my previous address, i said we launched our technology initiative. certainly, it will take 15 to 20 years to implement the breakthroughs that will be achieved, but certainly we see

even today there are a lot of teams that can come up with cutting-edge ideas. so we could introduce a lot of energy efficient technologies and russia could be the pioneer in many areas, even in the coming years. certainly, we need to modernize our enterprises. we have more than two dozen development institutions. but some of them have become a dump of bad debts. we need to upgrade these and streamline the work of these institutions and government is doing that. we need to certainly tap into the investment potential of domestic savings. i would like to request the central bank and government to come up with a program in how to

improve the market of corporate barns. certainly, must be profitable for our citizens to invest into it. but the coupon yield should not be taxed. in transportation, in construction, in agriculture, we have dozens of major projects in the pipeline. and it must be private market projects. to increase efficiency, we need to introduce target amendments. they need to remove barriers and assist in developing infrastructure. certainly, one ministry cannot

resolve the issues, so that's where we need to produce a mechanism of supporting large-scale, major projects. we need to have a special office set up for this. i would like to call upon the secretary to address proposals on this issue. etrade, e-commerce, we have a lot to offer and russian companies need to in turn internationalize. colleagues, we welcome foreign investors who have come to russia for the long term, even despite the challenges we are facing at the moment. we very much appreciate their friendly approach and certainly they see some of the benefits in russia to unleash additional opportunities, increase and grow our economy. our country is taking part in

integration processes. we've now moved to a completely new level within the eurasian economic union. we have a free movement of capital goods and labor across the countries of the union, and we have agreed to develop our eurasian union together with the silk road in china. next year, we'll hold a summit. i'm sure we'll have a joint positive agenda of cooperation. i suggest we start consultations with the sco and scn and new countries joining the sco. together our countries account

for about 1/3 of global production. we could optimize movement of goods across borders. we could harmonize standards and open access to each other's labor and capital markets. of course, this partnership should be equal and should respect each other's interests. for russia, such a partnership would create fundamental new opportunities to supply food, energy, engineering services, health care services, and tourist services to eastern countries and play a leading role in forming new technology markets. and also this will reroute some trade channels via russia. we'll develop our infrastructure centers, hubs, modern seaports

on the baltic sea in the far east. enhance our air transportation systems in the arctic and in other areas. we will consider the situation at one of the upcoming state council meetings. the arctic sea group will play an important role. we'll extend some benefits to other ports in the far east. this is a request that some companies contacted us about, companies that operate in this strategic area. it is extremely important for russia to develop this region socially and economically. investors are interested in new mechanisms that we offer there,

including priority development territories. i would ask the government to find ways to offer better tariffs for areas in the far east where they are much higher than on the average in russia. and also i would ask the parliament to consider offering land to people for free in the far east. we've invested a lot of funds to develop, and people really see changes taking place there. there's another city where we need to do the same. this is a high-tech city that produces products which are in much demand, and it also has a well-developed defense industry. however infrastructure industry there is underdeveloped.

all those things are not up to the standards. this is why it is hard to attract young people to work there. and the companies operating in this area really need young people, so we need to focus our resources and use them to address different issues in this city. of course, we will not be able to resolve all the issues today or tomorrow, but it's important for us to realize what needs to be done there. colleagues, we have a long-term agenda that should never depend on our elections, election cycles, or the current situation. and obviously this priority is to preserve our nation and help our future generation to develop. this will determine the future of any country and our country is no exception, so let me start with demographics. for three years in a row, we

have had natural growth. yes, it's not big, but it's growth nontetheless. according to estimates, we were supposed to face another demographic crisis. by now, we would have 90s in one generation and those were predictions that specialists gave us, even in the united nations, but we don't see this happening. primarily because half of the children born today are second or third children in the family, so families want to have children. they believe in the future. they believe in their country. and they expect the government would support them. next year the maternity benefit program will expire. it covered over 6 million families in russia, including some in crimea. but we realize, of course, that

these efforts are not sufficient to overcome the demographic difficulties of the past. of course, we realize that this is a heavy burden for our budget. like we said earlier, we have to consider whether we will be able to sustain this burden. yes, we can do that. i think we should extend the maternity benefit program for at least two more years. and another important element of our democratic policy is developing preschool education. we've opened a new kindergartens for about 800,000 children

providing places and kindergartens for all those families. and i know the head has paid special attention to this program, and i thank you for doing that, but we still have families who face this issue. they can't get their children into kindergarten. as long as this problem exists, we can't relax. so i would ask the government and the governors to pay special attention to this issue. now a few words about health care. our overall goal is to increase life expectancy. over the past decade, we increased it by over five years. next year, it will exceed 71 years. but the problems that we need to address, we still have a lot of them. next year the russian health care system will switch completely to medical insurance

principles and insurance companies that work in this area should protect the interest of their clients, including cases where clinics refuse to provide necessary medical services. and if things like that happen, those clinics should in some cases be banned from working in the system. next, we started providing high-tech medical assistance. we used to have 60,000 high-tech surgeries in 2005. then this number increased to 715,000 by 2014 and people don't even have to wait to get this high-tech surgery. but still, there are surgeries that cost a lot and they're performed usually in central

hospitals in major cities. so i suggest we consider this issue for a very long time. we consider where to find additional funds. we have members of the government here. we have governors here. you all know how it really works. it's a territorial basis, so it supports territorial clinics first and foremost. so chiefs of federal central clinics where these high-tech surgeries are performed, they worry a lot because they don't get sufficient funds. so what we suggest is to finance such centers and perform such surgeries -- we suggest that we set up a special federal fund in the insurance system. and i would ask parliament to pass all the necessary amendments the next spring. but even that is not enough

because, as we make these decisions, people still need help, so we need to make sure that medical assistance directly from the federal budget before we make our necessary decisions. >> we also know that the national health care project provided new equipment for the ambulance service we purchased a large number of modern ambulances. of course, these vehicles require repairs. this is what the provinces should do. they are responsible for taking care and providing necessary funds to do this. when we did this ten years ago, we had this agreement that we'll make this investment from the federal budget but then provinces will be required to

support and provide necessary repairs after that. this did not happen. i know that your situation is difficult but like i said earlier, you have to get your priorities straight. you can't just wait for the federal budget to come in and help you again, of course if some cases we may have to do that but this is not what we agreed on. anyway, i would ask both the government and provinces to review this issue and work together to address because people complain that sometimes they can't understand why clinics have to be combined or cultural associate centers have been combined and consolidated so on and so forth. we keep talking about the need to change the structure of those organizations in some cases,

they are overblown and that's true. but we have to be very careful in dealing with this issue, we have to realize that there's a certain benchmarks you don't have to do that. every time and then people would have to travel by hundreds of kilometers to get proper medical help. i would ask you take this very seriously and for the government to prepare and present their proposals on developing health care institutions in different parts of russia. we need to find the right way, legal way for us to do that. disabled people, families with children, we should let sometimes ngos participate because they work more efficiently and they don't have

that much bureaucracy, they care about people. in november, i would suggest we will launch a special presidential grant program to support ngos working in small towns and rural areas. seconds, ngos that have a proven record will have a special legal status with the government and they will enjoy certa=vq'v benes and preferences. and finally, i think it would be appropriate to send about 10% of local social programs to ngos and ngos could be more involved in those social programs. we all know existing laws and not imposing anything, but i would ask municipal and local authorities to consider this. on september 1st, this year, i

had a meeting you know in sochi with at the gifted children center serious. we really have very talented children, young people and we have to do our best to make sure that our children today get the best education possible, engage in creativities and can choose profession they like. and self-fulfillment, no matter where they live or how much their parents make, they all should enjoy equal opportunities for a good solid start in their lives. every year we have a more and more school children will have 3.5 million more school children in the future and this is great. but it's important that this growth does not have a negative effect on the quality of school education. the level of our school

education should continue to grow. we need more schools -- a special program for that. next year, the federal budget will provide additional funds to repair old schools and build new ones. will provide additional 50 billion rubles for that. but i suggest that we take a broader look at all those issues. it's not enough to have comfortable buildings for education. you need personnel. you need teachers. you need faculty. you need breakthrough technologies and you need opportunities for creativity and athletic opportunities and we should take all of the positive elements of what we had during the soviet period pioneer clubs and so on and so forth, of

course it should be modern and we should get businesses and universities involved in this work. let me mention something positive. we see that more and more young people are interested in engineering and this kind of professions, the number of -- the number of graduate school are interested in engineering and technical specialties has doubled over the past years. it is important for us to use -- it's kind of technical. competitions between school children to help, help our school children especially in high school, to find their profession. i suggest we call this program young professionals. this is very important. in short, in short, russian

schools should use a vocational trade and use this to develop our country's future. this is what our young people want and need and this is what our economy needs for proper developments. these young people will have to face difficult complex issues and we have to prepare them to be the best in their profession and proper people with the strong moral foundation. we often had to make important choice in 2014 for example when we had the reunification with the crimea, russia, declared to the whole world that we are a strong nation with a history of thousands of years a nation that

stands united by common goals and common values. today again, we are strong when we're engaged in an open con fom artation with international terrorism, we implement these decisions and we know that it is up to us to deal with the issues we face today. but we can only do this together. let me give you another quote. this is quite unexpected, for me, these are words that were said by a person who is very far from politics. he said this 100 years ago. here's what he said. if we are this united, we'll be destroyed immediately. our strength is unity. we should be like an army, like a family and this will make our nation grow.

we are a peace loving nation. these are wonderful words that accurately describe our situation today. at the same time, russia is part of the changing global world we are aware of all of the difficulties of the scale of the current issues developments always facing difficulties and obstacles but we will rise up to the challenge and be creative and effective. we will work hard for our common good and for russia. we will go on together and together we will certainly win. thank you. [ applause ] >> our live landmark cases series continues in a moment. we'll look at the supreme court's 1962 baker versus carr

decision on the role of federal courts in disputes over reapportion. and drawing of state election districts a discussion on isis recruitment in the u.s. later, a panel from the commonwealth club of california on particular campaigns and money. >> all persons having business are admonished to draw near and give attention. >> landmark cases, c-span's special history series produced with the national constitution center, exploring the human stories and constitutional dramas behind 12 historic supreme court decisions. number 759, earnest versus arizona. >>