provided for initial deposits of certain so plusses related to the civil service retirement system, plus an amount held in escrow as a result of prior legislation. public law 109435 also provided that 32015 they will make the annual pay as you go calls for current postal retirees, plus annual payments in specified amounts that range to $5.8 billion per year. prior to the 2006 change in the postal law, the postal service obligations to csrs, the retirement fund which they no longer pay, totaled about $5 billion a year. beginning with 2017, the pay-as- you-go cost will be paid from the fund and the postal service's annual payments will equal accruing costs for active employees plus amortization of the unfunded liability, actuarially determined by a opn.

. a study by a group which uses different assumptions from those used from another group. the private sector plans are reviewed. they start at a higher rate and decrease to a rate of a 5%. the report applies the 5% through active projections. it is not steady somethings that cover the postal service. cover the postal service. there trend assumption is appropriate. the assumption is based on careful consideration that there is a historical trend at the other program. retirees and employees are covered under a single program and participation in medicare is not required. both of these programs features

drives premiums upwards. there is a review of the assumption. one person applied and trend rate with increases higher than 7% until 2016 and lower their after. use of this trend assumption produces a result that is similar to the 7% used by the other report. the mercer report states that a 7% trend rate or higher would be a reasonable trend assumption and is consistent with the historical results achieved. both opm and hay have a discount of a certain percentage. had they applied the same methodology to their analysis as they did to their trend assumption, they should have something substantial or around

6.2%. we believe it is very important to make and supply assumptions consistently. opm has no objections to a legislative changes. we believe the bill which provide temporary relief to the postal service and the financial -- in a financially responsible manner. it would begin paying if normal costs for employees today along with a string of payments towards unfunded liability. thank you for the average city to discuss this issue. i will be average -- any questions. >> thank you for that. >> i am pleased to be here to

discuss the issues of the u.s. postal service. i will provide an update on the financial condition and now look and explain the recent decision to place its financial situation on our high-risk list. a lot to talk about addressing current a long-term challenges. the postal service financial situation has deteriorated sharply over the past year. the volume is projected to decline 28 billion pieces this year. that loss is 7 billion which has been mentioned previously, an increase in outstanding debt to 10.2 billion. an unprecedented 1 billion cash shortfall. the outlook for fiscal year 2010 is even more challenging as the

services would point to an increase in debt. around 13 billion. businesses and consumers a move to electronic communication and payments. the postmaster general says there will be a -- more declines of pieces of mail next year. we believe that restructuring is urgently needed. no single change would be sufficient to address the postal service challenges. cutting costs quickly enough is a challenge. the long-term challenge is to restructure the operations, networks, to reflect changes in mail volume. we have called for the postal

service to develop and implement a broad restructuring plan with input from key stakeholders and approval by congress and the administration that includes time frames for action. we should reflect changes in the use of the mail, better align costs with revenues, optimizing its operations, networks, and work forces, increasing mail volumes and revenues were possible, and retaining earnings and repay debt. turning to restructuring options in three key areas. .

>> there are savings opportunities and facilities. there is excess capacity in the processing facilities. processing capacities exceeds needs by 50%. about 30% of the retail revenue comes by mail, by the internet, and by grocery stores. the network of retail facilities has been underfunded and offers opportunities. cutting costs cannot be the only solution. we must generate revenue by new products. gao has begun work on it mandated study that will examine

these and other options second lead to operational reforms of the postal service. we look forward to working with your office on this effort. this concludes my statement. i am happy to answer any questions. >> thank you. we are grateful to the gao. we have wrestled with these issues. thank you for your testimony today. i will ask our colleagues to remain within the timeframe. we have time for a second round. we are not going to have any votes on the floor until 3:00. hopefully we will conclude here well before that. i would like to start for the panel to weigh in -- that was very helpful testimony. i learned some things.

it was fair and balanced. it was interesting to hear from mr. williams and mrs. kichak. almost everyone -- one thing we all agree on is we have to bring in the costs of health care. we will pass legislature this year on bringing down the health care costs and extending coverage to those who do not have it. i will ask you to weigh in on the debate we had last week, a bill the we have introduced to reduce the postal service for this year and the next several years to give the postmaster general and his team the breathing room they think they need to get through these tough

times. we think the legislation will buy them the time to attract more business. an alternative approach put forward by a colleague would provide some relief this year in order to reduce payments later in this decade. i would like to get the panel's thoughts. i will start with you. >> mr. chairman, in terms of the approaches, i support what came out of committee. it provides short-term relief. i understand the point that was made by senator collins that at the fact -- at the end there would be somewhat underfunding by about $4 billion and her proposal saw to address that. in the immediate couple of years

are urgent. i would support the proposal as it came out of committee. it provides more short-term relief and it gives us an opportunity to further discussion about the public policy issues are around the six or five-day delivery and other things we need to do to address these things. >> if you could keep your responses brief. >> the postal service needs some immediate assistance. your bill 15 07 -- your bill 1507 does provide some relief that is financially responsible. i would say the commission's review of the issue of long-term health care, retirement benefit liability differs from the opm

in the number of employees before cast in the future. it underlines my earlier comment and my confidence that they will continue to cut. therefore, in any further review, the understanding of the lower number of employees may help to resolve the long-term liability issues. >> recall for us if you will the level of postal employees, say, six years ago. >> we hit our maximum number of career employees in late 1999. we had 803,000 career employees. we have been addressing the diversion of mail to electronics and have been managing our work force aggressively. we have 630,000 career

employees. we have managed to reduce that by over 170,000 people, the number of current employees we have. if you look at where we are today compared to last year, we are down 37,000 career employees. we're down over 40,000 if you include non career. >> we are supportive of 1507. we like a lot of things about it. it pays current employees out of the fund. it is based actuarially, which is useful. it addresses the time from the date of the employment all the way through employment. that is a good feature. we do not believe 70% is a sustainable rate -- a sustainable inflation rate.

we think 5% is much better. nobody is paying seven%. the last thing is, we think it would be useful if we revisited this occasionally and if we used postal service-specific data instead of large data. we would want folks on a more recent times. the medical industry is almost unrecognizable at that. of time. >> thank you. >> he said a lot of things i like to address. let me say that with 1507, one of the things that is very powerful the way it is addressed is that the postal service is going to pay the accruing cost every year for its employees. if they are able to bring down the employment numbers, it can control that part, which makes

projecting what the loss is immaterial. those payments will be based on the actual numbers o@@@@@@ we believe this is one way to get them some breathing room. we also believe that it should be tied to a broader restructuring in it, a quid pro, if you will, so that something is given in return. >> are the options that face the postal service, iranian cross, -- reining in costs, you

can try to close some facilities, of postal offices and some of the satellite stations, and try to close some of the processing centers. processes, there are over 400 of those. you could try to find and create new business opportunities. i want to go there. this talks about some of the things you're doing now to be more entrepreneurial under the language we passed a few years ago. what can you do to be more entrepreneurial going forward? >> thank you for the question. we're taking advantage of pricing opportunities and flexibility that is in there. we now have, we are out contracting with different companies to get their business.

we did not have that ability in the past. we now have different prices depending on how you access postal products. we have pricing if you go on- line. we are offering some volume discounts. a different price if you comment and use our lobby services. we have a summer self to encourage people to advertise with us. our intent is to keep going with this kind of flexibility. we have increased the numbers of sizes and shapes for our priority box that have been doing very well in the market box -- in the marketplace. we have to think about the fact that we have a network of 37,000 retail outlets. america loves them. we cannot just sell stamps at

those outlets. stamps and mail, there is a substitution factor going on. i look at -- i look around the world. in australia, if you want to renew your driver's license, you go to the post office. if you are in japan and you want to buy insurance, more likely than not, you go to the post office. i think we have done a good job of trying to sell malil. i think we have begun to scratch the surface. >> thank you. senator mccain. >> mr. potter, the belief that we should implement many of the recommendations of the gao in their report that mr. herr just

mentioned? >> yes, i do, senator. we have been working very diligently to implement much of what he talked about. if you look back in the year 2000, we had 446 mail processing plants. today we have 355. we have taken out over 20% of our mail processing plants. >> how much has your volume dropped? >> our volume has dropped a similar amount. if you look at where we were -- at where we are now obverses last year, our volume is down to 0.6%. 80% of our cost is labor. it is down over 13%. the one area we cannot control

our costs is delivery. moving from door to door six days a week is a fixed cost. if the volume declines, that portion cannot be adjusted by the fact that mail volume has declined. we have gone from 5.9 pieces of mail on average to every door since 2000, down to 4.1 pieces. we have managed aggressively to take cost out to offset that loss. i think we have reached a breaking point with the recession. that's why we're seeking to go from toto five-day delivery -- we are seeking to go from six to five-day delivery. >> so you might not make the payments. is that correct?

>> we would be approximately $700 million short. >> you would not make payroll. so what adjustments need to be made? >> in january, recognized that this was an upcoming issue. >> you did not predict the size of those losses. i think we can go back to the record. >> that is true. they have been accelerated. the $2.4 billion loss in the quarter, there is some bright news in the sense that if the look at quarter three verses quarter towo, $800 million is a compensation, noncash adjustment. interest rates will be low.

we have had to make a noncash adjustment. the net present value of what we had there has declined. it will not earn as much. >> we only have seven minutes. >> it went down from quarter to to quarter 3 -- from quarter two to quarter 3. my preference would be the we get legislation passed that would address the health benefit issue and then we would be able to meet all of our obligations. we would not pay the full $5.4 billion payment. >> mr. herr, what is your assessment of the measures the postal service has taken so far? as to what actions need to be taken in previous gao reports to

congress. >> as we look at the situation this year and we consider this, we felt the considering the service provided, the challenging conditions in terms of the financial situation they face and coupled with a paradigm change in how people communicate, we felt we needed to put them on the high-risk list. >> i understand. how have the reactions of the postal service been in complying with or agreeing to the proposals you have made to improve the situation, which is very serious? >> on the delivery side, there is a big agreement to do readjustments of routes. that has resulted in some

savings. the issue is that -- >> what haven't they done? >> there are some studies under way. >> processing, meaning what? >> doing more consolidations. i mentioned that first-class mail, processing exceeds -- the capacity exceeded the need -- >> isn't the problem the benefits? >> 80% of their costs are salaries and benefits. through attrition, you would be able to cut those costs, as well. >> it is my understanding understandingup that ups pays a higher percentage and usps pays higher life insurance premiums

while other federal agencies pay about 33%. there is certainly a significant difference there. >> that is a. we have been making and in prior reports. the differential of there, it would be around $700. -- $700 million. >> that still doesn't get -- >> no, it does not. >> what does it? >> i think you'll have to look more broadly at the infrastructure. the other thing is the salary and benefits. you have to streamline the work force. >> i thank you, mr. chairman, and i think the witnesses. college just ask one more

question? are you aware of the pending -- could i just ask one more question? are you aware of the pending legislation? how do you view it? >> it is a short-term fix. i would think it should be coupled with a restructuring effort to start this moving forward and see this as getting them through the short term and to lay the groundwork come out of this in what is a real looming financial problem. >> thank you. >> senator lieberman. >> thank you to all of you. i think testimony highlights what we're coming to understand, and that is all there are no easy choices here. none of us want to close any postal facilities. none of us want to go to a five

day a week delivery as opposed to six. i fear we will probably have to do both. the alternative is increasing fiscal desperation for the u.s. postal service. the alternative to that -- it all comes back to us. you cannot keep doing what you're doing. the money does not come out of the air. either we have to raise taxes to pay the growing, surging deficits of the postal service, or we will end up doing what is easing but very wrong, which is putting it on the government credit card and delaying payment for coming generations. that will have terrible consequences on our children and our grandchildren.

i cannot say that enough. i think all of us, mr. potter, week in congress, have an obligation to bring the public where we are in this crisis. they do not want any postal facility to close. but the alternative is a higher taxes or putting off so their kids have to pay. i think you'll make it easy for them. i want you to take a moment to explain what the difference is between a post office and a branch or station. as i understand it, you are not talking about closing post offices. >> that is correct. the difference between them is that a post office is generally a zip code that has one postal

facility within its boundaries. a station is part of a larger post office located in our bigger cities. so in chicago, los angeles, new york, the geography of that city is broken up by different postal facilities. in some cases it is a station which has delivery and retail which can just be a store front will sell postal services. we have a review of our big city post offices. we spend $16.9 billion on those operations. 2 billion of which are for non personnel costs. it is a matter of reviewing what is 1/4 of the expenses that are incurred in the third 200 facilities. >> i hope that is hopeful --

helpful to people. you say the workforce is@@@@@@@ the emirate that there is a no layoff clause between need post office and the postal worker? >> there are no layoff clauses in each of the contracts. there are different levels of protections, depending on the contract. there are employees that could be laid off. but our contracts are very complex. if you were to lay off career employees, that means that you would have to eliminate all use of non-career employees. the largest body of people that could be laid off are in the carrier craft. ier section.

we have to deliver six days a week. we have competing obligations. you like to lower the costs. but you still have to perform the delivery six days a week. >> you have produced 170,000, which is almost 20%. by attrition, i presume. >> we capture all patrician we can. we have been very aggressive about doing that in the last couple of years because of the downturn. we eliminated -- we have reduced 37,000 career jobs. it is higher than the normal attrition. we have voluntary early retirement options for our employees.

>> as you know, the groups representing and others are unhappy about the amendment headed in the committee that said they could consider the fiscal condition of the postal service. you said you support that. i wonder if you could indicate why. >> there is a direction to the arbitrator in the law. it says they should consider paying wages comparable to that. it is a very broad direction. in the past, arbitrators have assumed that language meant the employees worked similar to the police. if you just take verbatim what that directive is, it does not in any way shape or form linked to what the financial position

of the institution is. i think that by ending that phrase, you're bringing a balance to what an arbitrator would consider when it comes to the postal service and how you would view each of these agreements and how critical they are when 80% of the costs are there. >> do any of the witnesses oppose that amendment? >> no, sir. >> if i might just add to the record with regard to your question about definition of post offices. the postal regulatory commission has a different interpretation. the service is defining post offices in terms of its administrative organization. who reports to whom. they define it in terms of the

service actually provided in the community. to the extent with which branches function like post offices, we define those as post offices and expect and anticipate that all of the laws regarding closing post offices cover those stations and branches. >> i appreciate that. i would ask you to submit to the committee what the definition is. where do you draw the line? the definition is quite clear. when dusk a branch become a post office in the definition of the commission? >> thank you. we will do that. >> senator collins. >> thank you. mr. herr, i support changing the payment schedule for the postal service to give it some relief

to get through this difficult time. where we disagree is in our assessment of what the increase in the unfunded liability want to bid and also in our evaluation of the postal service's ability to pay for greater amounts into the fund in the second five years of the 10- year period. i have worked closely with the gao come up with the amortization schedule that i proposed. as i indicated under sinner harper's proposal, it would -- under senator pop -- under senator harper's proposal, it would still increase, but it would be $500 million as opposed to $4 billion.

big difference. i want to turn to the second issue, however, and that is whether it is realistic to expect the postal service to be able to pay far more between 2015 and 2019, that second five years, then is the case under current law. under senator harper's proposal, the postal service would have to pay $6.3 billion more into the retiree health benefits fund then is required under current law in the second five years. under the bill the committee reported, it lowers substantially the payments for the next five years, but then ramps them up to the tune of

$6.3 billion over the current law schedule. how optimistic are you that the postal service's financial situation is going to improve so greatly that it will be able to pay $6.3 billion in payments above what would be required by current what? >> senator collins, i think looking at the situation the postal service is in now, if there is not dramatic and rapid change enacted, it would be difficult for them to make those of larger payments. we believe this restructuring plan is important going forward. however the committee decides to move forward, we believe it should be the need to get a plan de will help the postal

service move forward and deal with some of these structural problems. >> again, i support providing some relief to the postal service because we truly are in a crisis, but i do not want to be back here in 2015 having the postal service say to us, boy, there is no way we can pay these ramp-up amounts. that is exactly what is going to happen. that is why i think the proposed schedule that my staff and i worked out with the gao is a far more realistic assessment. it still provides relief. the difference is an increase in payments of $1.5 billion vs $6.3 billion. we half to be realistic.

mr. potter, the postmasters have suggested that one source of savings from retail operations is to negotiate with the unions about cross craft training. to have more flexibility in the workrooms. are you presuming what seems to be an excellent suggestion? >> yes, we are. we have had similar discussions in the past. >> are you optimistic you're going to be able to implement some changes in the work rules that will save money? >> i wish i could be optimistic. having discussed these issues in the past, we were not successful. hopefully the conditions we have today will have people be more open to that level of

flexibility. >> let me return to the question i raised with the gao. what are your grounds for believing that the postal service will be able to pay $6.3 billion more in the second five- year period that would be required? >> i have two reasons to believe that the $6.3 billion would not have to be paid. there is an assumption in the modeling that was done in the number of employees. that number that was in the initial analysis assumed there would be a growing number of employees. we have today 630,000 people. i also believe the country cannot survive with an inflation

rate on health benefit cost of 7%. i believe the senate, the house are having significant debates about that very issue. as the second largest employer in america, i can tell you that that issue needs to be successfully addressed. i think the burden is on every business. it is those things that make big optimistic. i believe that our target will ultimately be about 550,000 employees. i am optimistic that you'll see the type of changes in our system that will lower that cost. i'm hopeful the health benefit cost will be mitigated. >> i am going to have to leave for a while for a meeting that i cannot miss, and i will return. i realize this panel will have

finished. i do want to point out another issue as i am leaving, and that is the postmaster general's testimony request that congress lift restrictions on the ability of the postal service to get in to new non-postal lines of business. the postmaster general has indicated he is interested in getting into banking, cell phones, logistics, all sorts of lines of businesses. i want to point out to everyone that the postal service cost past forays have had very little success. gao did a study in 2001 that concluded that none of the earlier initiatives was

profitable. i would also point out that there are competitive issues here if we are allowing the postal service to compete with the private sector on non- postal areas. this is an issue that has not come up today. i will be submitting some questions for the record. >> i hope you come back and rejoin us. [laughter] i really do. take just a few seconds. you said -- i did not understand what you said. >> i did say that. let me just respond to senator collins. we're not spending a nickel on exploring any of these ideas. i was simply using that to illustrate that other countries, when faced with the same dilemma we are faced with, have provided

more flexibility in that regard. >> are you asking for that authority? it was my understanding you're asking us to repeal the prohibition -- >> i would assume that will come up with the regulatory frameworks alleged any proposals which would make would have to go to the regulatory commission. i think there is a real issue on how we generate revenue out of these over 30,000 retail outlets that we have. whether that is broadening. we can do there, i think it's something that needs to be addressed. do we have them or do we not have them? >> i am sure we will turn -- we will return to this issue again. will return to this issue again. the panel has been very

enlightening. i really have empathy and sympathy as we face this crisis in our postal system. as a new member of the united states senate, i find a lot of misinformation -- a lot of disinformation a bit disconcerting. many offices have been recommended to be closed in chicago and in the state of illinois. mr. postmaster general, in terms of the 657 offices that are being considered for closure or consolidation, how is the postal system conducting the study? what is the criteria that is being considered? how many possible layoffs would be involved? >> first of all, let me describe the study.

tudy. we have 3200 locations in major cities around the country. it's almost a $17 billion cost base. we have asked for the local facilities to determine and do an analysis of what facilities they have, look at space that is available and in surrounding facilities, look at with traffic we have in terms of people coming into those retail outlets, up look at backroom operations. there is a review being conducted to identify candidates. there will be a further review with in depth analysis and weather and there are cost benefits. there could be real estate opportunities. it will be done at the local level.

there is a pending issue in front of the postal regulatory commission. and then decisions will be made with input from the postal regulatory commission about what actions to be taken. there will be community outreach, and to get feedback from the community. before any actions would be taken, there would be 60-day notification. that is what is going to happen. >> how did you arrive at 6077 if all that still has to be done? -- how to derive at 6077? >> -- how did you arrive at 677? >> we began to conduct this review. at one point were asked to provide an update and are all

3200 going to be gone? there is a list that is very fluid. it got published. >> i have so many questions. how many people are we talking about in terms all playoffs? >> there is no intent to lay anyone off. >> so you're going to do all this by attrition? >> yes. >> i used a post office in chicago that is on the list and it is scheduled to be closed. >> it is not scheduled to be closed. is still under consideration. the people who work in that unit, in these big cities, they have biding rights to move. -- they have bidding rights.

>> has any study been made on what it would take, and this is just an inquiry, a speculation of a first-class stamp to cover the cost. what would it cost? we're now paying 44 cents for a first-class stamp. would it have to go up to seven 5 cents? >> well, some prognosticators said it would have to go up about 15%. all of our rates would have to go up 15%. i caution you to say -- given a pair financial situation and the fact that substitution is a reality, each of their products could move through a different channel. raising rates is just going to

drive mail away from the system. there is a misnomer here that the bulk of our revenue comes from citizens buying stamps. over 75% of our revenue comes from commercial entities. it is catalogs, its banks. think about what you get in the mail. it is those folks that make decisions -- >> would rate increase is applied to those items? >> any time we raise rates, we calculate the fact that the rate increase will drive people further away from mail. >> i am not advocating that. you looked at that. you are nodding your head. >> we try not to do that simultaneously.

we try to validated and we will work with your office so that you are aware of that. >> another question i have. in terms of the use of technology, and mr. harris said there is an excess of processing. s -- has the postal operation kept pace with the technology and the processing of the mail and packages and the various delivery -- in order to deliver the various items to the public. has the technology kept pace, or is that something that would cost of additional moneys? >> we have the best mail processing center in the world. you put a letter in a collection box, it is not touched by a human being until -- it is read

by machines. >> is it sorting to the light? >> to the light? >> technology. >> again, i invite you to come and visit a post office. >> we will talk about that. my time has run off. i tried to push the postmaster. i did not know if you have a second round with a paddle. >> we have another panel to go. i will not be taking a second round. there'll be other questions. this has been a very good back and forth. >> thank you. i will try not to use my seven minutes. in your estimates, you showed a continuing decline in first

class mail buying until 2011. do you stand behind that backs >> it is not a resurgence in the sense that -- >> deal still think you'll see an increase in first-class mail? >> the number of transactions has declined to. people have stopped using credit cards, they do not get a credit card bill at the end of the month. that would drive some. >> you do not have a dinner bet on whether that would happen. >> everything i see in my life, people who used to melt a church bolten, ascended by -- people who used to melt a church bulletin, they send it by e-

mail. i think that is too optimistic. >> we can say a drop in john q. public putting stamps in the mail. it reflects the commercial use of mail. >> that is what i am talking about. i get my bills not through the mail. >> i wish you were a better customer of ours. >> i appreciate your service through the rain, snow, and sleet. this is one side of the equation. do you have any comments on the protection of revenue? >> we have not -- the information we have indicates it will not be as bad pass it is now. it is unlikely to return to

levels that existed before we went into the crisis. >> i wanted to point out a figure on my statement. we show the percentage of payments in 2008. the mail payments are down to 56% and the electronic are up to 38%. >> that rate of change had not changed. >> the lines are merging. >> they are on a straight line. the slope of the curve is it is staying steady. you'll see an increase in that type boat decline. >> people will begin to move to these kinds of payments. >> i wanted to add that the commission used to get volume estimates on a quarterly basis prior to 2006.

it might be beneficial for them to resume that practiced in light of the recent experiences. >> the forecasts are not accurate. >> we would have a better opportunity to examine what they are. >> i do not disagree. they are highly inaccurate. we have had these hearings for three years. those of us who have been pessimistic have been much more accurate. the -- you have 637,000 employees. what is your fully absorbed labor costs? >> it is $57 billion. >> $57 billion. it comes up around $83,000 per

employer. it is fully absorbed. would be any benefit of having postal employees having the same benefits? >> there would be about a $600 million cost. >> that would be if they had that. if in fact you could achieve -- safeway has 200,000 use a nice employees. they have had half of 1% increase in the past four years. they have a healthier workforce with last time off because they are intervening and incentivizing people for weight- loss. why is it we would not want to sit down with your audience and say, here is a unionized work force that has helped their company but has had less out of

pocket costs. why we did not want to model that after what safeway has done? >> i personally would. in years past, under a different administration, we went down the path of seeking to determine whether or not we could withdraw from that and it was strongly -- we were strongly advised it was not a path to seek. >> your average cost is higher. >> i do not believe so. i would have to check. >> i believe it is. >> i am not sure, senator. >> so if -- we're going to solve your problem in the short term. the question for the american people, what is the long term? how are we going to solve this?

i believe we could give you the flexibility to go to five days. i think we should keep the flexibility to do what you want in terms of your core business. but what i do not believe we should do is continue to just get out of one crisis and moved to the next. my hope is with hearings like this, we will look at the real issues and be realistic to the american public. ultimately, if in fact future health care benefits are paid health care benefits are paid for, someone will pay f >> i wholeheartedly agree with your sentiment. >> just so you can note, there is a difference in the terms of

your cost. >> i understood that. >> so do your costs per employee -- so your cost per employee and insurance is higher. >> if you look at the 100%, i believe our employees take a lesser plans. blue-collar people tend to be healthier. >> [unintelligible] >> i know. it is great. that is what was in my head. >> thank you. >> thank you very much, mr. chairman. i thank you for having this hearing. i appreciate those where participating today. the postal service has shown signs of financial distress expressed here for some time. . distress has been shown for some time and

still faces -- the office recently placed postal service back on its high-risk list. i am very much in favor of extending needed assistance to the postal service to get them through this difficult time. this proposed fix came in the this proposed fix came in the form a bill which the committee passed last week. this bill would provide flexibility and pre fund health benefits and ordered to close budget gaps over the next several years. however, i am disappointed at the markup of s-1507. an amendment was added to affect the bargaining process and arbitration, giving on necessary deference to management in negotiations by requiring that

an arbitrator can contribute to the financial health of the postal service. the financial condition is already a key consideration. this amendment has no practical effect other than maybe to -- i believe we should not have included this additional policy change on this must-pass legislation, especially with strong objection from so many postal workers. i believe there is still time to find a compromise to address concerns by recognizing the economy and the postal service without injecting ourselves once again into the bargaining process. mr. potter, in the first part of this year, a service in hawaii

met a standard less than 7% of the time. most were well over the standard. only 1/4 of packages were delivered within three days of the service standard. i am concerned about these numbers in particular, which are the worst in the country, i am also concerned about the negative image of the postal service that such -- we offered suggestions about closing post offices and reducing delivery days. i am concerned that the point may be reached when usps is no longer the carrier of choice due to lagging service and cuts. my question to you is, what is the postal service doing to ensure that despite these problems, it continues to

provide world-class and universal service? >> flubbing address the whole why the issue -- let me address the hawaii issue. we lost the shipping -- when you pay ground rates, we put mail on boats and moved to hawaii. we have had trouble finding a supplier that operated a frequency that would have a higher level of service. we're continuing to work on that issue and is one we know we have to address. >> commissioner goldway, the obligations that found usps generally filling the

obligation. it seems to me that some of the cost-cutting options and service reductions and closings could have serious effects. my question is, do you think the options discussed for cost cutting could cause them to reevaluate the postal service's fulfillment of the obligation? >> thank you, senator. i think the commission is in fact concerned about the proposals to reduce the footprint of the foes -- of the postal service throughout the nation. we will be looking at these proposals in terms of their impact on universal service. we hope to have public hearings in the context of this end case. we may in fact review the

universal service obligation study that we did two years ago to look at what ought to be universal service in this time we are in, or how universal service could be provided. i am concerned that the cuts proposed may in fact be counterproductive, and by reducing access to the community in these options they propose that there will be simply a last opportunity for the postal service to grow in the future. .

reducing to a five day week would most likely save money by reducing staff hours a processing and delivering mail. likely some of this would be through layoffs in addition to attrition. i have two questions for you. in the past, you mentioned that a week they likely could be cut, so i would like you to address why and what changed this to saturday? how long would it take after the announcement of a five day week until in the cost savings were realized? was because further analysis around volume -- only

11% of mail is delivered on saturday. in addition, one of the reason it is low on saturday it is many businesses are closed on saturday and we do not provide delivery on saturday today. if we could pick a day in the middle of the week, there would only be four days of delivery t businesses. that may be harmful to our position from a competitive standpoint. competitors cannot deliver on saturday without a surcharge, so we are positioned well in that regard. second part of your question? >> cost savings from this. >> we estimate $3.4 billion. in terms of how quickly we could get it, literally the day that we start, we could start to capture the savings. right now, our thinking is once

it is approved, reviewed by the regulatory commission, and approved in the sense that we have the legal authority to do it, we would provide no less than six months notice to customers to make adjustments to their operations. >> thank you very much. >> that me follow up briefly. i may have missed it in the back and forth, but other country with a five-day service, i understand they do not necessarily get rid of saturday service, perhaps wednesday service. post offices could still get some kind of service. i am thinking of canada. during different times of the

year, they go to a six-day service. is there a different way in the way that country's do this? >> most places eliminate the saturday delivery. our concept has evolved, and i wish i could take a minute to describe it. we want to keep post offices open on sunday, so we're just talking about delivery. we would provide box mail delivery on saturday. part of the reason for that is there is a lot of money that moves through the mail, and those recipients have said that they need access to the remittances that come through the mail. we would continue to deliver to post office boxes. we would allow customers to pick up their mail at the plant as it is generated. in the american public has told us that they want to have access to postal personnel on weekends.

maybe they were during the weekend, on saturday to pick up a package that they may not have been able to get delivered because no one was home. we would continue to operate those officers on saturday. what we are talking about in the $3.4 billion in savings is simply the elimination of the sixth day of delivery. >> one quick question, mr. postmaster general. if it is not delivered on saturday, it would be delivered on monday. that would mean an extra load. have you taken that into consideration? >> yes, we do have holidays. when we estimated our costs, going forward on our savings, that was a key part of the calculation. it turned out, because the machine to sort the mail and put them in sequence, the bulk of

the workload is absorbed by the carrier and our systems. there is really no additional cost -- limited additional costs as a result of moving that workload from saturday to monday. >> before we excuse the panel, i want to thank you for being here, helping us wrestle with this tough issue. we thank you for your leadership. we still have a second panel, and i look forward to their testimony as well, but i would just conclude, before this panel leaves, some say that there are no silver bullets, and i do not know that there are, but there are many ways to address these challenges. into unions have wrung a lot of cost out of the system. we will see some additional reduction through attrition as

well. as members of congress, we need to get out of the way. where it makes most sense for people to have service, that is something that needs to be done. i am not interested in closing numerous facilities across the country, but to the extent that some need to to get out of the way, you have labor negotiations coming up and we commend the approach that management is taking to those negotiations. frankly, the approach that union representatives are taking as well. these are not easy negotiations, we understand that. reducing mail delivery needs to be something on the table, and we have said that there are some different ways to see how that can be crafted. if we do not have service on

saturday, no service on sunday, and monday is a holiday, three days without mail service would be a concern. having gone through some tough to ways to save money, and i know that you have done a number of them, the issue of new revenues. i understand you are not hiring a lot of people, but perhaps you would hire a lot of outside of the box thinkers. people who can really come up with ideas to and generate revenue. you are brainstorming a little bit about how to generate revenue, but perhaps we could do some other things brown postal facilities. lastly, i had a conversation with senator mccain and i spoke about the need to rein in health-care costs.

every republican and democrat in the senate has said, as we move through discussion, as important through discussion, as important as it is as important as it is to extend coverage to people who do not have it, it is incredibly important that we not raise the deficit and that we reduce the growth of health care costs. we have to lower the cost curve. someone said if we are still at a 7% rate of inflation for health care costs, over country is in dire straits. we are talking about putting our federal government brother in a whole and threatening to bankrupt not just medicare but our government, we further make our businesses and competitive. we have to come to grips with it. whether it is by%, 4%, or 3%.

in the meantime, when we work on that legislation, we need to work on the rest of this agenda, and we look forward to working with you. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> up next on c-span, a portion of the senate floor debate on the confirmation of judge sonia sotomayor to become an associate justice of the supreme court. that is followed by reaction from president obama and senate democrats. >> all this month, revisit the bears and festivals we have covered this year on "book tv." go to booktv.org for the full

schedule. >> the senate completed debate and voted on the nomination of judge sonia sotomayor to the supreme court. she was confirmed by a vote of 68-31. nine republicans joined with 59 democrats to approve for confirmation. senator edward kennedy of massachusetts was the only senator not voting. now, a portion of the final hour of the floor debate. this is about 50 minutes. >> when president obama nominated judge sodomite to that supreme court, i pledge that we would treat heart -- judge sotomayor o. it is an important office. i believe we have lived up to that obligation. i would like to change -- thank chairman leahy and members of the judiciary committee. i think he did provide a basis for full debate here in the

senate. i would like to thank judge sotomayor for the way she conducted herself. we have had a robust debate on the senate floor over these past few days, and we have addressed many important questions and issues. court system. according to the president, all nominees to the federal bench would now have to meet an "empathy" standard which requires judges to reach their most difficult and important decisions through "the depth and breadth of their empathy," and "their billio billion"their brot america should be." this is a stunning ideology and turns law into politics. the president of the united states is breaking with centuries of american legal tradition to enter a new era where a judge's personal feel, about a case are as important as the constitution itself. the president's empathy standard is much more than a rhetorical

flourish. it's a dangerous judicial philosophy where judges would base their rulings on social, personal, political, views. it's an attempt to sell, really, an old discredited activist philosophy by marketing it under a new label. it is this activist philosophy now under the guise of empathy that has led judges to ban the pledge of a becaus of allegianct contains "under god," and to create a new right for terrorists who attack the united states -- rights never before found in our country or any other country, while robbing american citizens of their own rights to engage in activities like even a silent prayer. that philosophy also helps explain request judge sotomayor's panel on federal judges allowed the city of new haven to strip 18 firefighters

of their elgibility for promotion on the basis of race and explains why judges have permitted cities and states to ban guns despite the constitution's clear language "the right of the people to keep and bear arms shall not be infringed." and it explains why judges have allowed governments to seize private property for private commercial development despite the constitution pos guarantee'e that private property may not be taken but for public use. the standard may sound nice but it's cruel, it is, in truth, a bias standard. the power to rule on empathy is the power to rule on religion disasand thprejudiceand the powf any or all and embraces empathy at the expense of objectivity

and equality and fairness. 18 firefighters in new haven worked, studied and sacrificed to pass the city's promotion exam but when the results did not fit a certain racial quota the city leaders just scrapped the rests. the firefighters put their faith in the system and the system let them down so they took their case to court. but judge sotomayor summarily dismissed their case in a one-paragraph order that did not even consider their civil rights claims. but the judge sotomayor who testified before the committee did thought effectively explain her ruling to deny the firefighters their day in court. she also did her best to distance herself from the activists philosophy she has so long spoken and championed. but it was an unconvincing effort. i believe she failed to offer a

critical explanation for her critically important rule uniteo eviscerate gun and property rights. she failed to offer a credit build explanation of her policy role in a group that took extreme positions while, when pursuing racial quotas advocating that the constitution requires that the government fund abortions and opposing reinstatement of the death penalty. her effort to rebrand her judicial approach stretched the limits of credulity. nevertheless, i believe we have had a deeply valuable public discussion. by the end of the hearing not only republicans and not only democrats but the nominee herself ended up rejecting the very empathy standard the president has used when

selecting her and this process reflected a broad public consensus that judges should be impartial, restrainted, and faithfully tethered to the law and the constitution. it will now be harder, i think, to nominate activist judges. this is not a question of left v. right or republican v. democrat. this is a question of the true role of a judge v. the false role of a judge. it is a question of whether a judge follows the law as haven't or as they might wish it to be. it is a question of whether we live up to our great legal heritage or whether or not it is abandoned. empathy-based rulings no matter how well-intentioned do not help society but imperil the legal system so circumstantial to our freedoms and so fundamental to our way of life.

we need judges who uphold the rights of all, not just some, whether they are new haven firefighters, law-abiding gun owners or americans looking for their fair day in court. we need judges who put the constitution before politics and the right legal outcome before their desired personal, political, social outcome. we need judges who understand that if they truly care about society and want it to be strong and healthy, then they must help ensure that our legal system is fair, objective, and firmly rooted in the constitution. our 30th president coolidge said of the constitution "no other document devised by the hand of man has ever brought so much progress and happenness to humanity, the good it has brought can never be measured." i certainly believe he is correct. that document has given us

blessings no people of any country has ever known which is why real compassion is not found in the empathy standard but in following the constitution. judge sotomayor, however, has embraced the opposite view. for many years before her hearings she has bluntly advocated a judicial philosophy where judges ground their decisions not in the objective rule of law but in the subjective realm of personal "opinions, sympathies and prejudices." a supreme court justice wields enormous power over every man, woman and child in our country, the primary guardian of our magnificent legal system because, i believe, judge sotomayor's philosophy of law and her approach to judging fail to demonstrate the kind of firm,

inflexible commitment to these ideals, i must withhold my consent. mr. president, i see my colleague, senator leahy, is here. he has handled many of these cases over quite a few years. we didn't agree on a lot of the things that came up in the hearings but he committed to giving the opportunity to the minority party to have a full opportunity to ask questions and to raise issues and speak out. thank you for that. i think you did credit to the senate. i than the chair and i would yield the floor. the presiding officer: the senator from vermont. mr. leahy: thank you, mr. president. mr. president, i thank the senator from alabama for his kind comments. as he knows i made similar comments about him this morning in the senate judiciary committee and i reiterate that here today. we did decide, both senator

signaturesignatures and i we woo make sure much was heard. we may have difficult outcomes on how we will vote but we will have much heard. that has been done and i compliment the leaders of the senate. i ask unanimous consent that joy cheney of the democratic policy committee be granted floor privileges during today's session of the senate. of. the presiding officer: without objection, so ordered. mr. leahy: thank you, mr. president. we're about to conclude senate consideration of this nominee. i thank those accepts who have evaluated this -- those senator whose have evaluated this nomination especially the republican senators who have shown the independence to join the bipartisan confirmation of this historic nomination and i thank all senators on both sides of the aisle who spent hours and hours and days and days in our hearings. some critics have attacked president obama's nomination of judge sotomayor by contending

the picture for the supreme court to substitute "empathy" for the rule of law. these kittic critics are wrong t the president, they are wrong about sonia sotomayor. let's leave off the rhetoric and go to the facts. when the president announced choice of judge sotomayor ten weeks ago he focused on the qualities he sought in a nominee. he started with rigorous intellect, mastery of the law. we should all agree with that. he then referred to recognition of the limits of the judicial role when he talked about an understanding that a judge's job was to interpret not make laws; to approach decisions without any particular ideology or agenda. but, rather, a commitment to impartial justice, a respect for precedents, a determination to

faithfully apply the law to the facts at hand. that's what president obama said. and then he went on to mention experience. he said "experience being tested by those suffering barriers and hardship and misfortune, experience in persisting and ultimately overcoming the barriers." it is the experience that can give a person a common touch and a sense of compassion and understanding how the world works and now ordinary people live. that is request it's a necessary ingredient in the kind of justice we need on the supreme court. and then the president concluded by discussing how judge sotomayor has all these qualities. the president was looking not just for lawyerly ability but for wisdom, for an understanding of how the law and justice work

in the every day lives of americans. in a subsequent radio and internet address the president reiterated the point when he said -- and i quote -- "as a justice of the supreme court she will bring not only the experience acquired over the course of a brilliant legal career, but the wisdom accumulated over the course of an extraordinary journey, a journey defined by hard work and fierce intelligence and the enduring faith that in america all things are possible." now, president obama did not say that he viewed compassion or empathy as a substitute for the rule of law. in fact, he has never said he would substitute empathy for the rule of law. that's a false choice.

in that opposition -- and that opposition to this nomination is based on a false premise. when she was first named, judge sotomayor said, "i firmly believe in the rule of law as the foundation for all our basic rights." judge sotomayor reiterated time and time again during her confirmation hearing her fidelity to the rule of law. she said, "judges can't rely on what's in their heart. they don't determine the law. congress makes the law. the job of the yuj is to apply b of the judge is to apply the law. it is not the heart that compels in cases. it is the law enforcement the judge applies the law to the facts -- the judge applies the law to the facts of the case." those who ignored her testimony should at least take heed of her record as a judge. judge sotomayor has demonstrated her fairness and impartiality during her 17 years as a judge.

she has followed the law. there is no record of her substituting her personal views for the law. the many independent studies that have closely examined judge sotomayor's record have concluded that it is a record of applying the law, not of bias. what she has said and what we should all acknowledge is the value of her background shall the value her background brings to her as a judge and would bring to her as a justice, our first latina justice. judge sotomayor is certainly not the first nominee to discuss how her background has shaped her character. justice o'connor has acknowledged we're all creatures of our upbringing. we bring whatever we are as femme a jobpeople to a job, liee suprem-- like thesupreme court.

everybody knows that. all 100 of us bring what we are to the united states senate. many recent justices have spoken of her life experiences as influential factors in how they approach the bench. justice alito and justice thomas nominated by republican presidents did so famously at their confirmation hearings, and then they were praised by the republican side of the aisle for doing so. indeed, when the first president bush nominated justice thomas to the supreme court, he touted him as an intelligent person who has great empathy. some of those choosing to oppose this historic nomination have tried to justify their opposition by falsely contending that president obama is pitting empathy against the rule of law. not so. not so.

this president and this nominee are committed to the rule of law. they have recognized the role of life experience not has a substitute for the law or in conflict wits mandates but as -- with its mandated but as informing judgments. the question is whether there is a double standard being applied by those who supported the nomination of justice alito and justice tom moss but choose to oppose the historic nomination of judge sonia sotomayor. judge sotomayor's career and judicial record demonstrate that she has always followed the rule of law. the point is, mr. president, we don't have to guess what kind of a judge she's been. she's had more experience on the federal court, both trial level and appellate level, than any nominee in decades. she will be the only member of

the u.s. supreme court with experience as a trial judge. we don't have to guess. there are well over 3,000 cases. we don't have to guess. attempts at destroying that record by suggest that is her eth nighs tirks her heritage will be the driving force in her decisions as a justice of the supreme court are demeaning to women and all communities of color. i have spoken over the last several years about urging presidents from both political parties to nominate someone from outside the judicial monastery. i believe that experience, respect, and understanding of how the world works and people live and the affect decisions will have on the lives of people are very important qualifications. by striving for more diverse bench, drawing from judges a wider set of backgrounds and experiences, we can better ensure there will be no

prejudices and biases controlling our courts of justice. all nominees have talked about the value they will draw on the bench from their backgrounds. that diversity of experience is a strength. it is not a weakness in achieving an impartial judiciary. mr. president, i have voted on every member of the united states scosht. i've been on the hearings of all but one. and that one i voted on the nomination. i sat in the hearings of judges -- justices no longer there either because of retirement or death. i have conducted thousands of nomination hearings, everything from courts of appeals judges, federal district court judges,

members of the department of justice, the rank and member of supreme court nominations and conducted this one. i mention that to thank the senator from alabama for his cooperation during it. you know, after those thousands of hearings, you get a sense of the person you are listening to. now, i met for hours with judge sotomayor either in the hearing room or privately. you learn who a person is. you really do. you really do in asking these kinds of questions. you have to bring your own experience and your own knowledge to what you're hearing. there's only 101 people in this great nation of 300 million people who get a say who's going

to be one of the nine members of the u.s. supreme court. first and foremost, of course, the president, who makes the nomination. but then the 100 of us who must follow our own conscience, our own experience, our own abilities in deciding whether we'll advise and consent to that nomination. mr. president, it's an awesome responsibility, and we should do it not because we are swayed by any special interest group of either the right or the left. in fact, i have a rule -- my office knows this very well -- that in supreme court confirmations, i will not meet with groups of either the right or the left about it. i'll make up my mind signature through hours and days -- sitting through hours and days of the transcripts and hearings. i would urge all senators to do

that. i think it is unfortunate if any senator of either party made up their mind on a supreme court nominee based on the whims or the ideas of special interest groups or special pressure groups from either the right or the left. that's a disfavor to those hundreds of millions of americans who don't belong to pressure groups of either the right or the left. they expect us to stand up. that is what we should do. that is what we should do on judge sotomayor. this is an extraordinary nominee. i remember when president obama called me a few hours before he nominated her. i was out with our troops in the fields in afghanistan. and he explained what he was going to do in just a few hours. he talked about that.

we talked about asmg we talked especially about-- --we talked about afghanistan. we talked especially about her. he said, they are web sites already developing opposed to her. within hours we had leaders calling her the head of the ku klux klan or being bigoted, senators on neither side joined with that. it would be unfortunate. mr. president, we're almost at a time for the vote. i would hope every senator would search his or her conscience and say, are they voting for this based on their oath of office, based on their conscience? or are they reflecting a special interest group? when the judiciary committee began the confirmation hearings on this supreme court nomination and when the senate this week began its debate, i recounted an

insight from dr. martin luther king jr. which is often quoted by president obama, "let us realize the arc of the moral universe is long, but it bends toward justice. it is distinctly american to continually refine our union, moving closer to our ideals. our union is not yet perfected, bu"but with this confirmation we will be making progress. years from now, mr. president, we will remember this time when we crossed paths with the quintessentially is american journey of sotomayor seentdz when our nation took another step forward through this historic confirmation process. i urge each senator to honor our oath, our constitution, and our national promise by voting his or her conscience on the

nomination of sonia sotomayor to serve as a justice of the united states supreme court. i will proudly for for her. i see the republican leader, and i would reserve the balance of my time. the presiding officer: the republican leader is recognized. mr. mcconnell: mr. president, once again i'd like to thank the chairman and the ranking member of the judiciary committee, senator leahy and senator sessions, and their staffs for conducting a dignified and respectful hearing. from the beginning of the process, i assured judge sotomayor that republicans would treat her fairly. at the end of the process, i can say with pride that we kept that commitment. this particular nominee comes before us with an impressive resume and a compelling life story. yet the question that we must

ask ourselves today is whether we believe judge sotomayor will fulfill the requirements of the oath that's taken by all federal judges to administer justice, without respect to persons; that is, to administer justice even-handedly? president obama asked himself a different question when he was looking for a nominee. the question he asked is whether that person has the ability to empathize with certain groups. and as i've said, empathy is a fine quality. but in the courtroom, it's only good if the judge has it for you. what if you're the other guy? when he walks out of the courthouse, he can say he received his day in court. he can say he received a hearing. but he can't say he received justice. now, at her hearings judge

sotomayor was quick and even eager to repudiate the so-called empathy standard. but her righ writings reflect a belief not just that impartiality is not possible but that it's not even worth the effort. judge sotomayor's record of complex constitutional cases concerns me even more. because in judge sotomayor's court, groups that didn't make the cut of preferred groups often found that they ended up on the short end of the empathy standard. and the consequences were real. one group that didn't make the cut in judge sotomayor's court were those who need the courts to enforce their first amendment rights to support candidates for political office, free from government interference. she is free to express her personal opinions on this issue, as she did when she wrote that merely donating money to a

candidate is akin to bribery. but as a judge, she was obligated to follow clear supreme court precedent. and when it came to this issue, she followed her political beliefs instead, voting not to correct her circuit's clear failure to follow the supreme court precedent in this area of the law. ultimately, the supreme court in a 6-3 opinion authored by justice breyer corrected this error by her circuit on the grounds that it had failed to follow well-established precedent. another group that didn't make the cut were those who need the courts to protect them from unfair employment preferences. as a lawyer, she advocated for and in fact helped plan lawsuits that challenged civil service exams for public safety officers. and as a judge, she kicked out of court, with just six sentences of explanation and without any citation of precedent, the claims of a group

of firefighters who had been unfairly denied promotions they had earned. this past june, the supreme court reversed her ruling, making her 0 for 3 this term with all nine justices finding she had misapplied the law. gun owners didn't make the cuss, and -- make the cut, and they haven't fared well before judge sotomayor either. she has twice ruled the second amendment isn't a fundamental right and, thus, doesn't protect americans when states prevent them from bearing arms. and here too she didn't even give a losing party's claims the dignity of a full treatment. in one case she disposed of the party's second amendment claim in a one-sentence footnote. in the other, she did it with a single paragraph. property owners weren't on the list either, and they too haven't fared well in judge sotomayor's court. in an important fifth amendment case, the amendment that protects against government taking private property, judge

sotomayor broadened even further the government's power, a ruling which one property law expert called one of the worst property rights decisions in recent years. in her ruling in this case, fit an all too familiar pattern. she kicked the agreed party's theory as constitutional claims out of court in a summary order with only a brief explanation as to why. these important cases illustrate the real-world consequences of the empathy standard in which judges choose to see certain facts but not others and in which it's appropriate for judges to bring their personal or political views to bear in deciding cases. lieutenant ben vargas, one of the firefighters who did not farewell under the empathy standard, may have put it best. speaking of himself and the other plaintiffs in that case,

he said, "we did not ask for sympathy or empathy. we ask only for evenhanded enforcement of the law, and we were denied that." lieutenant vargas understands what most americans understand and what all of them expect when they walk into a courtroom. that in america everyone should receive equal justice under the law. this is the most fundamental test for any judge, and all the more so for those who would sit on our nation's highest court, where a judge's impulses and preferences are not subject to review. because i'm not convinced that judge sotomayor would keep this commitment, i cannot support he. the presiding officer: without objection. mr. reid: mr. president, on may 17, 1954, the supreme court of the united states handed down a ruling that would begin to

reroute america toward a more unified union. when the justices unanimously directed in brown v. board of education that our children's schools must no longer be racially segregated their decisions he echoed far beyond e courtrooms in washington, d.c. or a classroom in kansas. the decision paved the way for countless future terms that would make our nation more just and its people more equal. not six weeks later after that opinion, sonia sotomayor was born in the south bronx. in her lifetime, this senate has sent to the supreme court the only two women and the only two americans of color to ever sit on that bench. in the ten weeks since president obama made history by nominating judge sotomayor, many have emphasized the importance of putting the first hispanic on the nation's highest court. this is truly historic for our entire nation, but especially for the young latinos in this

country who will see and judge sotomayor, concrete evidence of the heights to which they can legitimately aspire. but it is no less significant in a country where women represent half of our population, judge sotomayor will be the third woman -- only the third woman -- to ever serve as a justice and will be one of only two women serving on the court today. in many ways justice sandra day o'connor and ruth bader ginsburg have made this day possible for judge sotomayor. because of the trail these women -- that is o'connor and ginsburg -- and others like them have forged, judge sotomayor has been recognized throughout her career for her intelligence, talent, and accomplishments rather than being defined by her gender. it wasn't easy, mr. president. justice o'connor finished high school at age 16.

and when she finished stanford law school -- one of the finest law schools in the world -- a year early, she did it in two years, she was third in her class. two behind justice rehnquist. no law firm in california would hire justice o'connor as an attorney because -- because -- she was a woman. the most one firm would offer her was a position as a legal secretary. when justice ginsburg arrived at harvard law school, she was greeted by a dean who asked why the nine women in her class -- a class of about 700 people, mr. president -- why nine women in her class were occupying seats that could otherwise be taken by men. little did he know she would later join another group of nine legal experts whose membership was long restricted to men, the supreme court of the united

states.like justice o'connor, je ginsburg did not receive a single offer with any of the 12 law firms with which she interviewed even though she finished first in her class at harvard. when she was recommended for a clerkship to supreme court, at least two of the justices refused to hire her. why? she was a woman. america's grateful that o'connor and ginsburg didn't give up. we're fortunate that their voices and the real world perspective they brought to the table were part of the debate during some of our nation's landmark cases on gender equality. in the lily ledbetter, 2007 case before the supreme court, justice o'connor's successor, sam alito wrote the majority opinion in a 5-4 ruling that made it virtually women and

other victims of pay discrimination is fight back. justice ginsburg, who herself had been a victim of pay discrimination on more than one occasion because she was a woman, read her powerful dissent allowed from the bench. it's rarely done. but she voiced her dissent in the 5-4 opinion and she invited congress to correct this injustice. and we did that. we changed the law. and after we passed the lily ledbetter fair pay act this year, it was the first piece of legislation president obama signed into law. similarly when supreme court heard the case of a 13-year-old honor student, a girl, who had been stripped searched at school, justice ginsburg and her colleagues minimized the humiliation that this 13-year-old girl has suffered. justice ginsburg noted that she was the only one in the court

who had -- and encouraged her colleagues to take that into account -- had been a 13-year-old girl. and encouraged her colleagues to take that into perspective. the court rightfully ruled that a search was unreasonable. that would not have happened but for ruth ginsburg. judge sotomayor's life decisions will not dictate her decisions anymore than ginsburg, scalia, o'connor have let their pasts ascribe their own rulings much she will bring a perspective not only as a woman and hispanic, but also as a former criminal prosecutor beings commercial litigator, trial judge and appellate judge. she'll share the depth and breadth of that experience with her colleagues just as they'll able to share their own unique views on any case with her. their own views. justice o'connor has said that the first african-american

justice, justice marshall opened for his colleagues a different world and was able to relate for them experiences that they could not know. justice ginsburg and o'connor did the same and so will judge sotomayor. a more diverse supreme court is a betr supreme court. judge sotomayor's journey to this day, mr. president, has not been without obstacles. but because of the struggles fought by those who came before her, she has been able to succeed. today the senate will make history by confirming the first hispanic, the third woman, and the third person of color to supreme court of the united states. but equally as important we'll also make history by confirming someone as qualified as sonia sotomayor. her experiences come not only from the legal world, but also the real world. her understanding of the law is grounded not known theory, but, mr. president, also in practice.

her record is beyond reproach. her respect for the limits of the judiciary are resolute and her reverence for the law is unwavering. sonia sotomayor is an american of tremendous credentials. both her academic record and her career experience are second to none. she graduated summa cum laude from princeton university and excelled at yale -- again, stanford, harvard, yale, always in the top three of law schools of the country. she excelled at yale where she was a member of the law review. the prestigious yale law review. mr. president, after she's confirmed, she'll be the only justice who has seen trial from every angle. she's seen a trial from prosecuting civil and criminal cases, she presided over them as a judge and also as an appellate

judge. that is the kind of justice we need on the supreme court. mr. president, i've had concerns for quite some time that we have far too few judges on court who have had trial experience. as a trial law, i've tried more than 100 cases to juries, that experience to someone sitting on that court is important and she will bring that. and that's so important. we have too many supreme court justices who have never conducted a trial. many never been involved -- some of them never involved in a try. they looked at the cases from an appellate purview. i want someone who has looked at a case from a trial court perspective. as the distinguished ranking member of the senate judiciary committee, senator jeff sessions of alabama said shortly after her nomination of -- judge sotomayor's nomination, and i

quote -- "she's got the kind of background you would look for. almost an ideal mix of private practice, prosecution, trial judge, circuit judge. " end of quote. mr. president, i couldn't agree more with my friend jeff sessions. her experience as a trial judge will be invaluable to the supreme court. as a former trial lawyer, as i've just indicated, mr. president, a judge is more than just a political title to me. it is someone who understands the law and sees every day how it affects people -- real people. when i look at judge sotomayor, i see someone who knows what really happens in a courtroom, which is an arena unlike any other arena in the world. we tend to think of supreme court cases as major milestones that change the arc of our history and define our principles. and they do. but they often begin as ordinary, routine cases before a trial judge.

it could be a traffic stop that winds up in supreme court. it could be a protest in a park. it could be the placement of some monument in a park or some public place. it could be a dispute over money. linda brown was a girl just trying to go to a public school close to her house in topeka, kansas, setting in motion of the beginning of the end of segregation, brown v. board of education. linda brown was that little girl who wanted to go to school close to her home. judge sotomayor understands people like linda brown. she's developed a 17-year record as a moderate judge who's squarely in the mainstream. one of her colleagues on the second circuit court of appeals for our country has credit card sotomayor with such an insightful and convincing understanding of the law that she changed his mind many times.

he said and i quote -- "i would read one of the memos she had written on a case and say -- i think she's got it and i don't." end of quote. this is one of the reasons that both republican and democratic presidents have nominated her to the federal bench. it's the reason she's been confirmed twice by this body with strong bipartisan support. it's the reason that liberals and conservatives a like in the -- alike in the senate today will vote to confirm her. this woman's brilliance was on display last month. remember, mr. president, she had just broken her leg. but she stood four days of grueling testimony with some of the finest legal minds in our country, the democrats and republicans of that judiciary committee, and she did a good republicans of that judiciary committee, and she did a good job in a situation. she was asked tough questions and she gave honest answers.

judge sotomayor has been credit card with saving baseball in one of her opinions, hit that out of the park in her testimony and her -- her presence before that judiciary committee. if it were ever a home run, she hit it. i thank chairman leahy, my dear friend who has been so good to me for so many years. i think back fondness of our time here together in the senate. i thank ranking member sessions, who has always been a gentleman to me. we disagreed on many public issues, political issues, but never do we disagree on our friendship. so i appreciate chairman leahy and senator ssions for running a thoughtful and thorough confirmation hearing. i appreciate the generous and genuine cooperation of my

colleagues who support this nomination as well as the respect of those who have shown their dissent. but, mr. president, i commend barak obama, the president of the united states, for selecting such an accomplished and qualified nominee to replace justice souter. mr. president, it's with some sadness that i stand here today and recognize that david souter will no longer be on the supreme court. i can say about no other member of the supreme court that i can say about david souter. david souter was my friend. she did things socially and we had meals together. what a wonderful human being. i'll miss him. he's always been a powerful defender of constitutional rights, whether it is the state of new hampshire constitutional rights or our country's

constitutional rights. all americans thank this good man for his decades of service to this nation. and he has more to give. i'm confident, though, that judge sotomayor will soon build upon her impressive record, which is already very impressive when she is across the street at supreme court. i'm certain she'll leave the -- leave the writing of the law to those of us on this side of the street. and that's our job. and that she will impartially an faithfully fulfill her constitutional duty to apply only the laws that we pass here. now, i also -- i'm also convinced, mr. president, she'll pledge when she soon takes the same oath, every justice before her has taken, i'm convinced she'll administer justice without respect to persons and do equal right to the rich and to the poor. sonia sotomayor has risen remarkably from the trials of a modest upbringing in the south

bronx in new york, to psiding over major trials on the federal bench. and all americans, men and women of every color and background, can be confident that she will ensure equal justice under the law in our nation's very highest court. that's why, mr. president, i am so proud to cast my vote in just a few minutes for the confirmation of sonia sotomayor as an associate justice of the united states supreme court. nosh president obama met with reporters following the confirmation vote of sonia sotomayor. the final vote was 68-31. this is about five minutes. >> i am pleased and deeply gratified that the senate has voted to confirm judge sonia sotomayor as a nation's one

hundred eleventh supreme court justice. i want to thank the senate judiciary committee, senator leahy, senator sessions for giving sonia sotomayor a hearing in a timely manner so she can be fully prepared to take her seat when the work begins this september. the members of our supreme court are granted life tenure and charged with the vital and difficult task of applying principles set forth, and are -- and over the past 10 weeks, members of the judiciary committee have assessed judge sotomayor's fitness . they're scrutinized to work as a prosecutor, and litigator, and a judge. her commitment to faithfully applied the law to the facts at hand, and her determination to

protect our core constitutional rights and freedoms. the senate has affirmed that judge so my door -- sotomayor has the integrity and in it -- and independence of mind to a police serve on our nation's highest court. this is the role they have played for centuries, helping insure that equal justice under the law is not merely a phrase inscribed above our courthouse door, but a description of what happens every single day inside the courtroom. it is a promise that whether you are a mighty corporation or an ordinary american, you'll receive a full and fair hearing. in the end, the outcome of your case will be determined by nothing more or less than the strength of your argument and the dictates of the law. these core american ideals, justice, equality, and

opportunity are the things that made judge sotomayor's journey possible. she has broken yet another barrier and a move just another step closer to a more perfect union. like some many other aspects of this nation, i am filled with pride in this achievement and great confidence that judge sotomayor will make an outstanding supreme court justice. this is a wonderful day for judge sotomayor and family, but it is a wonderful day for america. >> following the vote, the democratic leadership talked about the confirmation of judge sonia sotomayor to the supreme court. this is just under 15 minutes. >> my maternal grandparents emigrated to this country

speaking very little english. they told my mother and my siblings if you work hard, you can accomplish anything because this is america. my wife's parents emigrated to this country. her first language is different than the one i am speaking. again, it was, you do anything, you work hard. it is america. you can accomplish. here, we have someone with a distinguished career as a court of appeals judge. more experience on the federal court than anybody who has been nominated or confirmed in decades. the only person who will be there with a trial court experience is the person i spoke of earlier. this is the american dream.

the dream that will speak about when we campaign. we have made it real. we have several members of the judiciary committee here. >> i just want to say thank you to our chairman, senator leahy who drove the judiciary committee through these hearings. finally, here we are with a new supreme court justice. i think it is truly a great day for the united states supreme court. i think it is a great day for the law. i think it is a great day for justice. i think it is a great day for every young woman out there that says, yes i can, i can do it if i work hard. that is the message of this

particular justice. as has been set, she brings 29.5 years of legal experience to the supreme court. she has seen every aspect of the law as a prosecutor, as a business lawyer, as a district court judge, as an appellate court judge. she knows the federal courts, and she knows what justice is up close and pertinent when someone has a case before her. she visited with 90 senators. she had a broken ankle. she sat behind a table with her leg propped up day after day. she did not lose your cool. but questions were hard, they probed, they pricked, and she did not respond or take the bait. i think our nation is going to

be really well served, and the supreme court is really lucky to have her. >> thank you. as new yorkers, we're so proud. as americans, we are so proud. this is a great day. a great american stormy. she was approved by more than 21, that should say something about the best of america. i want to salute our nine republican colleagues that had tremendous pressure on them. this was not a free will decision on their side of the aisle. there was all kinds of pressure to vote no. nine had the courage to do the right thing and vote yes. that is important as well. i believe sonia sotomayor will become a great justice of the supreme court.

why? the president said, what makes the leaders or their experiences and their powers, their personalities. she has got it. she will be a real leader that will lead this court back to the main stream, which is what this country needs. i want to thank chairman leahy for being undaunted in making sure that this happened and happened before the august break. it is just a great day. >> [unintelligible] >> thank you, chairman leahy. let me start off by thinking chairman leahy for the incredible work they did to make sure that the real judge

sotomayor appeared before the committee in terms of what her experience was, for being undaunted, and making this happen in a timely manner. for hispanic americans, today the mantle over the supreme court that says "equal justice under law" becomes one step closer to reality. we lived on opposite sides of the hudson river. she was raised in a public- housing project. if you told me today that i would be one of the united states senators casting a vote for sonia sotomayor, and asked her if she would be hit -- if she would be a supreme court justice, we would have told you at the time that it was highly unlikely. this is one step closer to making this a more perfect union. it is the coming of age for

america. because of her intellect and experience, she will be one of the greatest supreme court justices we will see in the history of the court. >> chairman leahy, thank you for your skillful leadership in the committee in your determination that sonia sotomayor be given her day before the committee. i also want to congratulate the republican members. they handled themselves with dignity and professionalism, and that is what we hope to take such a responsibility on. the doors of the supreme court will open for the new justice. when those doors open, the door of opportunity is going to open a little wider in america. each generation gets a chance to open that door a little wider. today in the senate, we use that opportunity to give sonia sotomayor chance to serve her country and the highest level of

court. >> are there other members of the -- i want to thank everybody here. i see senator franken, kaufman, schumer, murray, durbin -- some of the others. -- so many others. if anybody has any questions, this chairman would be very happy to answer. >> we would like to hear senator schumer and senator mendez -- on such a large number of

republicans voting no, would that hurt the gop? an expert has said they considered this a bell weather vote. >> i will speak to the political aspect. i could not help but think, as i listened to the hearings, if she had been nominated by a republican president, she would have won virtually every vote in the body. this was, i felt, the wrong vote for those who voted no. >> today is a day for celebration. i am almost reticent to answer your question. for the hispanic community, which is not monolithic, it was monolithic about judge sotomayor. whether you are mexican-

american, per rican american -- puerto-rican amercianican, it ws someone who was qualified. what it says to us for so many of our republican colleagues, and i do appreciate those who joined us on this vote. i think it is an exemplary example of what the process should be, to look at the person, not just the partisanship. let me just say that for hispanics, we often get told, you have to work harder. when you have someone who graduated from princeton, goes to yale and becomes an editor of the law review, who then becomes a tough prosecutor in the city of new york and is exemplary in her work -- who goes on as a corporate litigator and goes on to the district court with great

distinction. then goes to the appellate division appointed by republican president. finally comes the time to break the barrier. if you meet all of the challenges your told you need to meet and still you can be told no, despite fidelity to the constitution, the law, and president, it sends a tough message to us as a community. i think that message is one will be seriously reviewing in the days ahead. >> the fact that three-quarters of republicans voted no, i wonder if there is another vacancy -- >> i would advise the president to do exactly what he did this time. pick the most qualified person possible and to nominate them. that is what he did. that is what he will do if there

is another vacancy. he nominated the most qualified person. he nominated a very good person. i am delighted to see another woman on the court. i am delighted to see a hispanic on the court. i am delighted to see somebody eminently well qualified. i have said before, president obama -- if president obama had nominated moses, they would have voted no. it says to the president, just keep doing what you have been doing. he was a constitutional lawyer himself and professor, he will find the best person. we will get them through. thank you all very much.

>> today, the full senate confirmed judge sonia sotomayor as the next supreme court justice. this saturday on c-span, watch highlights from the senate floor debate. at 7:00 p.m. eastern on america and the courts. this fall, the inter-american oppose the highest court, the supreme court. -- enter america's highest court, the supreme court. >> up next, remarks on the economy by christina romer, counsel on the chair of economic advisers. after that, a senate hearing on the status of the u.s. postal service. on tomorrow's "washington journal." joel simon talks about the jailing of journalists abroad and addresses reporters working

abroad. ilyse hogue talked about that group's position on health care and protests that have been occurring at town hall meetings across the country. and dr. anthony fauce outlines efforts to combat the spread of h1n1 in the u.s. "washington journal" live at 7:00 a.m. eastern. >> sunday, frank rich reflects on columns from "the new york times." the whitewater hearings, and his column following 9/11. q&a, sunday night on c-span. >> now christina romer talks

about the employment numbers being released friday and economic stimulus package that passed in january. the economic club of washington hosts of this event. it is 50 minutes. >> could i have your attention for a moment? thank you. we're going to start right on time. i first went to a knowledge the presence of some special guests, the ambassador from india is here. [applause] and the vice chairman of the d.c. city council, jack evans. [applause] and we have representatives from the embassies of australia, poland, austria, and russia here as well. let me begin this morning by

introducing our special guest, dr. romer. as many of you may know, she is chair of the council of economic advisers. that position was established in the employment act of 1946 were it was decided that the president of the united states needed some independent, objective economic analysis and advice. at the time the council was created, it has had not -- some of the most distinguished economists serving in that position. obviously, ben bernanke was there as well. it has had a long history of very distinguished economists. she is one of the best known economists and the country, one of the best known macro economists, served for 20 years at the university -- she became an expert on the depression, the

consequences of the depression, and other u.s. government responded. she did a lot of this work with her husband who is also an economist at the university of california at berkeley. it shows an enormous amount of skill, because being married is difficult enough, being married and -- to someone in the same department, and writing articles with someone who is your spouse and raising three children is very difficult. she pulled it off. they have three children. none of whom are likely to be economists, but there is still hope that her eighth grader may turn out to go into economics. others are a natural science. -- are in a natural science. historically, people who have been on the chair of economic

advisers have often fought with the president of the united states because there are other people who want to see the president. they often do not get to see the president as much as the chair would like. in this case, dr. romer has had more face time with the president. as a result, she sees the president almost every day. she plays a policy role in helping to formulate the economic policies of this administration. what she would like to do this morning is talk a little bit about the fiscal stimulus program we have had in the country so far and the consequences of it. after she has done her remarks, we will have time for questions from the audience. it is my honor to introduce the council of economic advisers chair, dr christina romer.

[applause] >> i think he took my speech. [applause] -- [laughter] thank you, it is lovely to be here. it is an honor to speak in front of such a distinguished group. a couple of weeks ago, we hit the five month anniversary of the american recovery and reinvestment act. the act provided $787 billion of tax cuts and government spending, roughly 5% of gdp, making it the boldest countercyclical fiscal stimulus in american history. it was a central piece of the administration's wide-ranging program to rescue the economy from the worst recession from the great depression, and to build a foundation for a stronger, more durable

prosperity. over the spring and summer, there has been a lot of chatter. i would like to spend a little time this morning presenting a clear assessment of what it has accomplished and what we can expect to going forward. it is a natural time for this assessment, coming on the heels of last friday's gdp report. we got a first look of overall economic performance and a clear sense of the recession over the past five quarters. in a somewhat unusually whimsical moment, i sent in as the title of my document "so, is a working -- is it working?" the actions taken to financial

-- to stabilize financial markets has helped change the trajectory of the economy, it has provided crucial lift to aggregate demand at a time when the economy needs it most, and the effects that were filled -- that were felt through the end of this year will be felt in the next. let me begin by discussing the motivation for the stimulus and the logic behind its design. the economy slipped into recession in 2007. gdp declined at an annual rate of just 0.7%, and job loss was about 100,000 a month. a weld signed a temporary tax rebate began going out last april, and contributed to positive gdp growth in the second quarter of last year. unfortunately, worsening declines led to a fall in

consumer spending and sent shock waves through our financial system. the collapse of lehman brothers last september set off a financial panic and led to a devastating freezing up of our credit system. it was clear that the economy was deteriorating rapidly. now just how sick the economy proved to be and how fast it would fall, we are still unclear. new data on a world economic conditions was coming in. the economy was in its most precarious position since the great depression. now the cornerstone of our suggested response was a bold stimulus.

the reasoning was simple. the federal reserve had helped ease the credit crisis from lehman's collapse. the funds rate was near zero, and the fed had treated a multitude of special facilities. with the downturn to our key trading partners, there was no realistic prospect that the private sector would demand -- turnaround demand anytime soon. the stabilization of the financial system was essential. but it would not be enough. we had to bring in the only tool the government has to counteract a decline in demand, fiscal stimulus. in the past few months, some of tried to portray fiscal stimulus as an exotic tool with a questionable pedigree. it is, in fact, a tried and true remedy. to use a medical analogy, is a

well tested antibiotic, not some newfangled gene therapy. increases in government spending can help counteract a recession and is almost as widely accepted as the quantity theory of money. fiscal stimulus has been used to help weak economies by presidents of both parties. franklin roosevelt increased public-works spending greatly as part of the new deal. why eisenhower expanded the interstate highway program and accelerated other types of spending to counteract the 1950 recession. of gerald ford and george w. bush in 2001 used tax cuts to help and recessions. there's also evidence that fiscal stimulus works. many studies have been done over the years to measure the effects of stimulus. these studies show strong impact of tax cuts and changes in government spending.

since fiscal stimulus is the obvious step to take when a monetary policy has been exhausted, it is born out of the actions of other countries. this figure shows the size of fiscal expansions in a number of countries in 2009. what you see from this is that virtually every country has an active fiscal expansion during the current crisis. they have done so because it works. the fiscal stimulus that the administration worked with congress to create was not only bold, but well conceived. the president and for a package that was large and got good employment bang for the fiscal buck. it was designed to provide lift for at least two years, because we thought the economy was going to face an extended time -- at time when the deficit was already large, we could not dig

ditches and fill them then. . the final legislation was very well diversified. roughly one-third of the $787 billion took the form of tax cuts for american families and businesses. they helped keep -- keep workers employed and people hurt by the recession's by extended insurance. state budgets have swung into deficit and unemployment rate has risen sharply. both of these types of spending look more crucial than they did back in sec -- january. one-third of the stimulus package was for public investments. this was for roads, bridges, water projects, but some was more uniquely twenty first century.

investments in r&d, health relation to it -- and disorder electrical grid. so far, i have reminded you why we took the actions we did, why we work so hard the way we did, so let me turn to the question i started with. is it working? the money is absolutely going out the door quickly. as of the end of june, more than a hundred billion dollars has been spent. the numbers are rising each week. i know that some believe that the government can never do things well, but the program really is a model of efficiency and transparency. the recovery website provides an honest accounting of what is getting done. the biggest problem so far was when someone is interpreted injury -- misinterpreted an entry.

$1 million was spent for not 2 pounds of ham, but thousands of pounds of ham into pound packages -- in two pound packages. every dollar will go up quickly to the high value projects it was designed to do. and the program is working. millions of workers has in an extra $25 a week in their unemployment checks. many sought tax cut in their paychecks starting april 1. my father and all the other recipients got their $250 stimulus check in may. state and local government employees like teachers, firefighters, and police officers who were scheduled to be laid off are still working because of the federal spending to the states. 2500 road construction projects are under way.

soon, the recovery act signs popping up everywhere will be as ubiquitous as the nra wants was back in the 1930's. even if the recovery act is working in the concrete on the ground cents, there is still the question of whether we can see it in the overall performance of the economy. here, i cannot resist pointing out the fallacy in a common critique. throughout the spring, i frequently heard people say, the unemployment rate is even higher than you all predicted without stimulus. that means the policy isn't working and we may be making things worse. that argument is just plain silly. to understand why, let me give you an analogy. suppose to go to the doctor for a sore throat, and they prescribed antibiotic. after you get the prescription, your fever spikes. you decide that the medicine was

useless? do you conclude that the into bailout caused the infection to get worse? surely not. you can conclude the illness was more serious than you thought, and you're glad you saw the doctor and started taking the medicine when you did. that is exactly the situation with the economy. it is true that the u.s. and world economies went down much faster last fall and winter than we expected. the revised statistics show that the actual decline in gdp growth in the third and fourth quarters of last year was about twice as large as the preliminary estimates we have at the time. the rise in the unemployment rate has been exceptionally large, even given the large fall in gdp that we now know occurred. the fact that the economy deteriorated between january when we were doing our forecast at the end of march simply reinforces how crucial it was that we took actions when we did.

having gotten that off my chest, let me return to the question. a little more than five months after the recovery act was passed, can we see the effects on the macro economy? the answer is yes. the reason i say it is almost assuredly yes, it has only been in effect for five months. we only have one quarter of economic data on economic outcomes. if there is one thing i have learned in the past six months, did not read too much into any one number. with that disclaimer in mind, let me show you a graph of the growth rate of real gdp. what you see is, after falling considerably and progressively more deeply in each of the three quarters before the most recent one, the fall in gdp moderated substantially. after declining at an annual rate of 6.4% in the first

quarter of 2009, it fell at a rate of 1% in the second quarter. to be sure, the economy is far from healthy. we obviously have a tremendous distance to go. real gdp is still declining. economies don't switch from rapid decline to robust growth all at once. given what we now know about the frightening momentum of economic decline in the first quarter, it would be hard for the economy to stabilize much faster than it has. this graph shows you the growth rate, the change in the growth rate of real gdp for the last 25 years. it was the largest in almost a decade, and the second largest in the past 25 years. this picture shows a change in payroll employment over the recession.

a key indicator of just how bad this recession has been. we lost nearly 700,000 jobs a month. in the second quarter, we lost 436,000 jobs a month. this rate of job loss is horrendous. the change suggests that we are on the right trajectory. this figure shows the change in employment. job loss from the first quarter to the second is the largest in almost 30 years. after we administer the medicine, the economy that was in free fall stabilized. it stabilized substantially and it looks as though it could begin to recover in the second half of the year. of course, identifying the effects of the recovery act is just a few -- is inherently difficult.

one way at record to the analysis of behavior of key indicators is to do a more formal forecasting exercise. there are various ways to do such exercise. let me discuss the results of a typical one. we forecast the gdp and employment jointly by using data from 1990 through 2007. what we're going to do is forecast gdp growth. we will use actual data up through the first quarter of the year. what this picture shows is the forecast of employment change. that is the light blue bar. with a baseline forecast, there is further substantial job loss in the second quarter. in the past history, the implied average that we would have predicted for the second quarter was about 600,000 jobs.

you see that is the dark blue line. that is the actual job loss. it came in substantially lower than the forecast. these copulations imply that the unemployment is now about 485,000 jobs above what it otherwise would have been in the second quarter of 2009. this number is very similar to the estimate that stimulus added roughly half a million jobs relative to what otherwise would have occurred. i do however want to be very cautious. the approach we used was just a number of sensible ways of predicting what happened in the absence of stimulus. other methods could lead to other estimates of the jobs impact of the program. the clear implication is the program is working. the results for this forecast an exercise for real gdp are shown here.

again, the dark blue lines are actual data. the light blue line is our forecast. past history says that based on past behavior, history predicts that real gdp would continue to decline at a substantial rate in the second quarter. the projected decline as 12.3%, substantially worse than the actual decline which was 1%. this way confirms that something unusual happened in the second quarter. gdp growth was 12.3 percentage points higher than the usual time series behavior of gp would lead one to expect. private forecasters across the political and methodological spectrum attributed much of the unusual behavior to the recovery act. this table shows you that analysts estimate that the fiscal stimulus that it's somewhere between 2% and 3% to

real gdp growth in the second quarter. if you look at the different pieces of gdp, you can see telltale signs in the recovery -- of the recovery act's role. this shows you the contribution of the main components of gdp to overall growth in the first and second quarter of this year. the role of the recovery act is clearest in state and local spending. sharp falls in revenues and a balanced budget requirements have been forcing state and local governments to tighten their belts significantly. state and local government spending rose at a healthy 2.4% annual in 2009. the fiscal relief that has already got out face to the recovery act is a key source of this increase. another area where the role of the recovery act seems clear is

in business fixed investment. firms purchases of everything from machines to software to structures. a key source of the more modest decline in gdp in the second quarter is that this type of investment which had fallen a mind-boggling 39% in the first quarter fell at a much more moderate 9% rate in the first quarter -- in the second quarter. another important component is a bonus appreciation. businesses received about $14 billion of tax relief in the second quarter. this may have contributed to the slower investment decline. for the personal consumption components of gdp, the pictures were nuanced. consumption fell starkly in the second half of the year and has largely stabilized despite rising unemployment and falling bb -- falling gdp.

the improvement in confidence as a result of the recovery act almost assuredly contributed to the stabilization. as consumption fell slightly in the second quarter after rising slightly in the first quarter could be a sign that households are initially using the tax cut to increase their savings and pay off debt. we have been monitoring the behavior of consumers closely as we move forward. because the evidence can't settle the issue, is helpful to also look at other types of data. in particular, i want to mention two types of comparative evidence. the first involves comparisons of countries. the response to the crisis has very substantially. they can ask the question that the countries that responded more aggressively, did they respond more effectively or quickly? we started with a set of four

types of growth that were made way back in last november after the crisis had hit. we collected best guesses for second quarter growth, and this figure shows the relationship between how country pose a second growth prospects have changed from what was a speck -- what was expected last november at the country's fiscal stimulus in 2009. it shows that on average, things have improved more in countries that adopted bigger stimulus packages. and the relationship is sizeable. on average, the country as expected real gdp growth in the second quarter that is about 2% higher relative to the november forecast.

a second comparison involves individual states in the u.s. the largest proportion has taken the form of additional matching funds for state medicaid spending. what this figure shows you is the correlation between employment growth between that you worry and june in a state, and the size of those extra matching funds. what you're supposed to see is that on average, states that received more funds lost fewer jobs. there is an obvious elements of reverse causation that is pushing the relationship in the other way. states whose economies were weaker tend to get more of these funds. preliminary analysis addresses this issue by focusing on a subset of the spending that isn't a response to states' economic conditions. more spending is associated with less job loss.

obviously, these are very preliminary analyses across countries and states. it does not account for all factors that may be at work. our first look at these numbers provide further evidence that stimulus spurs recovery. all right, so much of what i have discussed so far has focused on the role of the recovery act. in moderating the gdp decline in saving jobs in the second quarter of 2009, the obvious next question is, what can we expect going forward? first, the impact of the recovery act will almost assuredly increase over the next several quarters. we expect the stimulus to be roughly $100 billion in each of the next five quarters. the impact of the steady stimulus will increase over time because the multiplier effect tends to rise for a substantial period before it begins to wane. the composition of the stimulus will be changing.

the early stimulus was weighted more heavily towards tax changes and state fiscal relief, whereas going forward, there would be more direct government investments. these direct investments have a short run effect, roughly 60% larger than the tax cuts. the second thing we can expect going forward, because of the recovery act, other rescue measures we have taken, most forecasters are now predicting that gdp growth is likely to turn positive by the end of the year. federal reserve chairman ben bernanke seconded this opinion in recent congressional testimony. as is always the case, especially around a turning point, there is substantial uncertainty. there is even greater uncertainty as to how strong the recovery is likely to be. it is important to realize that job growth will lag the

turnaround in gdp growth. the consensus forecast is for the unemployment statistics to show that the u.s. economy continued to lose hundreds of thousands of jobs in july. given that gdp growth was still negative, this is all but inevitable. it is unacceptable. unfortunately, even as 1's gdp begins to grow -- even as ones gdp begins to grow -- given how far the economy has declined, the recovery will be a long, hard process. even if growth is relatively robust, it will take a substantial time to restore employment to normal and bring the unemployment rate back down the usual levels. the president is committed to job creation, and this has been

the focal part of our efforts. the bottom line is, we are no doubt in for more turbulent times. the actions we have taken, particularly the investment tax have clearly changed the direction we are on. they're doing what the president's always said needed to be our top priority. i firmly believe that when the history of this period is written, the recovery act will be seen as the beginning of the end of this terrible economic crisis. it is a central part of our strategy to rescue the economy, complementing our efforts to stabilize the financial system, restart lending, and help homeowners in distress. the president has always made clear that rescue is not enough. the u.s. had problems even before the current crisis.

for this reason, the administration has worked with congress to help rebuild the economy better. it is as if he went to the doctor for the strep throat, you discovered you had high blood pressure as well. he prescribed other madison, a better diet, and a better dose of exercise. that is what the president is trying to do for the economy. he is urging health care reform to slow the health rate of spending, and provide all americans with health insurance coverage. we're working with congress to provide financial regulatory reform to make sure we do not want to close of a cliff as we did last september. -- what as close to a cliff as we did last september. we have serious medicine for serious economic problems. if we can accomplish those

important changes, will not only come through the current crisis, we will emerge even stronger and healthier than before. thank you. [applause] >> let me ask you questions. the first question we have is, in light of your comments with the economic stimulus bill, as there anything that the administration could have done differently in recognizing how deep the economy pose problems are going to be? -- the economy's problems are going to be? >> one of the things i tried to describe is that we tried to hit this thing with as much force as we could. we did know it was a very serious economic downturn. we were very much aiming at what we could get out the door very quickly, that is why things like the tax cut, and the fiscal relief for so terrific.

it did get out the door quickly. the other thing i want to say in answer to that is, the recovery act as a piece of a much bigger plan. all of the work that secretary geithner and the rest of the administration did to help rescue the financial system, the housing program, all of those were things we did precisely because as we saw the economy getting sicker, we knew that it needed everything we could get it -- give it. >> the next question is, you did not exactly give your own views on when you thought we would be in positive gdp territory. it would you be willing to say we would be in positive gdp territory in fourth quarter, first quarter, second quarter, or you're not going to say? >> i will tell you that i think the consensus forecast is doing very well. they're predicting we will see it before the end of this year, and i think that is a reasonable prediction.

>> was the administrative blindsided by the cbo analysis of the cost of the health care legislation? >> again, wide-ranging questions. the cbo is doing its job, trying to get congress estimates of what they think bills will do. it is important to realize that the cbo's job is to think about the 10 year budget window. here we are in complete agreement with them. we have said from the beginning that anything we do on health care, and the investments we make, it absolutely has to be paid for in that 10 year budget window with hard, as horrible savings that the cbo says are there. the revenue changes are there. that is completely a place where we are in complete agreement. their numbers on things like the kind of reforms we have been talking about for medicare absolutely line up with ours.

where we might have a difference is in the longer run. if you look at the longer run budget projections, you know the number one problem we have is skyrocketing health-care costs. so much of what the president has been trying to do with the health care reform in the legislation as it goes forward is to make sure that they're all the things that economists say need to be there to slow costs. that is why we have a structural change to really give us a chance at slowing the growth rate of cost. we think those are important. the cbo apparently doesn't intend to do long run projections. -- doesn't tend to do long run projections. we will deliver reforms and all of those things. they tell us it will slow the growth rate of cost. we feel they absolutely need to be in any legislation.

>> will give us a hint about whether the unemployment is likely to hit double digits when the numbers come out? when you think it will receive to the true level of 4.5%? >> the first thing to say, i have not seen any numbers. they come out tomorrow. i am not going to make any predictions except to tell you what market experts are telling us, that we will lose hundreds of thousands of jobs. they are anticipating the unemployment rate will go up. the economy is still in a recession. we are improving the trajectory, but there is no denying the fact that we are still in tough times for the american people. how quickly it comes back down -- i mention that even once gdp starts to grow, there is usually a lag between when we see gdp growth and unemployment start to go in a better direction.

it also depends crucially on how fast you grow. it is not enough to turn the corner. gdp needs to grow at about 2.5% to keep the unemployment rate where it is. we need to get growth at above 2.5% to get progress in the right direction. what we want to see is not just a gdp growth, but strong gdp growth. that is what will bring back to normal quickly. >> are more worried about inflation or deflation? >> of the trees is, i'm thrilled at the flag -- of the fact that the predictions seem to be flat. we have had 25 years of pretty steady inflation, and we have not seen movements in either direction. that said, given how bad the recession has been, given the fact that we have unemployment again over nine or