interest rate. the question is the interest rate is not too low and not too high. we have learned a lot about that over the years. there is a formula that people call the taylor rule. it is named after me. it simply says that the fed should raise rates in certain circumstances and in other circumstances they should cut them. that has worked pretty well. so you don't have to use that formula but you can use similar things. . use guidelines, people can discuss them and debate them and be more transparent about it. so that is how you get to the golden locks situation, which we were pretty close to 4 number of years, for those long expansions and short recessions. host: john taylor now with the hoover institution, formerly with the bush administration. blake is on the phone from georgia. the morning. the morning. -- goo caller: i am wondering if c-span

could advertise at least a couple of days in advance to let the viewers pick out the subject matter so we can vote on it and determine what the subject matter is going to be for that day. host: you can send us an e-mail anytime you want at journal@c- span.org. i'm not sure we will have a vote but we will take into account what you are thinking, because this program is for all of you. do you have a question for john taylor? caller: the question i got is how do people ever believe what you are saying out there -- you guys were involved in the most disastrous economic system we have ever had. so, for a lot of us, you did not have any accreditation. host: how do you respond? guest: it seems a broad criticism, not quite sure how to

react because it is not very specific. you know, what i have tried to do in this book and other books is to look back at what the decisions were and see if we can learn lessons. i think the more government can review -- i think there should be a commission or operation that goes back and looks of the reasons for this financial crisis. in fact, i think we should be doing that before we propose changes in the economy in reaction to it. lessons learned is the thing i think we should focus on here in the future. host: mitchell is joining us from florida. on the republican line. caller: good morning to you all. host: go ahead. caller: i would like to say that i'm a republican and i am not going to be a republican. much longer, i am thinking of going to the libertarian party. this stuff has been going on for over 20-something years, these jobs. democrats and republicans, not

just republicans. what we have is a bunch of greedy folks up there, and what obama ran on was change, and they claim that bush was given to the rich and it was trickle- down and all of that kind of stuff going on, what did obama do? he started out at the top instead of the bomb -- bottom, like a promised. so i will tell everybody out there, black and white and red and blue and whoever else, go libertarian, vote everybody out of congress and everybody out of the senate and get all libertarian's up their act and get the borders guarded, let's get the greedy folks out and let's get people back to work. host: thank you for the call. let me take his point and ask about what some say the republican partyost its way with a record spending in the bush administration. for that about what we are dealing about -- with in the obama administration but president bush saw a huge

increase in government spending. was that a mistake? guest: certainly from a conservative perspective, yes, the growth of government was too large. from the liberal perspective, they let more government, so it would not be a mistake. from the perspective of the caller, moving toward more government, which is not the way to be going. i think what we are seeing now is it has accelerated even more rapidly. president bush, it increased under president bush but it is increasing many more times under president obama. but i think in some sense it is not a partisan issue. for d. what good government for effective government to let the private sector grow and create jobs. i am concerned, like the caller, about the future because we are creating a lot of debt, much more than what was created during president bush ordering president reagan, it is astronomical come in many respects. host: you touched on this from there, but how you create bubblemania -- going back to

troops in holland, credit cards, stock market? guest: you will not stop them completely, that is when markets are. but what the government can do is not helped create them. frequently we see government actions -- and we talked about that with respect to the federal reserve -- it is a very powerful instrument. imagine setting the interest rate for the entire economy, it is potentially very systemic. the first idea is, do no harm. and then figure out if you can create more transparency, describe what the government is doing, more transparency from the fed. it reduces the probability of bubbles. and more important, it prevents them from spilling over to the entire economy. a tulip bubble will not be a major problem if it stays to the tulip market. the task for the government is not to make it so big that it hurts the entire economy. host: something you lecture at stanford.

adrian concerns -- adrian joins us from san diego. caller: good morning, how were you? actually i just had more of a comment for the under secretary. i know you've got a tough job, sir, quite a few things that are not too good in the bush administration but i know you did a good job. thank you for that. as far as the economy and things going on in general, i believe obama has some good things going on right now. he is not too bad looking guy -- every time i lookeat him by and proud to be an american and and latino and i feel he brings quite a lot of hope. host: how you view the first five months of the of ministration? guest: from economic

perspective, and kind of worried. a huge stimulus package that is not focused enough to get the economy moving. huge increase in the debt. his proposal is to increase the debt further. i'm worried about the intervention into the automobile industry, which is quite extensive and possibly even more intervention in other sectors. i know the intentions are certainly good, but i am concerned about what this is going to do with the economy. host: what piece of advice would you give the president and economic advisers? guest: start working on plans to reduce the deficit. no reason to have over $1 trillion deficit 3, 4, 5, 10 years from now. a credible plan to get rid of the deficit. number two, i worry about the tax increases that coming down the road that could hurt the economy. i would avoid any tax increases, that is what my advice would be geared -- would be. make sure you get the economy recovering by not come if you like, threatening it with higher inflation or higher interest

rates. host: the book is calalled "the >> on thursday's "washington journal" the original head of the homeland security department, tom ridge, at 9:00 a.m. eastern here on c-span. the u.s. house takes up homeland security spending here on wednesday. later in the week, speaker nancy pelosi will bring climate change legislation to the floor. today, however, a number of bills dealing with veterans benefits. live coverage here on c-span at noon peak -- at 12:00 p.m. eastern. senators are working behind the scenes to bring of the legislative branch spending bill for the new budget the year. the house did pass its version last week.

president barack obama holds a news conference today. it was going to be the is first in the rose garden -- his first in the rose garden. a warm temperatures have forced it into the ready room. he will open the afternoon with remarks on health care reform, energy legislation, and iran is disputed elections. live coverage will be at 12:30 p.m. eastern on cnn2 -- on c- span2. >> july 4 on the tv, discovered another side of our nation's first president. historian and author john ferling çon our first presiden. >> this morning, "washington journal" talked with former presidential candidate, john mccain about iraq and iran and domestic issues. the conversation is about a half

an hour. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] guest: nice to be back and best regards to brian lamb. many people said we were separated at birth because of our resemblance. he has done a great job and so have all of you over the years covering the capital in a dispassionate and objective fashion. host: thank you. iran -- the president's response, has it been appropriate, and now? guest: the president is having a full-blown press conference later on today, and, i mean, no one could watch the film of the young woman neda dying in the streets of tehran without been deeply moved, so i would imagine and anticipate that the president will come out more strongly today. host: what advice would you give him?

guest: follow the example of our founding fathers that declared that all of us are endowed with certain unalienable rights. senator daniel webster, when the greeks rose up against the turks in 1823, i would love to give you the full quote, but he said it is our duty to stand for people who are struggling for freedom. and ronald reagan, when he gave the evil empire speech, nathan -- said it spread through the gulag like wild fire. after the berlin wall came down, people behind the curtains said that you were our hope and are beaten. that is what america is. it is interesting, of course, to see the prime minister of england, the chancellor of germany and the president of france have been far stronger in their comments. .

anything except for what we have done throughout our history and that is land our moral support to people who are literally sacrificing their lives for a fundamental belief that they are to be able to peacefully disagree with their government without being beaten and killed. host: the five months since he has been in the white house, have you had a chance to have private conversations with the president? guest: not private. i have had a couple of meetings where there are just one or two other people in the room, but not just the two of us. host: how was he doing? guest: well, i think he succeeded in getting his agenda through. unfortunately, it is not a change in the climate in washington time. it was done by republicans. you pick off two or three republicans and you get your legislation passed.

that is an effective way, but it is not a changing climate. but most of all, i think he has mortgaged our children's futures. i think he has created generational that in laying this incredible deficit on the future generations. you cannot spend money like this without sooner or later to -- paying a heavy price for it. who five months ago about the automobile companies, largest insurance company, financial institutions, etc., and yet, there is no way out. and yet, despite rhetoric, we just passed through the senate and house a bill that was supposed to be for afghanistan and iraq at a close to $3

billion or $4 billion goes to come from -- close to clunkers. what does that have to do with iraq and afghanistan? nothing, it has everything to do with special interests. i'm very worried about the economic impact of this spending on the future of america. it is my great concern and, frankly, our national security around the world, whether it be north korea, iran, relations with russia. there are many challenges. >> richard is annika -- host: richard is on the phone from newport. caller: i would like to ask a couple of things, really, but first, when are you going to stand up as a conservative, get some cuts in the republican party of there and stand up to these stupid people for wasting your money up there? and second,ç when are you going to pass a bill that at the end

of your first term you do not get a full retirement or whatever you have been getting up there while the rest of those people out here have to work 30, 40 years just to get half of what we were getting when we were paid? guest: richard, i have been standing up and i would be glad to provide you a record of that. i fought against the stimulus package and i fought against this budget that is simply out of control but i also will continue to provide alternatives to the american people in the path and direction i think we should go. for example, with healthcare, i think we should remove the employer provided tax benefits to employees and give every family a $5,000 refundable tax credit, rather than have a government-funded health care system, which is the path we are

headed on. i do not have the majority of votes, but i understand your frustration. sometimes i feel it. the american people's approval of the way we do business here is very low and i will continue to fight cancer of the pot -- the country as best i can. host: ken is on the line from north carolina. go ahead. caller: why is the government continuing to spend money on health care instead of fixing the problems with medicare and medicaid before spending this money? host: we will come back and follow up on your second point. guest: the problem is that medicaid and medicare costs are out of control. the original estimate we passed medicare was not very smart -- and i forgot the amount. host: $500 million in 1965. guest: the costs are completely

out of control and the key to it is competition. and better ways of providing health care as opposed to expansion of that out of control system that is now one fifth of our gross domestic product. host: ken, your follow-up? caller: the treatment of the unions have gone with gm and now with the taxing on health benefits possibly, i find it into a string -- interesting that the $1.5 billion as a liquid to cover 12 million people with health insurance, which is continually roughly about the same number of illegal aliens we have in the country. what are your thoughts on that? guest: i think a part of the $47 million -- i think it is 47

million people that are illegally in this country. but relative to your question, last week there was a budget congressional office report -- and by the way, they are generally nonpartisan. it showed that the plan that we are considering in the senate on the health committee that i am under would only insurer one- third of the uninsured and would have a cost of $1 trillion just to insure that one-third of the people that would need insurance. if you do the math to ensure everyone, that is the -- that is $3 trillion. i'm sure the democrats are running that without any consultation from us and have not come out with any proposal as far as whether employers would be required to offer health insurance for their employees and what these so- called government option is.

so, here we are looking at a bill that insurers only one- third of the uninsured and costs $1 trillion to do that. host: you have been to iraq on how many occasions? guest: i have lost count, but i imagine it is eight or nine times. host: is an e-mail -- guest: well, the private contractors issues being addressed, whether it be people building things or the security forces that are providedç, includinto the iraqi government. i'm sure there are jobs that need to be created in iraq. i am pleased that the economic

progress that they have made. they have just recently upped their oil output. they have just been through years of a terribly savage war ended is going to take a while to rebuild their economy. -- and it is going to take a while to rebuild their economy. and they do things that -- they make a lot of mistakes and it is going to take time. but there are also those into iran who want the same kind of freedom. there are still a lot of problems in iraq, corruption, assassinations going on, yesterday or the day before there was a huge car bombing that killed like 100 people. but there also out from under saddam hussein, who bloodily repress them. host: you are seeking a fifth term next year?

guest: yes. host: next is bonnie from middletown, new jersey. caller: good morning, senator mccain. earlier we had talked about the deficit spending, there is a difference between deficit spending and what you would do with private insurance. during reagan's time, we became -- we went from being the biggest lender nation to the biggest debtor nation. now we are trying to invest in our people. my main issue is your view on health care. 90% of bank of this -- of bankruptcy is are due to catastrophic illnesses and with the unemployment rate creeping towards 10%, that is only going to become more so. you are offering a $5,000 tax credit for health care. my insurance costs $20,000. collectively, between my

employer and myself. how is $5,000 going to help? and the cost of the private health care is due to the private insurance -- interests. the insurance companies are driving of the costs with the public plan and, certainly, with the single payer plan that would be eliminated. i do not understand your reluctance to a public plan if you are so concerned about competition. isn't that what helps the economy and regulates our market? we would adopt -- offering an option that would cause competition. host: we have an argument from susan goldman along the same lines. whereas the competition been for 40 years? guest: that was part of my campaign was to reform health care. and everybody knows it is broken endeavour one knows it is not affordable. -- and everyone knows it is not

affordable. the shot that she took of ronald reagan, if you look it up, you will see that when he took office in 1981, unemployment was in double digits, interest rates for a 21% and inflation was double digits as well because of the excesses of the previous years. we went through some tough times and then went to the longest time of economic growth in the history of our country. i'm very proud of the record that ronald reagan had, not to mention winning the cold war without firing a shot. we want to give every met -- every family refundable tax credit so they can go across state lines, which they cannot now, and shop around for the health insurance that they need and want to take care of their family. according to the statistics that i have, a $5,000 refundable tax credit would get them and affordable and adequate health

insurance policy. you are in that bracket to which is very generous health insurance plan. it is a long story, but during world war ii when we have price wage controls and employers provided free and open -- free health benefits, they were tax- free. you take away the tax credits -- if you put in a taxation for health insurance if employers provide it, and at the same time give every american a $5,000 refundable tax credit, if you do the math, it almost every american family would be able to goç out with greater competitin and receive health insurance that is suitable to them. if you want the government to run health care, if you want the government to run automobile corporations, if you want the government to run institutions that are generally more efficient and better run by the

private sector with competition, and when bigfoot government comes in and compete with private business of america, they obviously have significant advantages. and according to the cbo report, this plan before us, which would crowd out -- which means pushing private health insurance companies out of business and inevitably lead to a government run health care -- i do not think that is what we want. they have it in other countries where they have to ration health care and there are great delays in receiving even elementary health care needs, such as operations. that is not what i want for america. if you think that america should have a public, government run health care system, i respect your view. i disagree with it. host: lynn wants to follow up on bonnie's point.

guest: i do not think that they do, to start with, and second cannot it is interesting that when someone welty -- and a second, it is interesting that when someone wealthy need health care, they come to america to get it. the problem is not the quality of the care. th problem is the cost of care and the inflation associated with care, which has to be brought under control. but wellness and fitness, prevention, rewarding people for good, healthy behavior -- there is a whole range of options that we can exercise to bring health care costs under control. including what may go and other health-care providers -- mayo and other of care providers have, which is overall

procedure included. we can do this without going to a government run system. again, those countries that have gone to a government run systems, they ration health care and there are delays in receiving some operations. in some cases, if you're too old, you just do not get them, told. that is not the system i want. -- you just cannot get them, i am told. that is of the system i want. caller: good morning, senator mccain. thank you for your service. your one of the most honorable man i have witnessed on tv. guest: thank you, sir. caller: i have a question with north korea. it is a problem. how big of a problem? and i wish your eye at the helm -- you were at the helm. guest: well, thank you, bill.

as we speak, there is a destroyer named after my father and grandfather that is tracking a north korean vessel. there is published information that it may be carrying weapons or technology that our nuclear in nature. -- that our nuclear in nature. it is common knowledge that the north koreans and iranians were working together on nuclear -- the development of nuclear weapons and ballistic missiles. so, north korea does pose a threat in their proliferation of nuclear weapons. the israelis had to attack and destroy a facility in syria that was being built with the assistance of the north koreans. it is a very serious situation in north korea. now, the u.n. resolution is inadequate as the kind of

description i can give you because they say, we cannot afford one of these ships, but follow it into port and expect the people that are in the port to have the inspection. well, this sport is headed for me and more. me and more is not going to -- for myanmar. myanmar is not going to inspect this ship. we should, and the interest of national security if we know, and we have intelligence capabilityç, that a north koren ship is carrying technology or weapons systems that could endanger the national security of the u.s., then we should aboard those ships. host: this morning in the "new york times" they say the news from afghanistan is grim and they're talking about the failing forces within the country and say that the taliban must be confronted head on to turn