presided with such a distinguished ability and dignity in the chair of this house. say "aye." the "ayes" have it. the leader of the house. >> a beckham of that this house do now adjourn. -- i beg now that this house do now adjourn. >> say "aye." the "ayes" have it. order, order. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> tomorrow, a political roundtable with faiz shakir.

a look at present rigid preventing weapons of mass destruction with peter brooks -- a look at preventing weapons of mass destruction with peter brookes. "washington journal" is live at 7:00 a.m. eastern here on c- span. tomorrow on c-span2, a look at u.s.-india relations and the obama administration with remarks by india's ambassador to the u.s. that begins live at 9:00 a.m. eastern on c-span2. >> how is c-span funded? >> publicly funded. >> donations may be? i have no idea. >> government. >> c-span gets its funding through federal funding. >> a public funding thing. >> may be. i don't know. >> 30 years ago, america's cable companies created c-span as a

public-service, a private business initiative. no government mandate, no government money. >> next, from this morning's "washington journal," a discussion on the economy and unemployment. this lasts about an hour. host: we are talking about the u.s. economy. peter morrissey \ ici is an ecos professor. how was the economy doing? guest: it is in serious conditions but the statements of the obama administration. it will take a long time to clean up the mess he inherited. not all the issues that got us into this mess have been adequately addressed. i expected the american economy to grow at a sub standard level for the next few years. we will pull out, but we will not be growing at our potential. we will be growing at 2.5% as

opposed to 3.5%. that is significant. the labor force grows at a percentage point a year. productivity rose at 2% each year. if we do not grow at 3% a year, unemployment goes up. we are facing a long time of high unemployment in the united states. we have not corrected the fundamental structural problems because in this mess. the banking system is not being adequately addressed. the obama bank regulation program says either we continue as we did or take this package that the treasury's separate -- treasury secretary has come up with. he is destroying one agency in creating two new ones. it is problematic in that regard. he is not addressing the compensation issue on wall street. goldman sachs will be giving out

a bigger bonuses than before the crisis began. it was the compensation system because the bankers to look for audit derivatives to write, which gave rise to the kinds of prices we had. they will find new ways to subvert the system. people are not so much as honest as they are following their instincts. host: what are the brightest spots? guest: most americans remain optimistic about the economy. we are seeing that in consumer optimism. we're seeing changes in behavior households. americans are saving more as they should. i was having dinner last evening with another couple. they were my age. they do not have a lot save for retirement. i have a lot of dinners like that. baby boomers have to work into

their 70's because they do not have the cash. we are going to save more, so we have to find other ways to create demand for the things we make in america. what we have been doing for the last 10 years is spending more than we burned, borrowing from abroad, an increase in the trade deficit to make up the difference. i do not see the obama administration adjusted trade deficit. -- addressing the trade deficit. host: we have a call from maryland. you can call three different numbers if you are republican, democrat, or independent. we are talking with the author of 18 books. he is an economist at the smith

school of business in maryland. what grade would you give congress in addressing the economic issues? guest: deep. you cannot spend money the way they have been spending it and have a good economy. i would give them a "d." we are assuming 4% growth for a few years. if the u.s. economy continues to grow -- starts to grow again at 2.5%, then we will have a deficit of the least $1.20 trillion-$1.50 trillion. that would require the federal reserve to print a lot of money or for us to have high interest rates. americans will find it difficult to buy a home. businesses will have a hard time investing. we will have a hard time like britain had in the 1960 colon cancer. it is not innovate a lot.

-- 1960's. it does not innovate and a lot. host: we have our first call. caller: good morning. i listened to comment about what $1 trillion is. if you had a $1,000 bill, which i have never seen, stacked it to a million, it would be 4 inches high. if you stacked those same bills to $1 trillion, is 63 miles. the only comment i would like to make this morning concerning our financial situation is the state of california. the only difference between california and as we go into the

next few weeks and months is the state of california does not have a printing press. i think c-span will be doing stories in the next few weeks about a collapse of the california economy i think once research has been done and the crying towels are put down, we will look at what has been going on to the state of california and the liberal thinking in sacramento. guest: what can you tell us -- host: what can you tell us about california? guest: i am not a republican. there are a lot of structural problems that have emerged. the u.s. economy right -- one of the things that concerns me is the obama administration's commitment with municipal

governments. during the recession, the stimulus package was increasing in state and local governments -- the notion that they need special assistance is false. the basic problem is that a lot of our state and local governments have been profiting from increases in their tax base during the bone. property taxes going up, mainly. you have a situation in california were spending has been out of control. the republicans or democrats are in because special interests have the legislature locked up. the obama administration is sending a lot of stimulus money to prop up local government. what they may need is a diet. what is really starting to concern me is the proposals out there that the federal government should guarantee state and local bonds the way

they guarantee deposits in banks, fdic insurance. if we did that, it would be sending printing presses to state and local governments. bonds would be as good as cash. that would give the printing press to sacramento. that would be very dangerous. what if local governments are compelled to freeze employment and start to be a better. we are in very tough times. host: we have someone on the democrat line. caller: what about the outsourcing of jobs to foreign countries? i am a victim of an outsource. i work for a company that had a facility in south carolina. it made components for electronics for the automotive

industry. all kinds of industries. they shut the plant down and put 1000 people out of work. they shipped the equipment to china and to mexico looking for slave wages. i am unemployed and not on the tax roll. i do not have any purchasing power. this company gets tax breaks by moving those jobs abroad. can you comment on that? guest: done a cast -- dynacast has to survive. that is the company you were speaking of. the context is much the fund by the government in washington. it as neglected the fact that some of our trading partners

trade for american labor very unfairly. china has an undervalued currency. it intervened in currency markets, buying dollars, converting them to treasury securities and so forth. washington, both the bush and obama administration has been unwilling to stand up to china, and the currency issue. when obama campaign for president, he said the chinese currency needs to be addressed. the treasury secretary said the same thing. their currency is manipulated and needs to be addressed. the currency manipulation creates a subsidy. the treasury department requires to remove that statement from the written text of his speech,

because they have privacy for currency policy. we have a situation where politicians are in favor of doing something about the currency manipulation in china three months before we have an election. so the company is doing what the government wants it to do. barack obama's administration, george bush's administration what this company to outsource jobs. they demonstrate that by their actions. one person used to say you are known by your deeds. barack obama is known by his deeds with a comes to china just as george bush was. we are getting new numbers friday on on employment in the country. it will be about 9.6. it will be 10 before we are done. host: what does that mean? is there a psychological aspect

associated with that number? guest: it will largely be felt on the political side. it will not have a real effect on the economy. at some point, the obama administration will have to stop blaming president bush for our problems. if the unemployment rate stays above 10% for a long time, the republicans will get traction other arguments the rea scene with government spending and other things that do not work. it is how we spend the money not if we have government spending. this stimulus package demonic -- unlike the chinese stimulus package does not do a lot to create jobs. there were a lot of bold claims about

abc news is a balanced operation. they started taking a hard look. they started fact checking and we discovered those job claims were based on some anecdotes and things that were hard to verify and those jobs were not there. government spending can be used positively to stimulate the economy. the stimulus package is not going to do a lot of the ventura up state and local governments. host: thank you for waiting. independent caller. go ahead. caller: i was wondering if your guest thinks the u.n. is an effective -- effective or problematic with the mess we are in. with our economy in trouble, it would seem that we have an undue burden on americans, on all americans. are we the world keeper? are we meant to be over there in the middle east in everybody's problems? guest: mixing foreign policy and

our domestic economic circumstances is a mistake. we have some problems with some of our economic partners abroad. we will always have some issues. with globalization in trade being intense -- to blame it on the u.n. is silly. the last guessed that we had reached a guy was watching the previous half hour in the greenroom. they talked about our policy in the middle east. if you think about it, most of the policies are determined in washington. the u.n. does not determine what our foreign policy is. it does not determine our economic policy domestically. it does not determine how we deal with china or others. we determine that. what beijing does has little to do with what the u.n. says it should do.

conservatives like to use the jargon that is not helpful. host: here is a tweed question. does your guests think obama should get certain things down to size? such as the defense budget. guest: it requires certainty that it can accomplish its mission. all government programs, large corporations, universities have a lot of waste. it is the nature of bureaucracy. unfortunately, when it comes to building of the military, i am with barack obama on that, although i do not agree with some specifics of his policy. i am not a defense expert. host: we have someone else on

the line. good morning. caller: can you hear me? host: we can hear you. go ahead. caller: there is nothing wrong with being a fiscal conservative. there was a lot of money spent in iraq during the bush of ministration. what would the economy looks like today if they did not spend all this money? guest: i did not rail against the bush administration for spending and other money in iraq nor am i doing that for the obama administration. we may have spent the money in the middle east the wrong way by going into a rock. -- iraq. that does not mean the money did not need to be spent. the u.s. economy may not have looked at different if we did not spend the money. i do nothing our spending on

defense is part of the problem. our policy in iraq is a different story. if we were not in iraq, we would not be spending the money -- that notion is silly. host: what else will you be looking at a month down the road where you say, that is the plan that is working? guest: we are tracking the infrastructure projects. there are some good things in the package. there is money for alternative energy which is very important. we need to correct our energy deficit. that is a good thing. we are looking for those things to cate temporary employment. spending is supposed to be temporary. we are looking for about 3 million jobs. we have our loss 6 million.

these jobs will only left to the years. they are intended to get us going until the private sector kick in. we have to fix the banks and the trade deficit which comes down to oil in china. until we fix those things, we're not going to get those jobs. host: are the banks lending again? guest: not as much as they should. the fed has pumped a lot of money into the new york banks in the forms of loans and securities and other measures of credit by buying up mortgage- backed securities. many banks to not have what they need. regional banks in iowa, california, oregon, they work but they do not have adequate deposits. so much money is being in a money-market and other places now.

securitization is going on. it is a very important component of our banking system. but many banks are not interested in that activity. ordinary sound won't do not of you pay jpmorgan $30 million a year. you have to pay normal salaries that make sense in the marketplace. the new york banks are not interested in that. i assure you. host: our guest is a professor of international business at the university of maryland. he is an economist. he is author of 18 books. he has taught of the university of maine. our next call is from

indianapolis. you are on the republican line. caller: if we pass the cap and trade, do you believe that as nancy pelosi and president obama have said it will create all the jobs they say it will, or will we lose more jobs and hurt the economy? guest: i think it will hurt the economy because the chinese are not required to undertake the similar activities. we will not reduce global pollution. the jobs that are here will go to china. what we do here will go to china. some of the things in households would be better left to better energy conservation by reforming the automobile sector which this bill does not do. the bill seeks to achieve a lot of social goals. it allocates a way that is not economically optimal. it will impose a lot of

inefficiencies on the economy. it will not be very helpful. it may be a good idea at some time but only if china implemented similar program. they create a new japan every two years and a new united states every five years. what is the sense of putting a straitjacket on the u.s. economy by reducing co2 emissions by 17% of the next few years if china is going to replace the united states as a global polluter over the next five years? host: back to washington. how is ben bernanke doing? guest: that is a very interesting question. he is been very criticized for doing extraordinary things that would of been required by any better reserve chairman in his shoes. i have no problem with what he has done. i believe him about merrill lynch and bank of america, knowing what kind of academic administrator he was. reading is testimony. i am fairly confident that he is

telling the truth. let us put that one aside. with regard to monetary policy and the banking crisis, he extended a great deal of credit. that needed to be done whe the situation would have collapsed. when he did not do as regulator of the bank holding company is good will conditions on the way they run themselves. it would've been hard to oppose the kinds of reforms necessary in new york to get the job done. he did not do that. he gave them the money. rocket -- record profits and goldman sachs uno accountability. -- and no accountability. the same goes for jpmorgan. host: we have read about the latest economic plan by president obama. it would give more power to the fed. is that a good idea? guest: it is a good idea to have

a systemic supervisor. the real question is can the supervisor see what is going to happen? the banks bundled the sub-prime mortgages into bonds and not sell the mall. they put them into offshore entered -- offshore entities. there is nothing unusual about those things. i can show you textbooks on how to do it. there is nothing unorthodox about this. no one including henry paulson who was treasury secretary at the times of any particular problem with that. we were told that those accounts would not come back to haunt the balance sheet of the bank there was a struggle. but they did. we have a massive financial crisis because we failed to see the threat in banks and doing what is ordinary things that turn out to be extraordinary

after the fact. asking them to be clairvoyant. it is simply not that. the notion of resolution according -- the fed is emphasizing this at citigroup. it's essentially owns the place. it is trying to cut citigroup down to size. that is what you do during resolution. use a lot the good assets. they cannot do it. these large financial supermarkets with resolution of the orders would address and systemic regulators would have the ability to go into, aig is the same way. you cannot deal with that. it raises the whole question of whether a systemic regulator can be effective if we are going to have banks the size of bank of america, citigroup, jpmorgan, or if we are going to permit operations that should be making largest in doing initial public offerings like goldman sachs.

getting in bought in trading securities that threaten the fundamentals of the banking system. we do not need to go back to classical -- glass stiegel. with the banking sector being such an important contributor to the democratic party and political candidates requiring all of these $5,000 contributions from individuals, the only place you can harvest the contributions you need are on wall street, silicon valley, and hollywood, which gives those sectors of the economy extraordinary influence on washington. host: we have michael on the line from mobile, alabama on the independent line. --caller: certain aspects of the budget had been hidden.

i understand that this particular budget that we have is much more in the open and visible. what aspects of the budget is above board that makes this budget a $1.40 trillion budget? guest: it is more like a $4 trillion budget. we have a big entitlement program. we have a huge stimulus package. we have the military. we have the state department that do not get enough money. it is hard to say. we probably have more people running around doing useless things than we need to do, and

we need entitlement reform. this is such a broad question that it is difficult to answer. they looked at the deficits and said, these are kind of big. if we have more revenue, we could do different things. . if you believe the economy is going to grow at 4%, i would bet that peter will be starting point guard for the washington wizard's next season. [laughter] host: let's get a call from maryland. tony, you are on the air. good morning. caller: i wanted to start with a quotation from jefferson.