the anxiety could be measured in one of many ways, to take one modern indicator. google searches for the term "economic depression" were up four-fold from the baseline level and something similar was true of mainstream media references to economic depression. .

second, to assure confidence, the recovery from the crisis would be built not on the glimpsey foundation of asset bubbles but on a firm foundation of productive investment for long-term growth. the president was clear from the beginning that these two tasks needed to be dovetailed. the confidence in our ability to rescue the economy depended on a sense of our commitment to reform and a vision for a rebuilt economy. the economic problems that confronted the united states as president obama took office were of a distinct character. this was not the standard post-world war ii recession in which rising inflation led to monitor contraction which led to

economic contraction. nor was it the kind of crisis frequently experienced in emerging markets and that fred referred to in his examples of the 1990's in which a country experienced a sudden loss of external confidence, forcing adjustment and demand contraction. indeed, the dollar strengthened over the second half of 2008. rather, the crisis was qualitatively similar to the crisis in japan after its asset bubble collapsed, the early stages of the great depression, and other major domestic financial crises in which asset bubbles burst, credit flows contracted, and deleveraging

reduced spending. we on president obama's economic team were very much aware that there were few, if any, examples of success in rapidly restored economic growth and financial stability after such broadbased financial crises. we concluded that past failures were a reflection of insufficiently aggressive action taken too slowly and vowed to our policy response would be neither too little nor too late. the administration decided as a first priority in focusing on the rescue of the economy to reverse the vicious cycle

connecting income declines and financial instability by directly supporting incomes and a return to financial stability. our policy started with a major commitment to fiscal stimulus. economists in recent years have rightly become skeptical in normal times about discretionary fiscal policy and a regarded monetary policy as a better tool for short-term stabilization. our judgment, however, was that in a liquidity trap type scenario of zero interest rates, a disfunctional financial system, and expectations of protracted contraction, the results of monetary policy were highly unconcern where as fiscal policy was likely to be potent.

we also concluded that with monetary policy being used enjetically it was desirable in the face of great uncertainty to use all available tools to move the economy forward. while in the context of a problem that appeared significantly smaller in the beginning of 2008 i had advocated stimulus that was timely targeted and temporary. our analysis of the situation at the beginning of 2009 suggested that the stimulus needed had to be speedy, substantial and sustained. ultimately the president proposed and the congress adopted the largest program of fiscal stimulus in the nation's peacetime history with the total cost of 5% through g.d.p.

the size of the stimulus reflected a balance of several considerations. the magnitude of the output gap the economy was facing, the difficulties of ramping spending up and then ramping it back down after recovery in a high-budget deficitted environment, the question of how much could be spent both quickly and productively, and the recognition that the recovery act was just one of several initiatives by the administration that would have an important impact on to the state of the economy. as to composition, we quickly concluded that in a world of substantial uncertainty and one in which it was important to get stimulus started quickly a diversified approach was appropriate. that's why we settled on a program that emphasized support for household consumption through tax cuts and expansions in unemployment insurance and food stamps, support for small business through lending and

expanded access to capital, support for state and local governments and investments in priority areas like health care, infrastructure, energy and education. we pledged at the time the recovery act became long that some of the spending and tax effects would begin almost immediately. we also noted that the impact of the recovery act would build up over time, peaking during 2010 with about 70% of the total stimulus provided in the first 18 months. now, five months after passage, we are on track to meet that timeline. more than $43 billion in the media tax relief has reached households and businesses. another $64 billion has been channeled into the economy through aid to state and local governments, expansions in social programs, and spending on

education, housing and transportation projects. in addition, to the amount that has already been paid out, another $120 billion in spending has been obligated by the federal government and so is calling for contracting for projects and beginning to work its way into the economy. as of may, tax cuts, fiscal support for state and local governments and family assistance programs in the recovery act have boosted disposable income by nearly 2%. in addition to providing fiscal stimulus, the administration also set to work on adistressing the origins -- addressing the origins of this crisis, a financial system in severe distress. there were many from across the political spectrum who proposed precipitous action to universalized guarantees or

nationalized major financial institutions. there was an even larger group who believed the policy needed to start from the premise that the financial system as a whole was substantially insolvent. even alan greenspan asserted that it might be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring. after considering all the options, secretary geithner led the administration in a somewhat different approach. we recognized the irreversibility of such actions as nationalization. we recognized that there was a very substantial risk the government could be a source of fear rather than a source of confidence and that strong actions taken towards one institution could have major implications for other institutions. we also recognize that a

substantial part of the flow of credit in the american economy did not depend on banks but depended on the shadow banking system, including the securitization of consumer financial assets such as mortgages. our approach sought to go as much as possible with the grain of the market, sought to move away from earlier approaches and treated the financial system a monolith and instead provide a basis for differentiation among financial instruments and financial institutions. the administration committed itself to a financial plan intended to restore the flow of credit to consumers and businesses, tackle the foreclosure crisis, and comprehensively reform the nation's financial regulatory system. central elements of the plan included the stress test process and the capital assistance program which sought to add

constance to the financial system by providing clarity on the situation of individual institutions and to increase capital in the banking system by calling for private capital and providing for public -- since the release of the stress test results banks have been able to generate over $80 billion in equity and issue over $30 billion in unguaranteed debt. another element was a range of measures designed to improve price discovery in the securities markets and jump-start the securitization markets which in turn, should operate to increase landing throughout the economy. we sought to support the housing market by providing significant tax credits for first-time homeowners in the stimulus bill, putting in place a set of measures designed to offer assistance to millions of homeowners by reducing mortgage

payments, and preventing affordable foreclosures. although we still have a long way to go, treasury plan is now moving swiftly with approximately 160,000 modifications begun so far and the pace accelerating. we also recognized the importance of financial regulatory reform as an adjunct to confidence. the administration recognized at the same time that the risk of collapse was not limited to financial institutions, a prospect of uncontrolled bankruptcy in the automobile industry would mean thousands of potential job losses in manufacturing and ripple effects throughout the economy. we stayed out of day-to-day operations but did demand fundamental restructuring, overhaul of management and business practices, and

sacrifices from all stakeholders. the president also recognized the important global dimensions of the economic crisis. as of last winter, essentially all of the world's major economies were contracting at once for first time since the second world war. a combination of the chronic u.s. current account deficit and the reality of net export growth is usually a key part of the recovery from financial crisis underscored the importance of global growth for the united states. the president insisted if restoring global growth be added to the london g-20 agenda and sought considerable success -- with considerable success to encourage other countries to stimulate their economies as we were doing. we worked with prime minister gordon brown to lead the effort to more than triple the resources available to the i.m.f. with the objective of

maintaining the flow of capital to emerging markets at a tense time. it was a period of substantial action over the last six months. where are we today? if we were at the brink of catastrophe at the beginning of the year, we have walked some substantial distance back from the abyss. a majority of businesses now report that they expect improved market conditions, the opposite of six months ago. consumer sentiment has also begun to improve. those options that were saying one in six of the dow under 5,000 this year -- 5000 this year are now saying it's closer to one in a thousand.

the rate on investment rate bonds has fallen by a third. municipals issue bonds in much more normal ways. the pace of g.d.p. contraction is slowing. and many private forecasters expect to see positive growth in the second half of the year. and, yes, if you look at the rate of surges of economic -- searches on economic depression on google or look in the mainstream media, it's back to normal to baseline levels. to be sure, unemployment is substantially higher and job loss has been greater than most observers predicted last winter. and unemployment is likely to rise in the coming months. this is obviously a major area of concern.

the country with significant amount of commentary, this does not provide a basis that the recovery act is falling short of its goals. both administration and independent forecasts predicted that only a very small part of the total job creation expected from the recovery act would take place within six months. indeed, the council of economic advisors study predicted that only 10% of the total job impact of the recovery act would take place during the calendar year 2009. given lags in spending and hiring the peek impact of the stimulus on jobs is expected not to be achieved until the end of 2010. there's another aspect of the job loss statistics that's worth commenting on. it is noteworthy that the higher-than-forecasted job

losses are not associated with substantially weaker than expected g.d.p. rather it appears that a given level of output is being produced with fewer people working than historical relationships would suggest. there is a significant residual in the law relationship, the unemployment rate over the recession has risen about 1% to 1 point -- one to one and a half percentage points more than would normally be attributable to a contraction of g.d.p. of this magnitude. to put the point different, normally in economic downturns productivity decreases as firms keep workers employed, afford

labor, even as the amount of work to do declines. this pattern of deteriorating productivity has not been a feature of the current recession. in fact, productivity has actually increased as it did in the last. i don't think anyone fully understands this phenomenon. one positive -- one potential explanation is the greater financial pressure on firms in this recession has led them to do anything they can to shed cashflow commitments by laying off workers ate more rapid pace -- at a more rapid pace or leaving jobs vacant when people leave. perhaps the expectation that the recession would be lengthy has also contributed to this behavior. i emphasize these points because they suggest the importance of the structural dimension of economic policy.

if unemployment and the surprise part of the increase in unemployment reflects more than just weak aggregate demand, the case for measures to increase the flow of credit and get banks lending again as the administration has pursued is reinforced. these facts also speak to the importance of structural changes that restore long-term confidence including job creating investments in education, infrastructure, renewable energy, and energy efficiency. substantial progress has been made in rescuing the economy from the risk of economic collapse that looked all too real six months ago. while employment continues to contract, the available indicators suggest that g.d.p. is on a close to level path with prospects for positive growth to commence during this year. factors supporting growth

include the growing impact of both fiscal stimulus and measures the support of the financial system, the wealth effect of stronger asset markets, inventory replenishment, and the replacement cycle for automobiles and other consumer durables. a critical question for the next year will be whether or not g.d.p. growth accelerates to the point where employment growth kicks in, leading to a mutually reinforcing positive cycle of income and spending increases. towards this end it will be essential to continue vigorous implementation of the recovery program and measures to support housing and financial markets. experienced during the u.s. depression and in japan during the 1990's, teaches the danger of premature declarations of victory and withdrawals of system i stimulative policy.

for quite some time the united states will be living with the consequences of an over leveraged economy. the common desire of household businesses and financial institutions to reduce their borrowing and improve their balance sheets will act as a drag on spend and growth. while painful these adjustments aessential to laying a sound foundation for future growth. it is, however, appropriate that while the private sector deleverages, government through fiscal policies and through central bank lending must cushion the adjustment process by providing public support or spending. if it is essential that stimulus set policies be -- and policies be sustained for as long as necessary, it is equally essential that they be sustained no longer than necessary.

that is why the president has repeatedly emphasized his commitment to containing the long-run federal budget deficit and reigning in the nation's det-to-g.d.p. ratio once the economy has recovered. the president's budget contained numerous proposals on both the revenue and spending sides directed at long-run discipline -- physical discipline. containing growth and debt is a central objective of the nation's health care form proposals. and the administration has supported the federal reserve's desire to assure that it has the monetary policy tools necessary to manage an eventual decrease in the size of its balance sheet. a sound macroeconomic policy framework is necessary for the confidence on which economic recovery depends, but it is not sufficient. the rebuilt american economy must be more export oriented and less consumption oriented.

more environmentally oriented. more bioand software engineering oriented and less financial engineering oriented. more middle class oriented and less oriented to income growth that disproportionately favors a very small share of the population. the president articulated his philosophy at georgetown two months ago. just as a cash-strapped family may cut back on luxuries but will insist on spending money to get their children through college so we as a country have to make current choices with an eye on the future. if we don't invest now in renewable energy, skilled work force or a more affordable health care system, the economy simply won't grow at the pace it needs to in two, five or 10 years down the road. we don't lay -- if we don't lay this new foundation, it won't be long before we are right back where we are today. yes, the president has an

ambitious agenda. but it is an agenda compromise of measures that lay a foundation for future prosperity. and i would suggest and provide for the confidence on which the current recovery depends. without comprehensive health reform there is little prospect of convincing markets that the long-term growth and federal debt is under control or convincing businesses that the united states is the most competitive place for them to invest. without financial regulatory reform, we run the risk that the next recovery will be distorted and per verdicted by asset market bubbles just as were the last several. without an expanded and improved infrastructure, we risk having growth constrained by lack of capacity and by bottleneck that

exacerbate inflationary pressures. and without comprehensive energy policies, we increase our vulnerability to the energy price gyrations that have caused so much economic pain in the past. our economic challenges were not made in a month or a year or a presidential term. recovery will take time, and history suggests that there will be setbacks along the way. yet the pervasive sense of fear of six months ago has receded as strong measures have taken hold. confidence and hope are returning as a program of rebuilding the economy, a program of rebuilding the economy moves forward.

the american economy is again progressive. thank you very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> i know back home when a diet coke is provided it's provided at the podium. i would be happy to respond to questions. yes, sir? >> i'm from george washington university. thank you for that great presentation and for your excellent work over the last several months. my question is about trade policy. you didn't say much in your talk about trade policy. and i'm wondering whether the administration thinks that trade policy is part of rescuing and rebuilding the u.s. economy.

did you say at the end of the speech that you want the u.s. economy to be more export orie oriented. so does the administration, therefore, favor sending the pending free trade agreements to the congress so that they can be approved and help promote imports? >> somehow i had a feeling that i wouldn't get in and out of the peterson institute without that question being asked. the president made it very clear his commitment to an open trading system. he's made it clear with his insistence that the stimulus bill, the w.t.o. compliance. he's made it clear in talking about climate legislation that he is very much aware of the

dangers of protectionism. he joined the g-20 laters and the g-8 laters, more recently, in making clear a commission to maintaining and moving forward on openness during this period. there are particular issues with respect to each of the regional, each of the agreements that you referred to, that need to be worked through. but at the appropriate point on the political calendar. if the appropriate steps could be taken, we would very much like to see those agreements completed as he would very much like to see the doha round brought to a successful

conclusion. at the same time, it's very important to recognize what has to be top priority right now, which is resisting. and there are reasons for concern in many parts of the world, steps back towards economic nationalism. that's why the president has been very committed to increasing our efforts to enforce existing trade remedies and to pursue issues of violation at the w.t.o. that's why we have been very focused to the administration on supporting exports and assured

the trade finance was a major subject in the context of the g-20 and the g-8 discussions. but i think one does have to look at the numbers, steve. and i think what you see when you look at the numbers is that there's been a very substantial, almost -- unprecedented contraction in trade in the last six to nine months. and that it is very substantially explained, some people would say totally explained some would say residual but everyone would agree dominantly explained by the global macroeconomic contraction. and so for any friend of trade, the most important issue right now has to be achieving economic

expansion. and as we achieve economic expansion, do so in a cooperative way. and i think the president has made an important contribution in that regard by putting the growth strategy questions at the center of the g-20 agenda in london and, of course in pittsburgh in september. >> thank you very much. i'd like to bring up a couple of points that are related. you didn't talk a lot about the depth and breath of foreclosures and the apparent unwillingness of the bank to try to keep people in their homes. and in addition to that, do you have confidence that the banks who helped to create the problem and the c.o.'s, chairmen,

c.f.o.'s who were still there are assuming a little bit of responsibility or at least self-discipline to do what is right for the country and not only for their bottom line? because there's a lot of suspicion that those banks that gave back the money so quickly did it so they won't have the feds looking over their shoulder. and they continue to do the same hankie-panky, waiting for new regulations which is going to take a long time. those are really big issues for the american people. >> they certainly are. my philosophy on this is trust but verify and legislate. i think it's crucial to recognize that the increased health and financial firms is a positive indicator for the

economy. the ability of the financial firms to pay back the resources they receive from the government is a positive and favorable sign. but let me be absolutely clear. there is no financial institutions that would be reporting the kind of positive results that we have seen in last quarter. but for extraordinary public support provided by the government the tarp support was only one element of that suppo support, explicit guarantees aveiled of by all major

financial institutions was another element of that support. support provided more generally to the system by taxpayers was an important source of confidence so no one should be confused about the extent to which the public sector has provided a foundation for financial recovery. and in that context, it is the obligation of the public sector to insist that reforms be put in place that assure that the mistakes of the past are not repeated. that is why an ambitious financial regulatory reform has been a priority of secretary geithner and has been a priority of the president.

i'll highlight just three aspects. eliminating regulatory gaps so that capital levels can be raised to appropriate levels. you know, archeme de said if you gave him a long enough lever, you could move the earth. we've seen it powerfully demonstrated that with enough leverage could you lose any amount of your own money and that of your clients. and something should and something will be done. resolution authority is at one level a very technical subject. at another level the system won't be safe unless it's safe for the failure of individual institutions. and we need ways in which institutions can fail when they need to fail without it having substantial collateral consequences so officials won't face the choice between collapse and bailout that officials have

based too often over the last two years. and finally, the consumer piece of this is very, very important. that's why the aadministration has proposed a separate consumer financial regulator. i think it is appropriate that at a moment like this the compact, if you like, between the nation's financial system and the broader national interest be carefully considered. and i think it is very important that those in the financial system consider it carefully their obligations to their fellow citizens. yes? >> the u.s. government reported that the budgeted deficit in the

u.s. is more than $1 trillion in china many people, also the government, are deeply concerned with this huge deficit and worried about the investments in the united states so how will you assure the chinese government and also the people and also the world investors that seek investment in the united states? >> let me say, first, that i think the greatest risk to future u.s. deficits would be uncontrolled economic contraction in the united states. containing this downturn and preventing the kind of debt dynamics you saw in japan or you saw during the depression in the united states has to be the first priority of anyone concerned with national credit

worthiness or any intellectually honest deficit hawk. rescuing the economy has to be the first priority. beyond that it's going to be essential to take steps on both the spending and the revenue sides. i believe the president has made the right judgment in concluding that our health care system cannot continue on current trends that reform of the health care system requires a comprehensive approach that addresses coverage and insisting that incomprehensive approach that includes coverage also includes substantial steps to change the health care system and reduce the growth of costs. those are the debates that are going on on capitol hill right

now. many of the administration's proposals have included in draft legislation. others including in particular and most critically, reform of medicare reimbursement, need to be on the agenda. but we need to rescue this economy first, but we are very focused and the president has made it very clear his commitment to bringing down the rate of debt and the ratio of debt to incoming united states. yes? >> when the economy recoveries,

expect inflation? and what is the plan for that? >> well, when i was at the treasury, i went eight years without commenting on the activities of the federal reserve. and i don't think now that i've moved to the white house would be a very good time to start. i think that goes to the issue i addressed in my speech, dressed and commented on the last question. getting the economy going again has to be the first priority. but we can't be stimulated -- it's necessary not to be stimulative any longer than is necessary, stimulative. that goes to budget policy. and it goes to the exit strategy for the central bank.

i would not try to argue with you about inflation forecasts. i would note that if you look at the experience of industrialized countries, inflation accelerations typically, almost universally have one or two predecessors. either substantial supply shocks -- and that's why comprehensive energy policies are important, or periods of below normal unemployment and over heated economy. the prospects of the overheated economy from this point do not appear to be our most urgent problem. and i'd also note to market indicators such as the spread between the index bond yields and nominal bond yields are not

suggesting a large alarm about inflation, even pro inspectively -- prospectiviley. but we are very much aware of the lesson of the 1907's and the lesson that's been taught many times before that if you wait until threats are conclusively established, you have waited too long. that's why we in the administration are constantly monitoring the economy with an awareness of these risks and a recognition of the importance of long-term fiscal sustainability. yes? >> good afternoon. "the national examiner."

i was at the future of finance initiative in march and you had met with the financial experts, other people, who said that 1,500 banks were going to close in the united states by 2010. that is an estimate that they had. i'm wondering if you have any comments about that. and, you know, recently there were seven banks that were closed. one in texas and i believe there were six in illinois. i'm just curious if you have any response to that. >> i would refer you -- i'm not involved directly in the regulation of individual banks. so i refer you to the statements of sheila baier and the f.t.c. on the prospects for bank fail yours. i'm sure we have not seen the last bank failure during this cycle, but i do believe that the kind of systemic risks in the

banking system that were a matter of widespread concern just six months ago have receded significantly. yes? >> there's a bipartisan legislation moving to the house currently that would require the general accounting office to audit the fed balance sheet. you mentioned effectively managing a reduction of balance sheet as recovery picks up. and i'm wondering if the white house supports that legislation. and if so, or not why or why not? >> i don't know the details of the particular legislation you're referring to, so i can't comment. we have long been -- the president has long been a supporter of both the independence of the federal reserve system and the need for

appropriate transparency regarding the activities of the federal reserve system. so measures which are directed at the appropriate transparency are measures that we would support. measures that would compromise its independence or compromise its ability to carry on normal kinds of financial operations would not be measureses that we would support. i'm just not familiar with the defails of the legislation you're referring to. >> dave walker. first, the federal reserve is audited at the present time by a financial firm for the audit so it's not clear what that legislation would be trying to do. and i haven't read it. but as former head of the g.o. i know that. secondly, larry, thank you for your service. you're exactly right that we need to focus on the short-term

before the structural. you're also right that health care is the real thing we have to deal with. however, what would you say about the fact that we're in danger of creating a huge expectation gap with the american people on health care because you can't reduce costs by expanding coverage? and in fact, the c.b.o. has said yesterday -- expressed serious concerns about the cost of these packages. and, in fact, we're going to finance looking at the cost of these packages beyond 10 years and the preliminary numbers are not pretty at all. >> david, you've just demonstrated another lesson i've learned over the years here in washington, which is that whenever in a public place somebody thanks me for my service that it's time to take the thanks and leave because the rest of the question is likely to be, shall we say,

provocative. look, let's take what probably is common ground and then let's talk about what's more difficult. i don't see how anybody can look at the excess of the growth rate of health care eefer over the rate of g.d.p. that's prevailed for many years now in the united states. and believe that that can be sustained indefinitely with a healthy economy and a healthy federal budget. so the need to contain the growth of health care costs i think is something we can all agree on. now, there are two views on how coverage relates to that. one view -- and you didn't quite say this but it's implicit in things that some people say. one view is look, the idea is to

reduce costs. how can you increase costs by getting 45 million more people into the system? and so coverage expansion is the enemy of cost control. we've rejected that. and the reason we've rejected that view is that we think in a system that doesn't provide for comprehensive coverage, if you put pressure for economies, people will achieve the economies simply by doing the equivalent of closing their emergency rooms and making sure that they don't get the 45 million people into their institutions. and pressure down wards on costs without doing something about access will simply lead to a more energetic game of hot potato with no substantial positive results for the system.

so we believe that you're not going to make substantial progress on costs without addressing access. that's a view that i believe is widely shared by health experts. so the president's approach puts emphasis on costs, and it puts emphasis at the same time on access. i think that's the right combination. part of what complicates this area, and you're an accountant so you know much more than i do about this. but we know that if people exercise more, eat better, and get preventive care, we know they will have lower health care costs down the road.

we don't know that those lower health care costs will stick to the person who encouraged them to get on the treadmill. we don't know just when those lower health care costs will result. and so we know -- we know enough to know that it's important to do, but we don't know enough for an auditor to account for it. and that complicates the process. so the c.b.o. director was acting reasonably when he didn't give credit for the health information technology programs that are making health technology pervasive. the wellness program that are contained in the president's economic recovery program. the cost effectiveness programs. i might mention that i think it was not a happy day when people

literally -- i don't get surprised that often anymore of the but when people literally said they thought that doing research on what kinds of care was cost effective and what kind wasn't was a bad idea. that idea has been seriously he posed -- opposed on the grounds that it will lead somehow to ration. those things are all very important even if they don't show up in what is scored. the administration in a way has taken a belt and suspenders approach. what we've said, and i think this was just the right way to push the debate. what the president said is we're going to insist on doing the difficult, fundamentally important things that don't score because they can't be audited. we're going to take no credit for those. we could make a bunch of

arguments about dynamic scoring and so forth. we're going to do none of that. we're going to take no credit for it except that regard it's fundamentally important to do it. and then we're going to insist that our health care proposals be paid for with hard, scorable measures of the kind the c.b.o. will score. and that's the debate that's now going through. we have endorsed exactly the principle that would you want us to that we can't afford more increases in health care than we can pay for with hard, scorable savings. and that's the debate that's underway. presidents put forth a lot of proposals. as i say, many of them have been adopted. the most important one that's still under discussion is the mid pack reform of medicare reimbursements. but you look at two cities not

very far apart and they use three times as much health care in one city as they do in the other. and you say, how can it not be a good idea to gather comprehensive data on that? how can it not be a good idea to allow in a relatively a-political way reimbursement rates and reimbursement policies to be set to respond to anomal anomalies of that kind? so i would agree with you very much on the importance of fiscal discipline and the importance of health care in the fiscal discipline equation. but i would want to insist that the approaches that we're taking because of this belt and suspenders aspect, taking no credit for the more difficult to audit measures actually is setting a somewhat new standard

of responsibility relative to what has prevailed. fred? >> larry, i'd like to go back to the macroeconomic dimensions of the trade issue that you've talked about earlier. you said quite rightly in your remarks that u.s. recovery ought to be export oriented not consumer oriented. and earlier on you wanted to avoid returning to the big imbalances that had been a feature of the precrisis landscape. that, of course, has profound implications for the economy. because if the u.s. is unwilling to be the consumer of last resort, unwilling to run big external balances, then the country has to get the global recover roy going by expand -- recovery going by expanding domestic. not to mention smaller country that have relied on export growth in the past so really two associated questions. one does the rest of the world

understand and believe that the structure of the u.s. recovery is going to be different with profound index implications for them? and, two, are you confident that they can make the shift to recover themselves through domestic demand expansion? and what does all of that imply for your sense of timing on recovery of the global economy which, as you say, went into the tank together in this one? >> if you look at the statisti statistics, the u.s. trade deficit has been coming down for quite some time. now, that's a little less positive than it seems at first because given that we import substantially more than we export, if all trade comes down by 10%, then the trade deficit gets smaller. if you look at the most recent months, months' data, there is a

sign of a more fundamental improvement that goes beyond that effect. and i think that's something that can give us some cause for encouragement. it's important to remember, also, that some of the adjustment has already taken place. current account deficit is down less than half the level than it was at when i last stood at this podium and gave a lecture about the importance of external adjustment. personal savings rate in recent months has been running in the 5% range. so in part premeditate aware of the need for this -- people are aware of the need of this adjust because they are already experiencing the adjustment. will there be challenge? i'm sure there will be challenges. on the other hand, you know,

every country's politics is different. but in general, i think increasing consumption is usually easier than decreasing consumption. and the fundamental adjustment that are important to the rest of the world do involve increases -- do involve increases to the level of consumption. but i think this is going to be a crucial issue going forward. and one of the things that economics teaches but the economists sometimes miss is the balance of composition. and there's a great deal of economic evidence that export-led growth is good. but there's the fallasy of composition that not everybody can have export-led growth. and i think that's going to be

an important theme of global economic discussions going forward. thank you very much. >> larry, thank you. terrific. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> how is c-span funded? >> through maybe donations? >> sponsorships? >> taxpayers? >> through philanthropy. >> fundraising? >> government maybe? partly? >> how is c-span funded? 30 years ago america's cable companies created c-span as a public service.

a private business initiative, no government mandate no government money. >> "washington journal" is next on c-span. that's followed by a senate hearing on security standards for state hiech issued driver's licenses and other -- state-issued driver's licenses and other identification cards. and later, live coverage of the national governors association annual meeting in mississippi. .