permitted? guest: it is a great question. as you say, magnetometer screaming -- screening is very common in most federal buildings. it is inconceivable. there is a lack of staff, a lack of funding, and the secret service has this really callous attitude, "we are the secret service, we are supermen, we are impervious." that is the mindset. and we see that in some of the other scandals. the madoff scandal, the sec ignoring a, or the wall that exists between the fbi and cia. people scratch their heads. how could people allow this?

when that happens, in the case of the jfk assassination, everyone says, my god, of course we should have had better security." the warren commission is exactly what happened -- what happened out of barack obama was assassinated now. the secret service had not been doing magnetometer screening as they should have. host: from colorado. caller: thank you for taking my call. i am an actual student at the university of denver here, a master's candidate in security. some of my fellow students and i were very concerned about the current elements going on in the government. it seems to have become normative in washington to become complacent or silent

about known shortcomings within an agency, and the management after the fact, writing books, making millions of dollars -- specifically, i refer to tom ridge's new book. you mentioned old weaponry, budget shortfalls in this agency, specifically the secret service. what can be done to the five leaders that are going to be effective, that will stand up and say something? guest: i certainly hope that this book leads to changes. i think there should be an outside director appointed. people in the agency have a culture. there has to be a clean sweep of management to get people in will not take these chances, who will have a broader idea of how to manage this agency, who will

understand that they need far more. so it is the usual situation where there is an extra day and you wait to see if there are developments by people in charge. the government certainly is not known for being very efficient or effective, and this is an example, unfortunately. host: behind-the-scenes with agents in the line of fire. ronald kassler wrote the book, so thank you for being on the program. we want to tell you briefly about tomorrow's "washington journal." "christian science monitor" and "politcico" will be here.

that is tomorrow at 7:00 a.m. eastern. thank you for watching today. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] . .

good morning. i know you are all here because of the air conditioning. people say you cannot do anything, but thank you for being here today.

cops how i'd think we don't know how far down mexico will go. but it is a very, very, serious drop in economic activity. the two questions i have is that, presuming the united

states recovers, will mexico ride up on the same elevator that it came down on? is that likely to happen? and secondly, is there any other major sources of growth that mexico has not exploited in the past that it can? i hope we get to those. we have an extraordinary panel here this morning to discuss the entire issues of mexico's economic outlook. to my immediate left, the vice president of the inter-american development bank, in charge of sectors and knowledge.

he was the chief economist before that. he has a long, distinguished, career. he was the overall general director of the mexican social security institute, which is a massive public enterprise. he was largely credited with and putting into practice and orchestrated the program called -- formerly called progressa. he is putting out more books than i can read. thank you very much for joining us. the next person is a director of

sovereign ratings at standard and pork and responsible for the sovereign analysis with -- for the latin american group, and teaches part time at columbia university. she worked at the federal reserve board of governors in washington. let me say that the job of the sovereign ratings is to put all of this into a single member, which is not so easy to do. it takes an incredible amount of analysis. and finally, a senior fellow at the inter-american dialogue. he works on a wide range of issues. he has been traveling a lot to

his home country of argentina. he served as the chief of the latin america western hemisphere program at the international monetary fund. welcome back to the dialogue. he will start us off, also he has written a paper on mexico, which he sounds a little bit like a pessimist. >> think you very much. in deference to your very strong feelings, the oi will now a power pointpoint.

this is a great opportunity. we are extremely knowledgeable. when i used to go on mission to mexico, i was always very interested in my counterpart. it was intellectually challenging, but always a pleasure to visit some diego and how much i could learn. and lisa has been working on these things for a long time. standard and poor's has been the tougher and the most objective of the agencies in dealing with mexico. let me just start by saying, mexico is in its worst economic crisis since 1995.

the gdp is expected to fall by about the same percentage as it fell in 1994 and 1995, when i was dealing with it, and where the hair i did not lose up the time turned very great. -- turned very gray. the problems mexico has makes it very difficult to be able to operate effectively, especially

after the elections at the end of june. mexico is the second-largest economy in latin america after brazil, and it is about three times larger or as large as argentina, the third largest economy between the two countries. they are about two-thirds of total gdp of latin america. when we talked about about latin america, we are really talking about brazil and mexico. mexico is, up to now, 2008 and 2009, then a country which was benefiting from a significant improvement and macro economic conditions.

mexico was always in a crisis, always in crisis related to this. , presidential. from 1995 on, it worked well, but some of these things started looking very complicated. mexico, although its macroeconomic policies and conditions have been good, they have low inflation and a balance of payments is not an imbalance, has had a very pour growth in performance. effectively, in the last 10 or 12 years, 10 years mexico has been growing less than the world average, and seven years out of those it has been growing less than latin america over all.

that shows that one looks at the gdp per capita. not much has happened over the last year's. it has lost its relative importance. even as it became integrated with the rest of the world, and with the united states in particular, it had more and more problems in terms of keeping up with not the neighborhood, but in terms of growing country in asia. mexico was hit very hard in 2008, two thousand nine. -- 2009.

exports plummeted. i have been projecting a bigger decline over the last nine months. peters said i was behind the curve and i really was, because i was looking at some notes in two months ago and i was saying that mexico might decline by 2- 3%. now it is 7%. it is broad base, it is an issue of exports, car exports have declined in the first six months of the year. -- is another big item. it has been declining at the rate of 10%. you have the issue of violence, which i think is overstated. but it is affecting tourism.

this is serious. then there is -- there are two issues. the private sector has had difficulties as far as toxic assets that people did not know about that hit mexico very hard life share. this year. the public sector, which is not in bad shape if we look at it now. it is in bad shape if we look at it over the medium term. even the secretary of finance said last week that mexico faces a most serious crisis in the years ahead, because oil production is declining.

-- is the largest oil company and the region, larger in terms of revenue, larger than -- smaller than -- in venezuela, but other than that, it is the largest. production is coming down very much. it has been -- effectively in terms of resources from the central government. the government did well this year by selling forward and protecting the price of oil. but fundamentally, they provide one-third or more of total revenue in the government. this is likely to shrink to one

half of that. with that, the government is faced with some very difficult choices they have to do. mexico has to find a way to tax other activities. i am not saying that you have to have major growth in the government, fundamentally you have to find a new source of revenue. it has to strengthen, they have to reinvest in many of the resources that are being taken out. fundamentally, what you have is a situation where mexico is solid from a macro economic point of view, but from a micro economic point of view, it is doing poorly.

i have talked about all the comparisons with a number of other countries, in terms of how mexico and latin america is doing. if we compare mexico and latin america, not emerging asia but a number of asian countries, you will find we are doing very poorly in terms of infrastructure, education, in terms of levels of investment. i think that is a general products of latin america, and in very serious. one issue is, and here i have to mention one item that i have been the source of emphasize a lot in recent months. mexico is, after to lay, the highest -- to lay the highest

--chile, fundamentally mexico has to be observed carefully. i think the rating agencies have been too generous to say the least with mexico in terms of its ratings. it is two notches higher than brazil. i think there is a problem there in terms of -- to finalize my presentation, obviously the authorities are making tremendous efforts. mexico has serious problems. these problems have been aggravated by the fact that the police will have the control of congress, this will make the

situation much more difficult in order to find appropriate solutions. i am afraid that although the macro may look ok, the challenges to mexico are such that the prospects for growth are -- i am fairly pessimistic about them. i believe that they may have some difficulties. i don't think they will lose their investment grade. they certainly may need to have an adjustment in their ratings. i have been saying that. i have been proven wrong, but mainly because i think that some of the rating agencies have not been sufficiently bold to recognize the problems that exist. >> thank you very much for that

cheerful. -- >> lisa? >> thank you very much. is plays -- is a pleasure to be here with you. mexico's rating is level as well as the dependency that we see. we put a negative outlook on mexico's ratings earlier this year, as was highlighted, the rating is triple b plus, a single a-plus local currency. we have a negative outlook on both ratings. the negative outlook highlights the possibility of a downgrade. what we see is deterioration in the fiscal outlook, along the lines that was highlighted.

the question of how the fiscal pressures the challenges will play out over the next several years and some deterioration as well. a key issue for us is how the government -- that involute -- includes executives will respond to what we see as deterioration in some of these indicators. mexico is a firm like an investment grade. -- firmly like an investment grade. mexico's profile, fiscal indicators external indicators are very well in this low investment-grade category. first there is speculative grade. we are talking about policy

response, a track record, policy predictability. this consists along with the indicators we look at, a policy framework, macro stability consistent with investment- grade. we see that the trends are negative. there is a greater chance we see of a downgrade today than not. it doesn't mean one will happen, but there is a greater chance. sovereign ratings, two-thirds more or less of negative outlooks have been followed by a downgrade. the outlook speaks to the six month to a year and a half time for him. this is the perspective we are looking at. it is highlighted in our analysis. we want to see how things play

out later this year in terms of discussions on the reform measures that executives are working on in concert with congress, to see how the political dynamics work out. we could keep a negative outlook later this year. we could downgrade, we could go to stable. again, some thoughts on mexico's overall profile and why the negative outlook. we moved mexico to investment grade in february 2002, and followed by two steps when it operates. this reflects a combination of factors. much stronger government debt profile with reduction in the external vulnerabilities. it concludes across party lines, a track record of adjustment and a downturn, for example. all of these improvements that

we see provide greater policy flexibility and room for maneuver vs 10 years ago. this is why mexico has moved to investment grade. we are working with numbers, 7.5% contraction this year, moderate next year. art used in the u.s. are also modest for a rebound next year. mexico has an independent central bank, exchange rate flexibility today. this is a very different picture than speculative grade credit and before.

inflation is in the single digits. big picture perspective, why investment-grade vs not, banking system is well-capitalized. the fact that credit is only 20% of gdp. that is a negative for growth. what it does do, it means that there is less of a fine natural contingent liability and of all the triple b's mexico has a

lesser risk spilling over to the public sector for two reasons. the bank is one of the stronger in latin america and domestic credit is low. the way we look at this, we are talking about potential risk of 6% of gdp. that is at the low and. it is a weakness on one hand and strength in the amount of stress in another. on the fiscal side, this is a key area of challenge. let's also think about the perspective in terms of a track record that has been developed. the debt profile as highlighted is much stronger. we are not talking about a rollover risk in mexico today. there is some deterioration, we had strong improvement in the profile.

local currency as we are relying more on multilateral, very different picture, fiscal deficits, range in the 90s today, 2% average. we sit row/share and it is going up a little more. all of these issues and what we have seen on the external debt side very much down, and 90 vs today. why the negative outlook? we see deterioration in the fiscal picture this year, and the next couple of years. everyone's fiscal picture is deteriorating. it is a matter of degree. if you think about a 7% contraction, borrowing

requirements a little over three, for the sheer on the outside. that is not what the government is looking for. it is in line with its peers. the pressure's really looking over to several years. the global pressures, the current scenario is reinforcing exact debating understand -- underscoring fiscal flexibility. limiting flexibility higher in the past but more limited, talking about the degree. and the dependence on oil. with limited resources, there is a stabilization, but you are talking about resources with less than gdp. contrast that with chile, and that much lower, it has much room -- more room to run counter

cyclical ratings. you have a strong dependence on oil with limited resources in the stabilization fund. you have a low, non oil tax base. there has been reform, trade to enhance the tax base in recent years but it is challenging. the bottom line is that the revenue base does not provide flexibility. you compare overall government revenant, public-sector revenue, giving you on the upside from mexico, 24% of gdp, that compares with the triple b medium of governments that are less inclusive of 36% gdp. smaller revenue base, mexico is on the low and in this area,

limits the scope on how oil revenues come down. these provide the challenges. the government has taken pro- active steps over the lapsed year -- last year. the issue is the recourse to more temporary measures. the oil stabilization fund be used this year or next year. relying on some of the resources from -- of this year, spread them over two years. all of these issues highlight the challenges to the fiscal picture. the government has highlighted across the years since the end of last year, but it wants to address some of these issues. this is what we are now looking

at. the fiscal challenges, in the context of what we see, means low to medium growth. given the outlook for the u.s. economy, reliance on the u.s. economy, this raises questions moving forward. the issues of public sector insecurity is very important, a strong policy commitment that will yield longer-term commitments, as we have seen elsewhere globally. there is a question what this might mean in terms of investment. it is a question we put on the table. there are other restraints on growth we have talked about, the outlook for oil production provides another stress. before concluding, we have the

fiscal pictures are a key element. another element that we have highlighted its financing needs in the corporate sector. we do see some deterioration in the external debt profile. if you look at financing needs, despite pressure in the market's earlier this year, mexico's financing needs compare well with the triple b peer group. they are not as strong as brazil and peru, lower rated. but there are other weaknesses in those ratings. despite the pressures, and stressing international reserves, the non-row over of some of the corporate sector paper, you still come out with a bit better than tripled b medium

and stronger than other and weaker than some. we are also seeing in the corporate structure, we had a number of defaults. we have refinancing going on. we are coming out of that. you have seen issuance, top names being able to tap markets. beginning in august you have seen a speculative grade. issuing globally. that is a risk we would continue to look at. >> good morning. thank you for the invitation. it is a pleasure to be here with old friends and new friends, to try to give some insights on mexico. let me talk about the crisis.

i want to talk about, if you look at mexico in june, 2008 or may, 2008, it is important to have a longer-term perspective. the story of mexico is a story that after the 1995 crisis, but even before that, was an economy that had achieved stabilization. even in the period of 2002- 2007, an unusually combination of very favorable circumstances

when latin america perform the best in three decades, mexico perform below the average for latin america. the problem has to be put into perspective of an economy that has achieved macroeconomics stability, but it is not able to achieve growth. that is the central question. in parallel with all that and central to the story, the efforts of no growth, country is making a transition to democracy. i think this transition for the purposes of this discussion has to implications. one, which is a good one, is this transition is accompanied by eight societal consensus for stability. this is not an issue of the executive anymore. this not an issue of a particular political party. this is an issue that has been

internalized by mexican society and reflected by the positions of the political parties that realize that mexicans were fed up of the every six years crisis. now, they do want stability. in addition to democracy it is good, but this is also accompanied by the absence of any deep consensus of in your house. -- of anywhere else. this stalls in terms of carrying out the fundamental reforms that are required to keep mexico competitive. mexico after '90s -- 1997 and 1998 they and turk a very -- they enter a very critical

period. prior reforms have not been implemented. there is a fairly naive view of the state and the ability for carrying out reforms by the executive themselves, by command and control methods in which of some of these reforms do not produce the results to expect. these reforms are not producing the efficiency that is expected. the mix of reforms that did not go as deep as they should have gone, and absence of further reforms presents a complex. -- a complex. period. this occurs and a most

unfortunate situation. the authorities have done the best it could do. the response of central-bank and finance ministry have been very responsible. there is very little room to maneuver because there is a deep underlying, structural weakness and fundamental to what happens in mexico is a major fiscal problem. the consensus for stability, making up the difference in --. in the context of weak fiscal base, mexico has some of the lowest tax basis anywhere in latin america.

is there room for a change in policy? towards the end of last year, it cannot implement very much. right now it is being the cyclical. that creates a very short problem. it is complicated by the fact that the midterm elections some complex problems in the second half of the administration. i'm not really worried about the macro. even though it will be a noisy discussion between now and november and there will be a lot of push and shove between now and november, at the end of the day, the societal consensus for

stability i think will prevail and by some combination of expenditure cuts here and there and changing the tax code here in there, i think stability will be maintained. the central issue is, assuming it is 2010 and the bump of 2008 and 2009 have been managed with high costs and all that. are you then in the context that you can grow again? or is mexico -- will a question its own forces of growth? that brings the discussion of why hasn't mexico been growing for the past 20 years, despite the fact that it has a crisis in 2008?

macro stability, societal consensus which is credible, which is reflected in the central bank, it is not being able to grow. a couple of points. if you look at the accumulation, berate of growth in labor and compare that to the u.s. mexico's growth story is not absent from factory accumulation. it is not that mexico has work less hard than americans or other people in the world or working hours is costs -- order. capital has slowed down a little bit. the growth story of mexico is an issue of the absence of productivity growth. that is the central issue.

that is my concern as i look over the medium term. productivity is driven by incentive structure that predict -- produces productivity. mexico has not been able to put together in the salinas reforms or in the fox reform or so far with the current president. mexico has not been able to put together an invented -- environment for incentive structure. it is working in the opposite direction. the underlying distortion in various sectors in tella commission -- tele- communications some public some private, the underlying power of some of the trade unions in education, oil, electricity and the public sector has increased in the transition to democracy as a counterweight exercise by

these groups whose executives are no longer there. you think maybe this is a case of the personality of the president, and with a different president will change. the deeper issue of what you might want to call a very entrenched, political equilibrium in which areas groups in the business sector in every culture, in the labor unions, are extracting rent in a rent-seeking relationship, that does not allow for productivity in hansard actions.

this situation is a little bit complicated because some of the social policies by some countries in the last few years are further distorting the incentive structure, as more and more social programs for the sector is growing. you see a very large growth of informal economy in which there is very little innovation or growth or labour training. what you see is a large amount of subsidies going in through the budget to subsidize the informal sector through the social programs. this is the nature of the problem. will mexico recover? in the very short run sense, yes. the interrogation --

mexico -- if you look to the 1995 crisis, mexico pulled q p 290 -- 1996. if that does not occur, then there is no reason to think that mexico's growth rate would go behind -- above the 3.5% in the next three or five years. we could have sources of growth internally, to raise productivity you have to change the politic 0 aquila bring that impis' reforms -- the political equivalency that impedes reforms. >> this is more of a conceptual

question. your presentation was conceptual in some ways. brazil had a slow growth during the early 2000. i didn't think there was any big jump in productivity or anything that was sort of look like -- suddenly around 2004, 2005, the growth curve began to go up. is reach one -- exceeded mexico. well as the distinction between mexico and brazil? the analysts suggest that brazil has a little inconvenience with the global financial crisis but it has weathered it very well. mexico has fallen down.

brazil seems ready to retake its growth pattern. i don't quite see the same impediment to productivity, at least from what i know of brazil are present as they are in mexico. and the same social programs. >> i think it is important to keep in mind, mexico has a longer track record of macro stability. i think brazil stands much with the transition with the ministration and the consolidation of mackerel stability. it is benefiting more recently from that sense of stable rules of the game. that plays a very important role verses mexico, you could say

gained very much after the tequila crisis comparatively speaking. i think it is interesting the productivity issue. there have been improvements in brazil, if you look at investment as a share of gdp, it is higher in mexico than gdp. it has improved, as it peaked towards 19% where mexico is in them mid-20s, mexico has grown less. i think the discussion that was put on the table, where brazil has benefited the last several

years from its formal employment games -- gains. you also have real, formal, employment gains and more of a vibrancy there and a decline in informality coming from the whole ipos and the deepening of capital markets in brazil. brazil benefits from these things today, but if they don't pursue more of the reforms, lowering the tax base which is very high, held the growth rate low. it is a matter of timing, as i see it in some ways. they are benefiting from something now that mexico may have benefited from before. >> we don't fully understand

economists have been struggling with this for years. at the margins, and i think formality has been growing in brazil. you can argue cause and effect but it is highly court related -- correlated. i will open it up for questions.

>> and the political side, the economies, you said [ unintelligible] >> we want to talk about this political equilibrium. what would jolt these system out of this? what needs to be done? if productivity in a traceable sector by sector, there is a to economy here -- a dichotomy

here [unintelligible] how do you compare some of the key debt ratios? >> how far has the stagnation really influenced mexico's growth factor? it does not stall but it has not developed as rapidly as we all expected it to.

>> there is a question on the astaires plan -- austerity plan that was also mentioned, which is the fact that mexico, because of the small-market it has had, it has no choice but to have crossed cyclical polity -- policies, in the sense that mexico i would say is not alone. there are very few countries that have margins of operation to have latin-american, colombia, brazil to some extent. mexico has no opportunity in this regard.

they can use them without preconditions. if they use them, it may be a signal that things are not so good. they want to maintain macroeconomics stability, but they have no choice with oil production coming down. mexicans make well below the $67 that it is today. mexico has to maintain the fiscal discipline. unfortunately, having to repeat the story of the past, whenever they had a crisis. the only thing is the mackerel part is so much better, they can

live with it better. -- the macro part is so much better. >> on the question in terms of how is the outlook, given the gains made? we put the negative outlook on before the election. we assumed there would be gainsaid. probably the margin came out a bit wider than we were expecting. therefore, the basic picture of needing cross party coalition building negotiation to pass a budget, to pass any kind of reform was our base case. the spread is a bit wider, might you have seen all the reforms that happen pass across party.

the topics on the table, improving the flaws -- fiscal flexibility, looking at the oil sector. those are politically challenging topics in mexico for any party. that is some of our perspective there. >> there is a segment of plants and manufacturing closer to the united states. we benefited from that. not only the automobile sector and parts sector her, but a whole range. these are the large, exporting side of the mexican economy,

but they are not even the entire tradable sector. there is an important sector of tradeable production for consumption that benefits from trade costs and customs and all that. that is a low price -- productivity sector, along with a very large segment of the non travel sector. -- and ontradeaable sector. that tells you a little of the story. the fact that china entered and mexico lost competitiveness

along the way during that time. >> the mexico debt for comparison. therefore brazil, government debt to gdp is higher. we have it going, we calculate it a little bit different than the government, 50% of gdp this year. . .

you are talking a 30-year yield coatede in brazil, a longer trak record in mexico. priscilla stromberg indicators. you're talking overall strong burdette for the public and private sector, net of liquid assets, relative to brazil, the creditor. mexico is a debtor. they are relying more on things. mexico is a bit weaker. extern takoma brazil is

stronger. as i highlighted, mexico is better than average in the bbb, so there is some comparative. as i said, brazil is stronger. >> contrary to my country, they have shown a capacity to make an opportunity out of a crisis. they convert every opportunity into a crisis. [laughter] we have a stalemate in the case of mexico. in the end, i think it will come closer to the government position, but at the moment, they want to flex their muscle as the party in power in

congress, and that makes the job of the government very, very difficult. why? because there are broadly presenting the right proposals, and at the moment, it is not yet sure if they should be supporting the opposition which would win a presidential election. so i think the next six months will be very difficult. >> and it has been a couple of years now, i think, since mexico adopted two modest tax reforms. one is what you might call an alternative minimum tax situation. the other was a tax on bank deposits aimed at the kitna economy. now, i have not read -- there is

a statement yesterday about austerity, but austerity can mean either cutting outlays for increasing revenues or a combination of both. i wonder, first of all, i would be interested in any comment about the degree of success thus far about these tax reforms and, b, if you think they will matter. i should add parenthetically that i think oil prices are going to stay high or even go higher, and i have a lot of faith. >> i was wondering if in any of the future insides of the mexican economy, they will take into account the indigenous

people in mexico. the reason i am asking this is that although mexico has a wonderful cultural rights for many, many decades, there is still economic problems with the indigenous people in mexico as in many other latin american countries. indigenous people -- and so, the question i have -- they have a high poverty rates, and there are half a million indigenous people that are here from mexico, even though they are called latinos. they are indigenous people that have come here from mexico, and the national free trade association did not really help the indigenous people in mexico. >> let me ask you more question, if i can. the political debate, you know, the enormous drop in gdp this year in mexico, the uncertainty,

the criticism that mexico gets from international organizations, on some of the issues, how does that enter into the political debates? are there any debates about economics that are in serious debate, or does it tend to be more of sort of a populist oriented -- what is the nature of the political debate over the economy? do you want to -- >> when we talk about productivity growth, competition. it is kind of the overhanging black cloud facing mexico.

in your view, what is it going to take? what is going to drive that kind of competition? yes, competition? >> we will take these four. >> so the last two, and then -- no, clearly, the competition issue, that is what i meant when i was talking about all of these particular sectors of the economy, telecom and energy and others, where there are serious competition issues. i think there is an increasing recognition by the public that these are issues that need to be tackled, but they are associated in either case, public or private, which is very strong interest groups, it is not easy to tackle. i would sit by and large, there is a recognition that, absent competition in the sectors, it

is not only real drag on productivity, but it is also from point of view and desirable, so from that consensus to the actual legislation, and then not only the actual legislation but the very complex process because of the mexican entitlement system to the actual implementation changes is a long road to go. i would say there is kind of a, you know, people are extremely concerned and have been concerned for a long time as it has been becoming clear. what has been difficult it is to translate that. i think people are aware of all of the issues. you might emphasize one, and

another might emphasize another one. it is just difficult translating that in the difficult transition that mexico is experiencing in to complete legislative action. -- in to complete legislative action. -- into complete legislative action. >> the government's new plan, i do not know the details of the recently announced plan by calderon, but tax performance, first of all, i am shirt that you need both the revenue and expenditure -- i am sure that you need both the revenue and expenditure. now, there is one serious issue in not only mexico, and that is

that the tax system is very inefficient in terms of taxing sort of the higher levels of income. mexico and brazil are the higher indicators. you have high levels if you look at the level of werth of the rich people in latin america compared to other areas of the run -- at the level of wertorth. but the tax system is not capable of dealing with this. i am not saying it is tax avoidance. it is not tax evasion, it is more tax avoidance because these interest groups are so powerful. so i would say there are these taxes that are taken at the time when mexico introduced the tax code on bank transactions.

i was very opposed to it. i would remain very opposed to it. basically there is a lot that has to be done in terms of income tax, not so much in terms of -- they're all sorts of discussions whether you want to have a tax like the sales tax, and maybe more regressive but more effective, versus tax on income. i think the mexicans have studied this. it is a question of being able to implement these. so f hard work in the implementation of policy more than in the design. i do not know if anybody wants to or is in a position to answer the issue of the indigenous population, but --

>> i was calling to say you might be able to. to follow up on the tax, i think that is a hard question. if you look at the trajectory of tax revenues to gdp, 2007, the tax and deposits, 2008, these are phasing in after that. you have still had a continuing decline from, say, 10% in 2002, and it went up a teeny bit in 2007, 8.2% of gdp, taxes, a downward trend, so given the way the economy, it is not clear. since the reform, how much of it is economic dynamic, but i think it is a valid question in terms

of loopholes, enforcement feeding into a collection of some of these new taxes. this is, i think, a challenging -- it is certainly a challenging. , and it is not a clear-cut area. it is not clear what they intended to do. >> the indigenous question. i think here, at the margin, there is good news. for the last decade, the growth for various social programs have benefited indigenous groups. it is not that they are specifically designed programs for indigenous groups. it is that they have programs against the poor, and since many of the indigenous are poor, they have benefited.

that said, there is a huge amount of migration, both indigenous and non indigenous groups. >> we have time for a couple more questions. >> in mexico, the manufacturing centers, germany, korea, japan, said the manufacturing technology in mexico is really important -- so the manufacturing technology in mexico is really important. with the increased productivity, there is a decline of people employed in manufacturing. it is logical there'll be a decrease.

how are we going to increase consumption in mexico if we have a decline in manufacturing? >> two questions. what kind of forms which used to being proposed in the coming year -- what kind of reforms would you see being proposed in the coming year? and the second question would be a about called ron was in brazil recently, -- would be about calderon was in brazil recently. mexico's exports and diversifying its economy. >> one more question. >> this is a hot-button issue in

the u.s. as relates to mexico. the undocumented migrants or eagles, whichever term you want to use, -- the undocumented migrants or illegals. does that create a bit of a brain drain, manpower, if skilled workers are leaving mexico for the u.s.? >> one more. >> the main point. >> do you want to start us? >> ok. the issue of productivity gains, it may reduce employment. this is not a mexican issue.

this is an issue that is global, and still, employment is growing. in china, you have this major increase in employment, and there has been an enormous increase in productivity. i do not think that the fact that manufacturing does not grow that much is a serious problem in terms of mexico's growth. mexico will have to increase its total productivity. this is really the issue. the question is not so much it is important, technology. it is more a question of the productivity increase. i do not have a good answer for that, but it is an area of serious growth.

now, in terms of what tax growth would be supported by various groups, nobody would support openly the tax reforms that increases the tax burden on your own group, unfortunately. it would have to be some type -- it will have to be a combination of a more efficient, broader tax, a value added tax system together with an income tax system that is more effective, and, again, it is more a question of closing loopholes and tightening the system of controls, but if it is difficult in the united states, it is as difficult in mexico and other latin american countries to come up with a sort of decent tax reform.

and i just want to say one thing about calderon. this was a high time for mexico and brazil to get together. i think it was tremendous. mexico as the only country in latin america that could constrained they're sort of sense the region -- their sense -- how it will work out, i do not know, but it was certainly be good for both countries, and that should be good for the region over. >> in terms of kind of a blend of the two, it is not clear what

kind of reform the government is planning to put on the table. there are discussions in the press, within the political party. it signals -- the signals that have been sent, it is going to be a mix in the expenditure side and on the revenue side, and they're talking about addressing some issues with the gasoline diesels subsidies, and tackling that is something that has been put publicly on the table. there, there is a question of how you deal with closing loopholes. on the consumption side, some syntaxes, what have you, but there is potentially addressing the issues of competition, competitiveness helping to deal

with kind of the medium term growth trajectory, enhancing the stabilization fund, the rules governing those, so it is a mix of things to be discussed. it is not clear what would be put on the table. but for us, given what is put on the table, what is actually politically feasible it implemented. what is economically implemented, and this will feed into the track record of being able to collect and get increased efficiencies from tax collections. we do not make a recommendation, so we cannot say what is the reform we are looking for. we have to see what the government puts on the table, the kind of mix of measures, and then make an assessment of what we think this may do to enhance a fiscal flexibility, potentially address some of the issues on the growth outlook, and that is a judgment call.

>> so, on the tax issue, i think the most distorting tax that mexico has to date is the tax on legal formal labor. through the whole range of regulatory -- it creates a wedge by my numbers of about 35% between hiring a worker formally and not. if you have a wedge of about 35% of your wedge between hiring someone at that magnitude, it is no surprise that you have a huge informal sector and that is growing. the deepest issue that has to be tackled by any tax reform is to eliminate that tax, which has to do with job creation and productivity. the other things might be revenue enhancing measures, but they are not going to be

productivity enhancing measures, and the issue is not a revenue issue only. it is a revenue and productivity issue. if you only focus on the revenue and do not focus on productivity, you will be repeating mistakes from the past. you really have to tackle both if you want to have high productivity jobs, and that goes to the question of migration. there is some literature that suggests that what to say is correct. there is a process of self- selection, and some people with more entrepreneur real talent or whatever label you want to put on it are more prone to migrate than other people, and it is very costly to mexico in the long run sense because you are losing a lot of talent in addition to losing wilberforce, so i am among the people who actually think that that problem is not going to be fixed until those people have opportunities at home -- you're using -- and

losing a lot of talent in addition to losing the work force. putting that at the center of the taxation debate and at the center of the tax reform debate more than the issues of the income tax or the other tax. >> thank you, santiago. this was an excellent session. we should do more of this, obviously. thanks very, very much. [applause] [captions copyright national cable satellite corp. 2009] [captioning performed by national captioning institute] >> oh, my. see what that provoked? >> on thursday, the justice department announced dozens of indictments against alleged mexican cocaine smugglers. attorney general eric holder spoke about it with reporters.

it also to questions about the scottish government's decision to release a libyan man convicted in the pan am 103 bombing of lockerbie, scotland. this is half an hour. >> the united states district attorney from new york, the drug enforcement administration representative, and customs enforcement representative. today, we are announcing in a coordinated action, major drug trafficking charges against 43 individuals, including cartel leaders, members come and associates in 12 indictments. specifically, we allege that these defendants shipped multi tons of narcotics into the united states through various smuggling corridors and then through a network of affiliated distributors, dispersed these drugs into cities and neighborhoods around the country.

the defendants whose indictments we announced today include cartels, including several different names. the indictment unsealed today outlined nearly two decades of criminal activity by these cartels and their leaders here in the united states as well as mexico and other countries. these cartels are not abstract organizations operating in far off places. they are multibillion-dollar networks following drugs onto our streets. what invariably follows a these drugs is more crimes and more violence in our communities. the audacity of the cartels is only increased by their reach.

because of the work of the d.a. and the ice and the diligence of our prosecutors in chicago and brooklyn and the support of our courageous law-enforcement partners in mexico, we're able to charge leaders and members of these in cities cartels with their heinous crimes here in united states. our friends and partners in mexico are waging an historic and heroic battle with cartels as we speak. this is not a fight that we in the united states can afford to watch from the sidelines. the stakes are too high, and the consequences are too real for us. we will continue to investigate, charged cartel leaders and their subordinates, and we will work to disrupt and dismantle their far reaching and dangerous operations. i will let the two u.s. attorneys to scrubbie charges and more details, but suffice it to say that the criminal conduct alleged in these indictments does not take place solly in

mexico. rather, it takes place here in our own backyards. for example, in chicago, we arrest individuals to work directly with mexican cartels and receive thousand kilos shipments of drugs and distribute them in the chicago community and throughout the country. we have learned from previous successful experiences in fighting organized crime that we must not only go after the leaders of these cartels but also seized the money that funds their operations. that is why in these indictments, we are seeking forfeiture of more than $5.80 billion of illegal drug proceeds. if we can suffocate their funding sources, we can cripple their operations. now, breaking up the mexican drug cartels and stemming the flow of drugs and illegal firearms across the southwest border is a top priority for this administration, and we have made important strides. earlier this year an extensive investigation of one cartel,

known as project accelerator, led to the rest of more than 750 people in united states and mexico and the seizure of more than $59 million of illegal drug proceeds. we have world out the counternarcotics strategy and stemmed the flow of illegal drugs and their allies the proceeds across the border. we have directed much needed resources to break up cartels with and support border-related initiatives. just last month, for example, there were millions of dollars in the recovery act funds for california communities to use in fighting crime and drug trafficking as part of our southwest border strategy. we have been working to tackle the critically important problem of weapons going across the border into mexico. we have formalized agreements within the department, and security and with the government of mexico to increase cooperation as we carry out our fight on several fronts.

we have brought charges against high level cartels, known as the company, and there are traffic- related crimes. this is in addition to numerous investigations, prosecutions, arrest, and interdictions that our agents carried out across the country every day. today's charges demonstrate that we will not stop until these violent criminal enterprises have been eliminated. and we will continue to stand with our partners in mexico as we carry on this fight. now, on that note, i would like to acknowledge president calderon and his administration and all that they continue to do in leading mexico's fight against narcotics traffickers. i would like to also thank the brave prosecutors and agents have made the indictments announced today possible. they're hard-working, courage, and their sacrifice make all the

difference in our ongoing fight. they have shown in the past that we can defeat international narcotic traffickers, and i and confident that with their help, we can do it again. with that, i will turn over to pat fitzgerald. pat? >> thank you, attorney general. in the indictments unsealed today in chicago as well as seven indictments filed earlier this year, it essentially trace tons of cocaine back to the groups in mexico who obtained that contained by plane, boat, submarine and brought into mexico and then shipped on to chicago. it is alleged in the indictment unsealed in chicago today that approximately 1500 to 2,000 kilograms of cocaine per month and significant quantities of heroin were going to an organization in chicago with a pipeline. that is about two tons per month.

that was being distributed in chicago and many other cities in the united states. going in reverse is the flow of cash, hundreds of millions of dollars going the other direction. this organization in chicago was receiving cocaine from two separate streams. one was a group charged in one indictment with 11 defendants, two leaders of different factions of the cartel who work together, and the group split their cocaine together, and there was a group that picked them up in l.a. and chicago, and the money was sent back together. on the other side was a different supplier, and they also said substantial cocaine to this group, and, in fact, the two different sources were threatening the group in chicago not to distribute the other drugs hit now, as of today, both sides in that dispute are indicted, and a source is out of business.

the members are charged, and the number of them have been arrested. as an example of what has been done by dea agents in chicago and around the country, during one two-week period in 2008 last year, as a result of three seizures in l.a., approximately 1 ton of cocaine was seized. separately, over a longer period of time, 13 seizures in california and illinois, two tons of cocaine were seized. as well as that, $20 million cash has been seized. this case does not and made without the tremendous work of a number of dea agents too numerous to name in chicago and elsewhere working together with a time of prosecutors and working with our other offices. i tip my hat off to the people who do such hard work. and with that, i give it to my

colleague from brooklyn. >> thanks, pat. did morning, everyone. i am here today to announce the and ceiling of four indictments today including those powerful drug cartels in mexico. there is the federation indictment that names six defendants in their roles of importing thousands of kilograms of cocaine into united states, much of which originated with one of colombia's most violent cartels between 1990 and 2005. approximately 22,000 plus tons of cocaine were seized in 1994 by two shipments by the u.s. coast guard off of mexico. it also alleges that the federation is an organized crime syndicate that has several of the powerful drug organizations in mexico. it further charges that the indicted defendants, including

several people, are the chief leaders of the federation. the second indicted we unsealed today charges of different cartel for shipments of cocaine in mexico from the valley cartel and a colombian paramilitary and drug trafficking organization. according to court documents, the cartel operates in the corridor, when the primary drug- smuggling routes along the border to el paso, texas. edie dei estimates that approximately 90% of the cocaine that enters the united states comes from mexico. according to the indictment, the group maintained their power. the third indictment charges one

man and his brother as a drug organization. one is currently incarcerated in mexico and is awaiting extradition to the united states. according to court documents, he apparently ran a drug route in mexico that branched off into various points in the united states, including the new york city metropolitan area. for the 12-year period charged in the indictment, he allegedly imported over 100,000 kilograms of cocaine into the united states. the dea estimates that between 2004 and 2006, the organization was responsible for shipping truckloads containing over 2000 truckloads -- kilograms of cocaine to new york city. mexican authorities seized 52 kilograms that was destined to the united states.

finally, the third indictment -- the last indictment charges of trafficking network that imports multiple tons of cocaine in to united states from mexico through california to texas, and transports its across the country to cities such as los angeles, new york, and chicago. in addition, he also acts as an importer and other functions for the other cartels. law enforcement authorities in new york, chicago, and texas seized approximately 76 and kilograms of the organization's cocaine. now, as you all know, an indictment is simply not a criminal case is begun. all are innocent until proven guilty. this debate is a result of the serious international and national cooperative effort. we could not a brought these charges without the hard work and dedication of numerous people in the d.a., the new york

city police department, the department justice criminal division, several offices around the country, the southern district of texas, the southern district of florida, and others, and we thank them all for their efforts, and i am proud of the district attorneys that were involved in these indictments. they are part of a long line who have worked tirelessly in the ongoing effort to serve the citizens of our districts and country to rid us of the scourges of drugs and drug trafficking. i now announce michelle, rda administrator. >> good morning. i want to start by thanking the attorney-general holder for recognizing the hard work and dedication of so many dea agents working in mexico and around the country. many of the case agents on these investigations are here today, this morning.

today's indictments are yet another strike against the leadership of the mexican drug cartels. our relentless investigation penetrated deep into these pervasive criminal organizations, connecting st. operations in u.s. communities like chicago and new york to the top drug kingpins calling the shots in mexico. make no mistake. along with our courageous partners in mexico, where will bridge these cartels, and we will pursue these leaders. in these cases, we documented the direct involvement of kingpins. they and the organizations they lead are responsible for terrorists and communities in mexico and for smuggling tons of corn is of cocaine's, large amount of heroin and other dangerous drugs into the united states each year. specifically, d.a. in chicago and dea in new york established

direct connections from the streets of chicago and new york to attend drug kingpins at the highest command and control levels of their organization, and this led to the un ceiling of indictments in chicago, including that the people mentioned. we also have new indictments in the eastern district of new york against another person, a leader of another cartel, and another man from a drug trafficking organization. the mexican based cartel also known as the federation is among the most violent and in serious of these organizations, and working closely with our great partners in mexico, we are keeping up unrelenting pressure on the federation as well as the other cartels. we are determined to dismantle

these cartels and their domestic cells. during the course of these investigations, the g-8 and our partners made noteworthy seizures of drugs and assets, including more than $22.60 million in cash, more than 32,500 kilos of cocaine and more kilos of heroin. many of these notorious criminals appear on the most- wanted list of both countries, mexico and the united states, and, in fact, for many of the cartel leaders, the united states offers a reward up a bill of $5 million each for information that leads to their arrest and capture, and there are fewer and fewer places for these criminals to hide, so looking forward, we are committed to tracking down the leaders of these mexican drug trafficking cartels and sustaining pressure on their organizations and operations, and with our mexican law- enforcement partners, we will find them, and we will bring them to justice. thank you very much.

>> good morning, i am an assistant secretary for ice. as you have heard, these indictments represent years of work by ice and our partners in the law-enforcement community, and particularly the united states attorney's offices. just to give you some perspective, i six agents invested more than 20,000 hours in the united states and mexico to make these cases. the drug cartels we bring to justice to they are not indestructible. rather, they are made up of men who commit crime, and through these indictments, each man will be left with wives on the run, looking over their shoulders, and they should be looking. finally, let me know to for all of you here the significance not only of the indictments of these individuals but the reflection that these indictments bring on the growing cooperation between the departments of justice and the department of homeland

security. it is with great pleasure that i said that most of the people standing with me at the podium i have known for a long time. i came from the department of justice, and i can tell you firsthand after a long career in federal law-enforcement that the cooperation between the drug enforcement and others is unparalleled. it is growing stronger by the day, and you're going to continue to see these kinds of cases, these kinds of joint investigations, this kind of concerted effort in mexico with our partners to put these criminals down, to work with partners in the u.s. attorney's office to charge them and to bring them to justice. thank you very much. >> any questions? >> mr. attorney general, good morning. i would like to ask your personal perspective on this. in light of the fact that you're

deputy attorney general dan years ago, how does the war on drugs appear to you today compared to a decade ago? it sounds like just about everything you said today you could have said in a press conference a decade ago, and, in fact, if anything has changed perhaps, there is less cooperation from cocaine producing countries and south america. and secondly, if i might, because we have you, and we are talking about perspective, it is more than one decade ago that you helped prosecute the lockerbie case, and just recently, you beg to the scottish minister not to release the man who was found guilty, and yesterday, they did so. i would like your personal opinion on that, as well. thank you. >> well, we are very

disappointed with the scottish decision to release mr. al- megrahi. i do not believe that the interests of justice were served by that release. 20070 individuals, 189 americans died as a result of his actions. he did not show compassion when he planned and executed that heinous act. he has not shown any remorse for what he did, and in my view, the release was entirely inappropriate. we communicated this to scottish authorities previously. it is my belief that he should of been required to serve his entire sentence. our deepest sympathies go out to the families and to the survivors -- survivor families who continue to suffer as a result of mr. al-megrahi bibby's

actions. second, we are committed to fighting the drug cartels in a way that is unprecedented. people are literally putting their lives on the line. we see unprecedented amounts of cooperation. we have been made more successful. this is an ongoing struggle. but i do not think the facts that this is an ongoing struggle necessarily means this is one that we cannot win. i think we're in a substantially different place than we were 10 years ago, and i suspect we will be in a substantially different place in the future, so i am very hopeful that as time passes, we will hopefully eradicate these cartels. >> you indicted all of these leaders of the top cartels.

is it your understanding that they will agree to the extradition of any top cartel leader that is caught? >> we are certainly working with our partners to bring that about. as initial indicated, there are substantial rewards for the capture of these people. there have been unprecedented numbers of extraditions of the past two or three years as the calderone administration has captured these people and made them available to us here in the united states for charges. that is why i believe these indictments are so important. they will face justice -- as the calderone administration -- called run -- calderon administration. >> [unintelligible]

>> we are going after those cartels where we can reach them. we are cognizant of the fact that there are other organizations that have had a devastating impact in mexico, and we continue to work with our mexican partners in mexico to try to fight them, as well, and to the extent that we develop information, evidence, that will allow us to bring charges against them, we will obviously do so. >> there are those that have been getting a lot of profits in the united states. >> rest assured, there are major operations aren't going right now against all the mexican cartels, and each one of those mexican cartels significantly impact the united states because they are all sending cocaine to the united states.

proceeds from sales on the streets of the united states are heading back to mexico along with the weapons, so this is the announcement of the top 10 of a couple of the cartels, but we had a project reckoning almost one year ago, and we announced indictments against the leadership of the gulf cartel, and the attorney-general and i just and fair during announced other actions against another, so we are after all of the cartels. >> this one was indicted probably about 10 years ago in san diego, and a couple of others of them have been indicted before. what is the difference? what does it signify? >> we are often asked, if you can indict over and over again, and why do you do that? it is simple. these indictments are now more recent, and every time we target

and go after these cartel leaders, we find out more and more ways to attack them, and that is why we continue to do it. what is different now, the big difference which the attorney general already covered, the big difference is mexico. we have a true partner, and we have a true partner through the coalderon administration and have extradition to the united states. >> let me make something very, very clear. these are not symbolic acts. our intention is to invite these people and put them in jail for extended periods of time. this is not simply the expression of displeasure of the united states. there are great numbers of people in our government in cooperation with people in

mexico, and our intention is to indict these people and, as i said, to bring them to justice here in united states. >> one of the family members connected with the lockerbie tragedy was talking about the lack of compassion their families were shown. what can be said for those families, and, secondly, is there anything the united states government can do to deal with the situation. >> i am not sure there is much the united states government can do, but i want those families to know, and i want the american people to know, that we have done all the we could do part to this decision being made to make sure that this decision would not, in fact, be made. i had contact with scottish authorities. secretary of state clinton did, as well. we argued as best as we could to try to point out the injustice of such an act. the decision was ultimately made

by the scottish authorities to release mr. al-megrahi. there was a press conference, i understand, that they held earlier in the day, and i will let them speak for themselves. >> the cia and the interrogations. the former cia director michael haden, in his words, he said it would be destructive for it to happen. and also, where are you in determining about the investigation? >> we do have a deadline on monday, and we are working with our colleagues in the cia to release only those things that we think will be consistent with our national security interests, and yet responsive to what our responsibilities are as a result of that lawsuit, so we will not be doing anything that will endanger the american people or in some ways less and our national security.

with regard to any ongoing decisions, we will speak to that when a decision is made. >> a question about lockerbie. what are your concerns that this decision by the scottish executive, what is your concern about the message this is sending to people that might consider doing this? that you can spend eight or nine years in jail and go back to libya? >> i suppose our counterparts in scotland would say that there are extenuating circumstances. perhaps a message should not be drawn from that. we expressed the concerns that we had that given the nature of the acts, given the number of lives that were lost that mr. al-megrahi should serve the entirety of his sentence and should have died in jail. >> when did you first learn that this was possible? did this come up during your trip to england earlier this year? >> we had conversations, i

think, over the past few months. i am not sure when it first came up, but we made our feelings known about this in a variety of ways over the past few months. >> about the decision of president calderon to remove all custom officers at the border. were you aware, i suppose, of the decision, that you're putting together a joint task force? >> let me answer that one. it is important to note that this is part of a professional customs service by mexican authorities. we have been working very closely with our counterparts on this issue both at ice and act

cbp, and we have been talking about ways that we can assist them with the training of the new officers, and i do not think this is going to harm our existing relationships. on the contrary, i think it is quite to strengthen them considerably. the customs authorities in mexico as but a different powers that we do in the united states, and in particular, they do not have a strong criminal investigative powers, and we tend to work with other parts of the mexican government, but the long and short of it is that this is a welcome step. we have been working with them as they go through it, and i do not think it is going to hurt our relationships at all. >> the fact that they are -- it does not worry you? >> it does not.

i think that this is the right move, and we are trying to support them with all of the training and assistance we can. >> you mentioned that al-megrahi has not expressed any remorse. there are reports out today that the son of muammar qaddafi is flying back to libya. muammar qaddafi is coming to the united states next month to address the united nations. this administration has also been embracing moammar gaddafi, try to improve relations with libya. from your perspective, from the perspective of justice, should the united states stay on the course of improving relationship with the libya of moammar gaddafi? >> i think there is a basis for, i think, a legitimate basis for us to try to improve our relationship with libya. obviously, what happens today

with regard to mr. al-megrahi is something i think is very regrettable. whether that will have an impact on our ongoing relationship with libya, i am not sure. it was the decision by the scottish authorities to release him. >> "the washington times" columnist john mccaslin on "weed man" tonight on 10:00 p.m. eastern on booktv on c-span2.

>> how is c-span funded? >> private donations. >> taxpayers? >> public television. >> donations. >> i do not know where the money comes from. >> federally? >> contributions from donors. >> how is c-span funded? america's cable companies created c-span as a private initiative, no government m&a, no government money. >> health and human services secretary kathleen sebelius says they are expecting an h1n1 sw ine flu outbreak. now, a briefing from the commerce department in washington. this is about 25 minutes.

>> thank you. kathleen sebelius and others have spent months at the forefront try to combat the h1n1 fibers, and i am happy they have joined us today to try drug businesses prepare for what many experts believe to be an active flu season. we're also joined by a doctor from a the center for disease control and another person who will be on hand to answer questions at the conclusion of our presentations. as all of you know, h1n1 is more than just as significant health issue. it has the potential to affect virtually every aspect of our lives, from our economy to national security to our educational system. as such, it will take americans from every walk of life, all of

us, pulling together and doing our part as i have travelled around the nation, i have looked at what we are trying to do in a timely way. a flu outbreak is a very scary prospect, and president obama has mobilized the entire federal government to get america prepared. and the interagency effort you see here is further evidence of that cooperation. but government cannot do it alone. for this effort to be successful, we need the business community to do its part. businesses play a key role in protecting the health and safety of employees as well as limiting

the negative impact to the economy and society, whether during regular flu's season or during an outbreak of the h1n1. here is what businesses can do to help. first, they can set the right tehran within their companies. that starts with letting their employees know that if their employees exhibit flu-like symptoms, they should not come to work. and if an employee shows symptoms during the workday, the cdc recommends that that employee be asked to go home. in america, we love to praise the puritan work ethic, and with reason, but this fall, it would serve the country better to praise common sense and responsibility. from top to bottom, businesses need to drive home the point that if an employee stays home sick, it is not only the best thing for that employees' health

but also for the health of his or her co-workers and the productivity of the country. -- for that employee's health. second, staying in touch with the local health departments. aligning their guidelines accordingly. that could mean anything from the basics, encouraging employees to frequently washed their hands to covering their malice when the cough and sneeze to considering alternative work and are immense for employees at higher risk of complications of the h1n1 flu. developing sick leave policies that are flexible and non punitive also makes sense. you know, some businesses now require workers to provide doctors notes or other paperwork to prove -- to provide dr.'s notes. that is a record demand that employers should consider dropping. it has the potential to

overload the health care system that will likely be stressed during this year's flu season. the third thing that is absolutely essential for american businesses is thorough preparation. even if precautions are taken, some employees will likely get sick, and parents will likely have to stay home with a sick child or even healthy children in the particular school is closed down. that is why companies may to plan for continuity of operations with a depleted work force. plans should be put in place now to allow for tell working and staggered ships. employees should be cross trained to cover essential functions, and if the flu outbreak becomes severe, companies may need to take steps to reduce face-to-face meetings or to curtail non-essential travel to reduce the possibility of h1n1 flu transmission. hopefully, companies never have

to take the steps. but a little planning now will help insure that our economy withstands whatever the h1n1 virus throws us this fall -- will help ensure that our economy withstand whatever the age 1 and 1 viers throws this fall. you can go to a website and get a toolkit -- whatever the h1n1 virus throws this fall. this can help you deal with this to keep it from drastically affected operations. i would now like to have hhs secretary kathleen sebelius to come up and talk about what steps businesses can take to prevent their employees from ever getting sick in the first place. >> well, thank you, secretary to jolocke.

it is good to be here with my colleague from the flu fight, secretary napolitani, and welcome deputy secretary harris and others who are with us today. i am pleased to be here at commerce to talk about the role of the private sector can play in preparation and mitigation of the flu outbreak. this is a real shared responsibility, said the federal government, as secretary locke said, is doing our part, working across agencies, working with our state and local partners to get ready for flu season, but we really rely on the private sector to also work with us to make sure that americans are safe and secure, as safe and secure as possible, so in terms

of the steps that employers can take, secretary locke also already talked about the employee policies that need to be reexamined in terms of getting ready for the flu, but i want to talk for a little bit about strategies for mitigation. certainly, before a vaccine is available, before vaccine becomes ready to go, there are a couple of steps that are critically important. one is encouraging target populations to get their seasonal flu shots. seasonal flu vaccine will be ready. it is ready in some places right now. it is certainly going to be widely available in september, so encouraging employees to get that shot and get it out of the way it is a good first step. as secretary locke has already

said, the strategy is involved hands and home, so keeping the hands washed, frequent use of hand sanitizer, but also covering sneezes or cops with a sleeve, or an elbow, not a hands, about was stop the transmission of germs, or go home and stay home is a critical piece of this puzzle, because we know that those are two important ways to stop the transmission of the virus. now, vaccine, as we know, is one of the best ways to immunize the public against this new flu strain, some getting employees prepared to receive the vaccine is important. the target population has been identified, and we hope that employers will do some personal outreach to the target

population who may be in their employment. pregnant women are particularly susceptible to the h1n1 virus to and should be strongly encouraged to be ready to get a vaccination once it becomes available. adults under 65 who have an underlying health condition. any kind of respiratory distress, asthma. the our in our target population, and if an employer has younger workers, the target population includes those that are six months of the to age 24. i am hoping nobody has children working on their shops and a regular basis, but certainly the 16- 24-year-olds are a target population, and, again,

employers can go and long way towards encouraging them to get vaccinated. health-care workers are a critical population, and a lot of the private-sector employers deal with health-care workers on a full-time or part-time basis, and parents or guardians of infants under 6 months old. vaccination is not recommended for babies, but keeping parents or guardians, grandparents, foster parents of those kids vaccinated will help protect the baby, so having the employers assist us in getting the message out to this critical populations so that they are ready to get vaccinated. we are working closely with scientists at the national institutes for health, the centers for disease control, the fda, working actively to make sure that an h1n1 vaccine is as safe and effective as possible.

we know that the health departments will be the best information source for regular information, and we anticipate the same kind of an outbreak that we saw in the spring, which is that in some areas, there may be a lot of flu, and in other areas, there is very little. it is hard to predict in advance what that sporadic outbreak will look like, so staying in touch with the local health department as an employer is a way to make sure that we can monitor this carefully. for the conditions change rapidly. again, what we saw this spring is that the day-to-day changes are quite dramatic, so local public health officials, again, have the best palls on the situation. human-resources and all these policies need to be as flexible

as possible, so letting employees stay home, and the cdc guidelines is 24 hours after the fever ceases is the period to stay home. that is going to vary from person to person. some may have a two-day outbreak, and some could have a longer series. but after 24 hours with no fever, it is safe to come back to work and we engage, and then, finally, keeping workplace is as clean as possible. we know germs are often transferred from hand contact, so frequent wiping down of services that people are likely to touch, have a protocol in playset the cleaning is done, and having hand sanitizer in place so that people have the opportunity to clean their hands on a regular basis of up to navigate -- mitigate the spread

of the flu. again, the website has information, regular updates, so we hope that people take a look at it, and now i would like to turn this over to the secretary of homeland security, janet napolitano. >> thank you, secretary locke, secretary sebelius, and i do not have a lot to ads, but i do want to emphasize some themes. number one, protection from the flu is a shared responsibility. in all likelihood, the flu virus will be back on our shores. it never really left, but we are going to see it reenergize at the beginning of the school year, and that means from a business perspective that planning is essential, and what

is being released today is assistance for the plan. people in business are dealing with a very tough economy, and they may not have had the time to think through what a really bad flu season means, and this is why we are providing some assistance to businesses, so they do not have to start from scratch. they can take the document that the secretary held up, and it is available on-line. it is not just seasonal flu, which will happen. we have every year. that is why it is called "seasonal" flu. encouraging your employees to get the seasonal flu vaccine, but preparing for absenteeism for the h1n1 virus, particularly in this period where we are now.

we are in the flu season where the h1n1 is before the vaccine will become available. let's not just play wait and see. but be proactive. we are being practiced at the level we are out, but we are now asking the business community to be pro-active in this plan, too. let me emphasize one part, and that is businesses that control critical infrastructure. to make sure that those operations continue, even if you're absenteeism is high, whether they are sick or whether they have to stay home with a sick child. monday, i was down in the gulf coast, meeting with members of the oil and gas industry there, and a key part of our meeting was to guarantee and really make sure that they have thought through what needs to happen so they're critical employees have backup.

telecommuting has been explored. whatever needs to be done so there is a continuation of operations at the critical business level of the supply chain level and the like, and the department of homeland security will continue over the next week's with that sort of our reach in the private sector, as we have been doing all summer. so, again, if you shared themes. one, this is a shared responsibility, washing hands and the like. two, the encouragement to go ahead and did the seasonal flu vaccine, particularly if you're in the targeted category for that, so that stressor on the health-care system is taken care of or is mitigated before the full effect of h1n1 arrives. 3 is have a plan for absenteeism and the

understanding about the absenteeism that needs to occur with this flu, and number four, we will continue to work with the dhs aspect with the critical infrastructure, in particular, because the country needs to be prepared, but it also needs to be resilient. thank you very much. >> i think some questions are in order. all right, any questions? yes, sir? if you could say who you are and then say which one of us you would like to talk to. >> i guess this is a general grilling right here. from bloomberg news. if the flu spreads despite these measures, are you prepared to

put out more drastic guidelines, such as encouraging businesses to shut down certain branches to stop the spread of flu in that area? >> well, the key is for every business to put in place plans on how they would continue to operate with, perhaps, severely reduced work force, and so, that is going to be up to every company on the case by case basis, and they will have to decide when it is most economical to shut down a ship or assembly line, etc., etc., but each business, each industry varies, so it is impossible to come up with such a blanket statement, but the key is to come up with a flexible work and leave policies, the plan for cross training, higher absenteeism, and to encourage employees to go home upon the

first symptoms of flu and to reduce the impact on the public health system, perhaps awaiting policies that require notes and verifications from medical personnel because the medical community will be inundated, attending to those who are sick, and then having to issue notes or verification that somebody is sick or that somebody else and home is it merely compounds the problem. >> what we know also is that this will change on a regular basis, so the centers for disease control is prepared and ready to issue updated guidance as situations change. again, we anticipate variants and local outbreaks, so what may be happening in atlanta is not likely to be happening in seattle. her local health department officials will be the best guide, but the guidance from cdc

is based on what we are seeing right now, the recommendations for the preparation for getting ready, but we anticipate as the flu season unfolds and more outbreaks occur that that guidance will be updated regularly, and we will keep people posted, as we did this spring, as more outbreaks occurred. there were some school closures in areas. there were other measures taken. we anticipate right now that that could change as the fall flu season unfolds. >> next question? yes? >> secretary sebelius, only a fraction of the doses for the h1n1 vaccine are actually going to make it here by december. i am wondering how you feel about that and how you fill in the gap. also, i am wondering if with

schools in applies to secondary schools, colleges and universities, and how do you deal with the difference? >> well, the school guidance for k-12, there will be school guidance available later for higher education, and it is somewhat different, so stay tuned. it is in preparation right now, and the final stages, and i would like to have the adderall from the centers for disease control answer the specific vaccine question, but my 30,000-foot view is that we are very much on target. we are working with five different manufacturers. they are preparing, as we said, for a target date of about mid october for the production lines to begin. when never anticipated that all of the vaccine would be available on day one. it would be on a rollout basis, but i would like to call on the admiral to give you a very

specific update on the vaccine. >> thank you, madam secretary. our intention with announcing the number of doses was really to reiterate that this is something that is evolving and to just be as open as possible with what the actual situation is at this moment. there are efforts underway as we speak to increase the number of doses than are available to address this situation, but i think the one thing that we ought to expect is that as this process goes forward, there are going to be fluctuations in those numbers. in terms of the sort of impact on the date that vaccine will be available, there are only so many people you can vaccinate at once, so i think that as we go forward, the total number of doses is going to be the same, and there may not be any difference at all in the terms of the number of people have that can be vaccinated in those first weeks in october.

>> yes, go ahead. >> james rosen, a colleague from fox news. i have a question for the admiral. i am wondering if you can address whether or not the h1n1 opposes any kind of national security threat, and, as does uggla, a whether you are aware of any mobilizations by any branches specific to this threat in the recent days that have passed or that are to come? >> i think in terms of the mobilization, it is more on the level of interagency coordination at this point, so we are working with the department of defense. there are some issues that are more in the military as opposed to the civilian population, so those will be coordinated across the departments. in terms of a specific national

security threat, i think we are taking measures to protect the health of the public, and i think that answers that question, that we're doing everything we can to minimize the health impact and other impacts that this illness will cause. >> next questions? any other questions? great. thank you very much. thank you. >> years as a campaign manager for george mcgovern, and when walter cronkite was considered for the role of vice president. sunday night on c-span. >> go inside the supreme court to see the public places and those rarely seen spaces.

hear directly from the justices as they provide their insight about the court. the supreme court. the first sunday in october on c-span. >> president obama talks about what he calls the misinformation and distortion concerning pending legislation, and following him, a georgia congressman, a physician, with the republican address. he says the proposal will undermine people's rights to choose their own health-care plan. >> americans are grappling with health care premiums ever- growing at three times the rate of wages. thousands are losing their insurance coverage each day. without a real reform, this will continue to multiplied. people are concerned about

health insurance reform, and rightly so. i am glad that so many are engaged, but there should also be an honest debate, not one dominated by a willful misrepresentations and distortions spread by the very folks that would benefit the most by keeping things exactly as they are, but, today, i want to spend a few minutes debunking some of the hour -- smiths on the internet, on cable tv, and repeated at town halls across the country. let's start with false claims that illegal immigrants will get health insurance. that is not true. illegal immigrants would not be covered. that idea has never even been on the table. some are also selling the coverage for abortions would be mandated. also false. when it comes to the current ban for using texter as for abortions, nothing will change under reform. and every credible person has looked into it has said there are no so-called death panels,

an offensive notion to me and to the american public. these are phony claims meant to divide us, and we have all heard the charge that reform will somehow bring about a government takeover of health care. i know that sounds scary to folks. that sounds scary to me, too. but here is the thing. it is not true. i no sooner want the government to get between you and your doctor then i went winter want insurance companies to make arbitrary decisions. as i said from the beginning, under the reform that we want, if you like your doctor, you can keep your doctor. if you like your private health insurance plan, you can keep your plan. period. there is confusion over what is called public option. this is to provide more competition and choice, especially in the many places around the country where just

one insurer thoroughly dominates the market place. this alternative would have to operate like anyone else, on the premiums that it collects. again, this would be an option. those who like their private insurers would be under no obligation to shift to the public plan. the insurance companies and their allies do not like this plan or any that promotes greater competition. i get that, he and i know there'll be more conversation about it when congress returns, but this one aspect should not overshadow the other steps we can and must take to deal with the britains families and businesses face, so let me stress them again. if you do not have insurance, you will finally have access to quality coverage you can afford. if you do have coverage, you'll benefit from more stability and security. if you move, lose your job, or change jobs, you will not have

to worry about losing health coverage, and we will set up tough consumer protections that will hold insurance companies accountable and stop them from exploiting yearwood unfair practices. we will prohibit insurance companies from denying coverage because of a person's medical history. they will not be able to drop your coverage if you get sick. they will not be able to water down your coverage when you need it most. they will no longer be able to place an arbitrary cap on the amount of coverage you can receive in a given year or it might time. we will place a limit on how much you can be charged for out of pocket expenses because no one in america should go broke because they get sick, and we will require insurance companies to cover preventive checkups and routine care, like mammography or colonoscopy. there is no reason we should not be addressing a breast cancer and colon cancer on the front end, and it also save money on the other end. this will help us bring down

skyrocketing costs which will mean real savings for families, businesses, and government. we know what a phillie to act would bring it, more of the same. more of the same diminished coverage. if we fail to act, the crisis will grow. more families will go without coverage which -- we know what a failure to act will bring. what we can take steps and will provide every american, family, and business and a measure of security that they lack. it has never been easy moving this nation forward. there are always those that oppose it and those who use deaf ear to block a change, but what has always distinguished america is one of the arguments have been heard and all the concerns have been voiced, and the time comes to do what must be done,

we rise above our differences, grass the judge's hands, and march forward as one nation, one people, some of us democrats, some of us republicans, all of us americans. of this is our chance to march forward. i cannot promise you that the reforms we seek will be private or make a difference overnight, but i can promise you this. if we pass health-care reform, we will look back many years from now and say, "this was the moment we summoned what was best in each of us to make the moment best for all of us." this is when we made a health care system were the for our nation and the people we love. this is the moment when we earn our place alongside the greatest generations, and that is what america is called to do right now. >> hello, i am congressman tom price, and i have the pleasure of representing the sixth district in georgia. i took care of people on the north side of atlanta for 20

years. right now, from coast to coast, americans are debating the reform of our health-care system. people understand the imperative of reform, but they want what keeps what is good about our system and fixes what is not working without destroying our quality of care. the status quo is clearly not acceptable. rising costs, shrinking access, and third parties are driving people away from care. the challenge is providing americans more accessible and affordable care without impairing the choices that define american medicine, and this is simply impossible with a one size fits all approach taken by the president and democrats in charge in congress. experience tells me that as a doctor, no two patients are exactly alike. while the same diagnosis can be reached for two people, the proper treatment for each can be

completely different based on countless numbers of issues that only a caring and compassionate physician can understand. having it done this for two decades, i can tell you that washington is incapable of processing be personal and unique circumstance is that patients and doctors face every day. that is what a positive solution will put power in the hands of patients, not in insurance companies or the government. unfortunately, the plan being promoted by the white house would give washington the power to make highly personal medical decisions on behalf of patients, on behalf of you. whether it is the government choosing what should be in your family's health care plan, or a bureaucratic board deciding what treatments are appropriate and who should receive them, the president's plan is it 1000 page expression supporting the notion that washington knows best when it comes to your family's health care, and that is simply not true. as opposition to invade and

ministrations government-run plan is mounting, the president said he was to stamp out some of the disinformation floating around out there. the problem is that the president plays fast and loose with the facts. i would like to clear up a couple of the president's worst offenses. on the stump, the president regularly tells americans that if you like your plan, you can keep the plan, but if you read the bill, that is just not so. for starters, within five years, every health care plan will have to meet a new definition for coverage, one that your current plan may not match even if you do not like -- even if you do like it. what is more, experts agree that millions of americans will be forced off of their personal, private coverage and shuffled onto the public plan. the president also says he thinks the government should compete with your current health care plan, but we all know when the government is setting the

rules and is backed by tax dollars, it will destroy, not to compete, which the private sector. the reality is whether you get to keep your plan or your doctor is very much in question under the president's proposal, but perhaps the most striking misinformation that the president has put forth is that there are only two options out there, that is either his way or the highway, that is either the government running the show or the insurance companies. the truth is, there is a third way, a patient's centered way. rather and allow the -- rather than allowing an insurance company or a government to make the decision, which we have plans to increase coverage and lower costs without putting in bureaucrats between you and your doctor. we believe that what is good for patients is good for american health care. if anything has been learned from the debate in august, it is that the american people think that we can do better. they seek reform, but they reject a government centered

approach. with people on the left and right and everywhere in between dissatisfied, and it is time that we start over to create a truly bipartisan solution that push pace it -- puts patients in charge, that deals with the principles of quality care that we all hold dear. we can create a patient's center proposal of that all can support. we are looking to work on behalf of all people to make patient- centered health reform a reality. i am congressman tom price. thanks so much for listening. >> and washington times reporter on a marijuana trafficker of the 1970's. he is interviewed by the founder of the national organization for the reform of marijuana laws. that is tonight and o'clock p.m. on c-span2, booktv. >> how is c-span funded? >> private donations. >> taxpayers?

>> you know, grants and stuff like that. >> public donation. >> i do not know where the money comes from. >> contributions from donors. >> how is c-span funded? america's cable companies created c-span as a public service, a private initiative, no government m&a, no government monday. >> and now, arne duncan. this is about 40 minutes. -- no government mandates, no government money. >> we are honored to have secretary duncan here to talk about the administration's agenda for transforming education in this nation, and i am really pleased to have this opportunity to introduce him. arne duncan was nominated to be secretary of education by president-elect barack obama and was confirmed by the u.s. senate on inauguration day, january 20,

2009. as you listen to him talk about reforms and the agenda, it will become apparent why the president selected arne duncan to lead this transformation. prior to his appointment as secretary of education, he served as chief executive officer of the chicago public schools, becoming the longest serving the city education superintendent in the nation. as ceo, his mandate was to raise big education standards and performance, improve teacher and principal quality, and increase learning options. in 7.5 years, he united education reformers, teachers, principals, and business stakeholders behind an aggressive education reform agenda that included opening over 100 new schools, expanding after-school and summer learning programs, closing down underperforming schools,

increasing early childhood and college access, dramatically boosting the caliber of teachers, and building public- private partnerships around a ready of education initiatives. -- around a variety of education initiatives. this is in addition to working with a non-profit and working with and literacy curriculum. now, what you do not get from reading his bio is his passion for doing what is right for kids and the urgency he feels about the time for reform is now. i have observed both of these on

numerous occasions, beginning with the staff meeting he held at the department. i recalled walking into the auditorium and seeing on the overhead screen the," call me arne. -- on the overhead screen, "call me arne." he talked passionately about the president's agenda and our role in its implementation. he shared belief that education reform starts locally, in classrooms, schools, districts, and states and that his role is to encourage and support the innovation and progress that takes place at the state and local level. he talked about pockets of excellence, and how he wants to scale up best practices. he challenged us to make the department of education become

an engine of innovation. he also talked about the importance of working with our external partners. in the last six months, he has visited over half of the states and listened and learned from parents and educators and community leaders about what is working and what is not. he has met numerous times and conducted numerous conference calls which stakeholders to share information and listen to their ideas and concerns. he demonstrated his commitment to do what is right with kids. most recently, which his letter, he urged to have state policy guidelines to ensure that every student is safe and protected from being unnecessarily or inappropriately secluded or restraint. as he speaks, be thinking about what you would like to ask him, because he would like to hear from you while he parrett --

while he is here, as well. please give a warm welcome to arne duncan. [applause] >> thank you so much, and good morning. i think my mother probably run it for you, so i apologize for that. it is really an honor for you -- i think my mother probably wrote it for you. it is really an honor to be here. this is a fascinating time to be working in education. it is obviously a time of real crisis. never have we been in more financial distress perhaps then we are today. rahm emanuel, the president's chief of staff, as a good . "never waste a good -- has a good line.

never wasted opportunity. this is absolutely a test of leadership. i was in alaska last week. north carolina yesterday. i am going to florida tomorrow. when you travel the country, you really get a sense that some places, due to the magnitude of the crisis, and frankly, due to a lack of leadership, people do not know where to move for which ago. do we use this to break through and get what we are going to. we will see what we can do, using this crisis and opportunity to get better. it is absolutely an opportunity.

over $100 billion in new money for education, and money is never enough. i do not know how many of you have walked into a department and have your budget doubled. it does not happen too often. i was very excited about that, but i did not know about those possibilities, so there is a chance to do something, and what are we going to do with that money? first of all, we are going to save jobs. we have to get better. we were very, very worried that with the economic crisis, we would lose a social workers and counselors, having people laid off, and take a step backwards, and we all know that we cannot take a step backward. we can get dramatically better. there'll be hundreds of thousands of teachers in the classrooms helping students who would not have been there if it were not for the recovery package, but let me be clear. if all we do is save jobs, as

important as this is, we miss a once-in-a-lifetime chance to move this forward, and we know around the country, we have some students receiving world-class educations and others that you are not. we know our drop out rates for everybody is unacceptably high, and we know today the stakes have never been higher. they think there are no good jobs out there. there is nothing for them to do. so how to use this crisis, this opportunity, to take our country, our educational system, to an entirely different level, and the president has challenged us. we have lost our way. we used to lead the world with our percent of college graduates. other countries have passed us by. i really think we are paying a price for that. frankly, i see this as the civil rights issue of our generation.

children from whatever background they might be, if they have a chance to go to a great school, they are going to fulfill their dreams and do well. children from whatever background, if they do not have the opportunity to get a good education, they are going to struggle. this is a chance to drive a very, very strong reform message. we cannot afford to let this slip. what we fundamentally believe is that every child in our country regardless of race, disability, ethnicity, where economic situation has a right to an education. we cannot wait. we cannot afford to lose another generation of children. we have to move as quickly as we can to make sure that every child has that chance to fulfill their god-given potential. the progress made under the ada,

parents of children with disabilities now believe their children will graduate and go to college and get employment. those who graduated from high school in jarrin or starting school between now and september are members of the ada -- are members of the new ada generation with an opportunity to give back to others and their community. this is a tribute to the hard work and passion and perseverance of parents who work so hard to make sure their children have the opportunities they desperately deserve and to our state directors of special education, are constantly looking for new and better ways to make sure we can educate our children and prepare them for the world once they leave our schools. i want to talk about something that some say is a little too ambitious, but you have to

start early childhood education. and i think a very compelling case can be made that if we get our babies off to a great start, if they hit kindergarten ready to learn, they will have a world of opportunity available to them. if we do not do this, we are constantly playing catch-up, and we have to get out of that business to make sure that all of our children hit kindergarten with their literacy skills intact and their socialization skills intact. we have to make sure that we engage parents. i think the larger parental community can learn from your advocacy -- from york advocacy. we have to make sure that parents are reading to their children every night, that they are turning off the television. we know those early years a brain formation are critically important. if we do not do that then, we are literally putting ourselves behind the eightball. we have incredible resources,

north of $5 billion to dramatically improve access, to make sure that every child has a chance to go to an early chaudhry program who wants to, and the second is to dramatically improve quality. if all we are doing is glorified baby sitting, that will not get us where we need to do, but i think long term, those investments will pay tremendous dividends both in terms of dollars returned to the community, but most importantly helping our students to fill out of their tremendous potential. secondly, we have to wear very hard on ourk-12 -- our k-12 agenda. i have met with school chiefs. who here is satisfied that the drop out rate is low enough proof that the graduation rate is high enough? -- is low enough proof that the graduation rate is high enough?

-- who here is satisfied that the dropout rate is low enough? first, making sure that we raise the bar in terms of high standards, college ready, career ready, international benchmark standards. in too many states, we have 50 different goals, 50 different benchmarks, and many have dummy down the standards and have lied to parents and children. they are, quote-unquote, meeting the state standard. we know in many cases, there are barely able to graduate from high school and are woefully under repaired to go on to college. how do we raise the bar -- under prepared to go on to college. the unions are on board with this. the business community is crying out for it.

nonprofits are working very, very hard. everyone is at the table working hard. there at the table to make sure that the standards are being developed, to make sure that students with disabilities and needs are taken into consideration. this is complex, but we need everybody on board to make sure that we can stop lying to charter in the country. a few years ago, you cannot really talk about these things. these are not federal standards. these are not national standards. our children should be able to compete with the best and brightest, not just here, but also in india and china. that is the competition. that is the global economy we are in, and we want to make sure that states are doing the best they can to differentiate and to meet these much higher bars as

they get developed. secondly, how to reduce teacher quality? we note is not race, not class, not socio-economic status. in fiscal year 2007, 57% of students with disabilities spent 80% or more of their time in regular education classrooms. had we make sure that not just special-education children but each child can be a child a special needs? how we can use this for special development to make sure that we're not putting kids in their basements anymore, that we are mainstreaming, making sure that every teacher has the ability to support those students. how do we do it better job of not burning out our special education teachers? we know how tough an overwhelming that job is and how much paper work there is. there is great turnaround. -- how much paper work there is. how do we change that?

-- paperwork. how to reduce the paperwork? how to start being more creative math, science, foreign- language. had we make sure that they go to the best communities? the achievement gap is real, and we have to challenge every day. i would like to focus on what i call the opportunity gap. i am convinced that children that have been consistently underserved, with better teachers working with them, they can do better. how to a fundamental turnaround are struggling schools? challenging states and districts to think not about the 99% of schools. i put schools in three categories. our best schools are literally world class. we should be learning from them and replicating them. we have a set of schools in the

middle that are improving every day. let's talk about the bottom 1%, not the 99%, but the bottom 1%, those schools where, unfortunately, students are falling behind and behind more year, where 65% or more are not graduating. how do we fundamentally challenge the status quo? how do we do it with a real sense of urgency so we do not lose another generation of children? i think we know what we need to do. i think, frankly -- frankly, we need the courage. we have to think very differently about this. if every year -- the bottom 1% of schools and the country and fundamentally change that and turned them around, which did that three, four, five years in a row, which would a minute that bottom rung of our education system. -- we would eliminate that bottom rung.

we as educators have been part of the problem in perpetuating poverty and social failure. and then, finally, really linking students, to understand what students are making the biggest difference. how we monitor progress throughout a student's economic career -- academic career, so that we know what is working in real time, know what is not working, differentiating instruction, thinking differently about small groups. there has been a change of the last five or 10 years. some of our best teachers are talking about how this is transforming their class. how we make is the norm rather than the exception. to tell what is working, what is not working, and help us get better. there is a real significant chance for us to improve their, and all of this is to what end? our goal is to dramatically

reduce the dropout rate, dramatically increase the graduation rates, and make sure that many more students are academically prepared to go on to college. the higher education act was reauthorized last year, and with it came important to new provisions. for the first time, eligibility for federal work steady and federal education grant programs, funds are going to be expanded to include students with intellectual disabilities, and we at the department of education are working to develop regulations for this law which will be posted for public comment. as part of the stimulus, over $30 billion in new money for college, more pell grant it's, increased were steady -- more pell grants, said that people will not be burdened by such huge months. -- so that people will not be boarded. going to college has never been

more important, but it has -- said that people will not be bargains. -- bert and -- so that people will not abate burdened. those dreams start to die at an early age. we are trying to put resources on the table so that all of us know that they work hard. they do the right thing, regardless of what is going on at home, they will have the opportunity to take the next step. also, you guys know north of $12 billion in funds gives us an unprecedented opportunity to think about how we can dramatically improve the outcomes of students with disabilities, and we it are encouraging looking for strategy is consistent with the four reform goals that i talked about -- we are encouraging looking for strategies consistent with

the four reform goals i talked about. i think, again, if we can use a massive influx of one-time dollars to help every teacher become a great teacher for a student with special needs, the benefits, the dividends, while far outlast and the last dollar is spent. the money of going out, north of $100 billion, we have unprecedented discretionary dollars. we want to invest heavily in states, and school districts who are willing to lead the country where we need to go. states that are willing to challenge, push the envelope in all of these areas, and we want to invest hundreds of millions of dollars in those states, in those districts, who are willing to take the next step. we have millions in the innovation fund to work with nonprofits who are close in the

achievement gap and that are raising the bar, and when i came to washington, i thought that not all of the good ideas come out of washington, and now that i am here, i know they do not. they're going to come from the local level, from parents, from teachers, from you. we have a unique opportunity. i want you to understand this. we have a unique opportunity to take this. through all the challenges, i have never been more hopeful. we have more great classrooms and more grade schools and grade school districts. think if we can take the scale of what works, and we want to invest hundreds of millions of dollars in those districts, in those states, and those nonprofits that approving every day that it does not matter what challenges are students face, that when we provide the support and resources, our students go on to do extraordinary things. they were talking about the

safety and restraint issue, and that was one that was extraordinarily troubling to me. at a minimum, before we talk about educating our children, our children have to be kept safe, and we adults are doing things to in danger in them, and we are absolutely doing the wrong thing, and i pledge you, we are watching this very, very close the, and we have asked to have things submitted to us. .

it's fascinating, as we go

rural, urban, suburban, there are differences there but the common themes are very profound. and the challenges we all face are much more similar. they are different. as we move towards reauthorization, this is something we're not going to do every year. this will be the law of the wland for the next several years. as we travel the country, i would ask you to please come to those hearings, come to those meetings. make sure yur voices are heard. there's a huge chance, we don't want to rush. we want to be very thoughtful. we want to make dramatic improvements. so it's a chance for everybody to step up and be part of the answer. i just want to close and have folks think about the magnitude of the opportunity. those who have been in education for 30, 40 years, i don't think you've seen $100 billion come into education. i'm a little biased but i don't think you've seen president who despite fighting two wars in the toughest economy week after

week keeps coming back to education. and you guys know with him and with the first lady michelle, this isn't like an intellectual battle. this is really personal. neither one of them was born with a silver spoon in their mouths. both came from very humble beginnings. and they are who they are leading the country because they got a great education, because they worked so hard. so they know personally, intimately what it means to receive a great education. and they know what it means when you don't have those opportunities. so for all the tremendous crises, for all the tremendous problems we face, we will never have this opportunity again. i want us to think kwlabtively, i want you to push us, our department. we've got many members of the team who will be here with you today. i want us to push you. to work in ways we haven't worked before to dramatically improve outcomes for children. if we can do that, i think we can change education for the next couple of decades. that's the goal. huge amount of money.

this money will be gone in the next several years. if that money is gone and there's no lasting success, there's no lasting track record legacy, then we will have lost an opportunity. but if we can use these resources to drive a level of reform, it will change education in this country for the next four decades and we will have done something really special together. it's a tall order, it's ambitious, it's a challenge. i'm convinced that we have that opportunity and would love to do it together with you. thank you so much. i will stop there and take any questions you might have. [applause] >> i think we have a couple mikes here. just come up to the mike.

>> thank you very much. i appreciate everything you had to say. you're preaching to the choir. i'm from missouri and the state department's with you on everything you said. i do have a question for you. we were one of six states that were selected to participate in the program, state implementation and scaling up of evidence based practices. but there is no money to go with that. and, unfortunately, we've had to be on the inactive list because of that. and i'm just wondering why there's no funding for that. and would encourage you to look at that. >> when were you selected? >> a year and a half ago. >> ok. >> and -- [laughter] -- we hoped that would change with the administration and we

would be able to move to active and, unfortunately, that didn't happen and there was no money put behind that at all. the reason we were selected because of all the great work we've done with systems change in missouri and we've come very far. but we have lots of financial problems and human resource problems. >> i don't have an easy answer for you right now. i will say regardless of that grant, think about $4 billion to the top, think about $650 million in innovation funds. so we can look at that specific one. i'm pressing opportunities to build best practices. >> and race to the top funds are wonderful. but unless those requirements change, that will exclude us also. there's some real issues with some of those requirements. and i know those are out for comment and we'll have to see what they turn out to be. but from what you say, i mean, really it sounds like what you're about is change and it

seems like if we've got states that are already in the process and are just needing that extra push to scale up, and that need that extra funding, not a lot of funding, just a little, would really do it. so i appreciate you looking at that. >> thank you so much and thanks for the hard work. >> i'm paula. i'm with parent training information center in minnesota. and i thank you. i'm excited to hear everything you said. and i especially appreciate your comments about children being safe. we receive many calls from parents especially kids with disabilities who are being bullied. some horrific calls. and 16 0,000 children stay home from school every day because they've been bullied and in georgia and massachusetts 11-year-old -- two 11-year-old boys committed suicide in the last couple months because of being bullied. and we have a national bullying prevention week in october starting october 4 ds. i wondered what your administration is doing in terms of looking at helping

children in this country who are being bullied. >> it's a great question. it's a huge issue. and everyone here it's preaching to the choir. but if i want students thinking about high school and college, if they're not safe, if they're not fed, if they can't see the blackboard we're really kidding ourselves. so these foundational things we have to do. i'll going to mention two people who were brought in to help lead our team. alexa is going to do an extraordinary job leading this every. [applause] she is a real star and we're lucky to have her come in. we've brought in a man named kevin jenings. and i try to bring in who it's personal. it's personal to alexis. she started yesterday to run elementary and secondry, was an ell student who was told she couldn't go to college and ends

up getting a phd from ucla. kevin as a child was bullied, overcame situations at home and went on to be successful. you have people who have lived this, have been on the receiving end and have this is very, very personal. i look forward to their leadership to help us look at a comprehensive approach to make sure we get every child not even in school but to and from school. we have to make sure our schools are safe. we can't be satisfied. we have a lot of hard work to do but i promise you we're trying to build a team of folks where this is not just a job, this is an absolute passion. and those people, i don't think we couldn't have gotten more lucky. >> thank you. >> over here. >> good morning, mr. secretary. i am from new mexico. i have two children, a parent of two children with difficulties that have

graduated from college. one is actually gon on to become a teacher. and it's an incredibly difficult journey, but i've got three things for you that i think will really help and i think you hit on them. three things that make a difference. highly qualified leadership for school mrs. i really believe -- administers. i really believe we have a huge deficit in that area. transparency and partnerships with all stakeholders. i really believe it can make a difference. just those three things. and if you can help that happen, i personally would be very grateful. >> i appreciate that. i couldn't agree more. i know your children wouldn't have made it without you working extraordinarily hard. i think this has been a huge burden on parents. and how do we stop being the enemy of the system and start being a better partner and better collaborator. and a lot of hard work but we

want to make sure stories like your children become the norm rather than the exception. i couldn't be more thrilled that one is going to be a teacher. thank you so much. [applause] i'll take these two last ones and i'll have to sneak out, unfortunately. >> good morning, mr. secretary. i want to thank you first of all for being here and for your comments. it just means a lot that you're here. i also want to thank you for your vision. i couldn't agree more with what you've laid out in your plan. and in saying that, i want to challenge you to keep that vision and to think differently. you talked about differentiating instructions and increasing the graduation rate, decreasing dropout rate. when i returned to north carolina, i have a letter from the united states department of education that our peer review has anything gated our alternative assessments. we worked very hard on those and they have rigor and challenge.

but every child that we teach is not the same and so those families are going to be very discouraged that once again their children's test scores are not going to count because of the peer review process. and i believe this is about the second or third time that we've been through this. i'm trying to get our alternative assessments creblingt so they are rigor, challenge, aligned with standards but can assess the children that are disabled and cannot assess the regular tests. so i just encourage you to keep that vision to think differently and understand that every child is not exactly the same. >> i appreciate that. and i don't know the details of your specific proposal. i'm sorry it's been a tough one for you. for me it's a huge one as we talk oobd no child left behind. how do we make sure we're assessing them appropriately. and that's a -- you talk about

very complex one to get right, i'm going to be looking across the country to those states that are doing creative thing. so it's a huge issue. >> thank you. and i would encourage you to include some of us as stakeholders in looking at that. >> we absolutely will. i had a great visit in your state yesterday. >> mr. secretary, myrna. i represent a number of groups but i am going to ask my question on behalf of the national alliance of pupil services organizations, which is a large coalition here in d.c. that represents related services under idea, the same group of folks. you've talked a lot and i appreciate also representing school social workers and you always mention us and i have to thank you for that. you've had a question about bullying, about dropout and grad rates. one of the things that we're very concerned about is that we're seeing with all the economic problems a huge number

of positions being cut. and you just alluded to that in your comments, that folks are not retaining the positions that school counselors and social workers, all of the therapists and we believe number one that those folks should be available to all kids and not just students with disabilities. i wonder what the leadership in the department will do to ensure that local school districts have the means and understand the necessity for keeping these folks on board. >> tease are great questions. this is a really hard one that i frankly worry a lot and would go so far as to say it's short sighted to be cutting those positions. i think in many places those ratios are already out of whack, those is already way too high. if those ratios sky rocket, i think the impact on the children and school climate generally are going to be tough. having said that i ran a district for seven years that was desperately underfunded. every year i had to make tough budget cuts and i knew things

that were helping kids just because i had to. so i understand the tremendous difficulty that school districts and states are under right now. and there isn't an easy answer. again, we've got $100 billion on the table. i know the cuts go beyond that so we're not going to save every position. literally hundreds of thousands around the country. but my only rule of thumb was to try to make those cuts first that were furtsest from the class room and do everything you can to protect class rooms and what's going on in schools. so some states are in ok situations, some states are just in horrendous budget situations, way worse than anything i had to deal with. so all i can do is urge folks again when times are tough it forces you to prioritize and those, how we spend money talks about what we value and what we're cutting things, again, in tough times never easy decisions for anybody but just really urging folks to be very, very thoughtful about what

they're doing and doing everything they can to protect the class room and protect future learning and children. so easier said than done. but the more folks are thinking long term. and we're hoping next year the economy will bounce back and if we can hang in there for the short time then we'll be in a different spot we hope as a country. but i worry about the cuts and the impact obchildren. >> thank you. >> thank you so much. thank you so much on behalf of children. [applause]

>> go inside the supreme court to see the public places and those rarely seen spaces.

har directly from the justices as they provide their insight about the court and the building. the supreme court home to america's highest court. the first sunday in october on c-span. >> now, a discussion on the outsourcing of intelligence gatsering to the private sector. former c.i.a. director michael hayden and former homeland security secretary michael chertoff participate in the discussion. from the national press club it's an hour and 20 minutes. >> you've helped us answer the question of whether washington is empty in august. the answer is no. we thank you for being with us today for this joint makers and book and committee event. i'm chair of the "newsmakers"

committee and also washington correspondent for a business manage zin. the book and author committee chair is andrew snieser. he is right over here to my right. he is an associate editor at kip linger washington editors. in this morning's "newsmakers" we're going to explore the privatization of intelligence, a topic whose news peg was sharpnd to my delight by today's front page stories on the c.i.a. outsourcing 2004 operations designed to kill al qaeda leaders. we have with us an outstanding panel to devpl into this topic. first i want to introduce michael hayden who is to my immediate left. a retired four star air force general and director of the

c.i.a. from 2006 to 2009. to my right, my immediate right is another former bush administration official michael chert of who was secretary of the department of homeland security in president bush's second term from 2005 to 2009. he was the second head of the agency in its history. we also have on the panel with us to my far left jack devine. he is a 32 year veteran of c.i.a. who is now president of arken group, an international crisis management firm in new york city. and to the far right is o our moderator for today, joe fender, a "new york times" best selling author who has for many

years written about the intersection of ees uponnage and business. his latest book, vanished, was released on tuesday. and joe is the reason this is a joint "newsmakers" and book and author committee event. he will sign copies of his newest book after outside. joe will, as i said, moderate and each panelist will give an opening statement and then we'll move to q and a. during q and a i would ask that each of you please identify yourself and your organization. we like to know who has joined us for these events, and i invite you to go to the microphones stationed in each aisle. so i will now turn the proceedings over to joe. fender. >> so i hope that you realize that this lead story in "the new york times" today and the whole

series of c.i.a. leaks has been artfully orchestrated by my publisher for this panel to make it work. what actually began as a crass attempt to introduce my novel "vanished" and its hero, a guy named nick heller who is a private spy, has evolved into something a lot more interesting which is a way for me to display my ignorance of intelligence issues in front of people who know a lot more about it and some very, very accomplished people who i want to thank for showing up here. what i want to do is i want to -- i want to sort of moderate the first half and then open it up to questions. i would like to basically serves as not quite a moderator but as an enhanced interrogator you might say. so there's really two parts to this whole private spies issue. one is the outsourcing of

intelligence operations and functions by our government to outside contractors and another one which is a lot less talked about is the evolution of this really interesting profession of private intelligence operatives, most of whom come out of our intelligence community. so what i want to do is start, address my first question to general hayden so as most of you know that there was this terrific front page piece in "the new york times" today reporting that in 2004 c.i.a., before your time, hired outside contractors from blackwater as part of this program to locate and assassinate al qaeda operatives they, quote, helped the spy agency with planning, training and surveillance. now, maybe i'm not a narcissist like all writers but i can't help but speculate that this

emanated as a leak by the c.i.a. and a response to a piece i did on tuesday in "the daily beast" saying that leon panetta's urgent hearing on june 24 to congress disclosing that the c.i.a. had misled congress for eight years was actually based on a mistake, that this was not a violation, that the program was really little more than training and intelligence collection, but i'm wan not goio talk about that piece because i know that i've tried to ask general hayden about it and he won't talk to me but i do want to talk about the use of private contractors by the c.i.a. so the article indicates that the reason panetta briefed congress in the first place is that he became alarmed and here i'm quoting from mark's piece that the c.i.a. had used an outside company in a program with lethal authority which

raised deep concerns about accountability in covert operations, so this tells me that the use of private contractors in this kind of a risky lethal action changes the whole game. panetta thought that the use of contractors meant that he was required to -- that this met the threshold for briefing coness. so i'm going to ask you general hayden without going into some of the stuff that you won't talk about, do you agree that outside contractors shouldn't be used in risky covert operations? >> well, i guess the first thing i'd have to say, joe, as you've carefully pointed out i'm not commenting specifically about any concrete action or commenting on the specific article that mark rhode or the times or was in the "washington post." we use contractors at the agency for a variety of things.

we go to contractors because they possess certain experience or certain knowledge that we don't have inherently inside our workforce or at least we don't have it inherently at that time. i have put stars on the wall during my time as director that were contractors. so i make no pretense that contractors, those here running our fire department and government employees are all over here, it's simply not true. contractors don't run our fire department, those are government employees, and it was one of the questions i asked is why do we have government employees for a service we can obviously -- we can obviously buy? i would brief the hill on a variety of activities, be they foreign intelligence or covert action, and i would occasionally be asked, more than occasionally, particularly as time went on, was that done by a

contractor or was that done by a government employee? and generally my answer was, i don't know, i'll have to get back to you, because in most instances we were trying to use -- to use a football metaphor which my wife warned me not to use so much anymore -- we generally use the best athlete available in the draft. who is the best individual for this task at this moment? ok? we have come into a bit of a spin inside of our broader political culture, contractor bad, government employee good. if you take anything away from my contribution to this morning's discussion, reserve judgment on that. certainly don't make that a generalization, all right? we viewed contractors as an integral part of our workforce and i am going along and i'll say just one more sentence and perhaps someone will follow-on

with questions. and all that said, with how important contractors are, i reduced the number of contractors by 15% and we did that over a period of time, not more than 12 months, but that was far more about the agency than it was about contractors, it was far more about what the agency did in regard to management and far less about what contractor his to offer in terms of accomplishing our mission. why don't i stop there. >> but, general, you haven't asked my question, with all due respect which is, the c.i.a. apparently uses outside contractors in some really high-risk covert operations. isn't that a problem? should that be? >> if you look at current o.m.b. guidance, and this is about as far as i can go in our conversation, joe, the definition of inherently government activity -- and you need to go look at this -- is surprisingly narrow.

in actual intelligence, actual intelligence analysis, actual intelligence collection, our permissible activities for contractors undercurrent -- >> ok. >> no, without commenting on mark's story, what he talked about was planning, training and surveillance which i think i can scoop up into intelligence and analysis and collection. >> ok. but if i can persist for one second. you said that you basically don't -- you're not awa when you were c.i.a. director of the difference between the blue badgers, the outside contractors and the green badgers, right? >> no, what i said on a particular activity, with the team we put together, generally speaking, i may be careful that i don't overgeneralize, for a lot of the agency's activities what we put together is a blended team of government employees and contractors, very frequently the contractors are what we call i.c.s,

independent contractors, so please don't take anything that i said to suggest what the agency routinely does when we@ãr what we're talking about are very desscreet skill sets housed inside an individual, we want to make part of the team. and, therefore, we hire that individual. >> but there's still a big legal problem apparently. eric holder is reportedly considering appointing a special prosecutor to investigate c.i.a. criminal activity involving water boarding and that sort of thing. and including private contractors. now, my understanding, and i want to ask you about this too and then i want to ask secretary chert off about the legal issue here. these guys are not indem fid by government. right? isn't that a huge problem?

parts, ok? about the endemmity, joe, i'd have to consult a lawyer. what people accuse us of doing, however, and i saw it reflected in "the times" story yesterday is that we go to contractors when we do not want to take responsibility for some activities. let me just yell out loud and kick the podium and say that it's absolutely not true. agency officers, myself as director, for example, have the same moral and legal responsibilities for the actions of government employees or contractors operating under our guidance, operating under our authorities, operating under our direction. we do not use contractors to carve out something we do -- we want to deflect responsibility for. that is simply wrong. and you should not believe that. you can criticize us for not having some inherent skills you

may think we should have inside the agency and we may be vulnerable to criticism because we have to go outside that you might legitimately judge that we should have inside, i got all that, but we do not go outside in order to deflect responsibility from ourselves, period. >> well, secretary chertoff, to directly link to this, it is apparently there's a lot of fear among private contractors in washington because the rules seem to -- there is no law apparently, protecting them from doing things that they did for government, for example, interesting case, boeing is facing a major lawsuit by the aclu, alive today because they leased a plane to the c.i.a. for the rendition flights. there are a lot of contractors who i talk to who say, look, we

do anything risky for the u.s. government in intelligence function, we're not protected. what do you think about that? >> well, you have to separate two issues. one is is an individual contractor protected or endemmified and it's a complicated issue and i don't want to give a blanket statement and that's different from the issue that you raised with boeing which is, is there simply a risk for getting sued and forget in the end of the day if you win the lawsuit, but you have to get a lawyer and you have to deal with a certain amount of legal hassle, is there such a high transaction cost surrounding that that you'll get contractors who simply don't want to do anything because they just don't want to get pulled into having to be in court and getting emmeshed in these proceedings and, by the way, what is interesting about the boeing thing, it shows how far this argument can extend because it's a question of not actually

doing the rendition itself, but simply providing the airplane. i guess that the guy who makes the pencils and the pens that are used to sign a piece of paper that orders something, he could be sued because he's creating pens and pencils. this is actually less to do with the role of contractors in government than it has to do with problems in the legal system which have now become a tool of combat. if you don't like a policy you sue or you try to create legal problems in an effort to raise the temperature and hopefully cause people to shrug their shoulders and say i don't want to help the government because if i engender controversy i'll pay a cost. the guy of whole foods is experiencing a little bit of this, not maybe in terms of being sued, but with the temperature being raised in the public media. so to me this is not really an issue about contractors as much as it is an issue about the legal system. i do think that it is worth saying that contractors may be

in a different legal position than government employees and that's something which i think is a contractor's issue and that's why they need to think through very carefully what they do, what they don't do, and how to protect themselves with respect to things which do create a certain amount of legal risk. >> but it's not just a contractor problem, it becomes a government problem, i mean, when you ran homeland security you were part of the intelligence community. >> correct, yeah. >> you hired outside contractors to do some threat -- terrorist threat assessments, to do some sensitive intelligence, right? >> the government, and, by the way, not restricted to just intelligence, in the law enforcement community it's not uncommon to have contractors perform functions, whether it's a security function, you know, guarding courthouses or analystic function, the idea that there's this clear line between government and non-government is simply not

borne out by the reality of a government activity across the board, not just intelligence. >> but if you want to hire outside contractors on an ongoing basis which seems to be what's going on in the intelligence community, we're kind of -- you know, rent-a-spy, in a sense. you therein have a problem if contractors are going to realize that they're going to face liability, right? >> i don't think that there's any question that it's in the government's interest to make sure that there are the kind of protections for contractors who are operating in good faith that we want to see with respect to government officials, that's why we have the laws always created various kinds of immunities to give people some space in which they can operate without being in legal jeopardy, as long as they're operating in good faith. you know, part of the undercurrent of this discussion is, well, why do we need contractors? and the truth is that we need contractors because as general hayden said, there are skills that we don't have in the

immediate government that we may have a requirement for. and there may be skills that we don't have a continuing requirement for. for example, there was probably not a lot of emphasis in the community 10 years ago for pashtoon speakers and now there's probably a high demand for that. it may be in 10 years that the demand for pashtoon speakers won't be there anymore and we may be interested in people who speak dialects in africa or dialects in southeast asia, so it doesn't make sense to bring people in for permanent positions for a skill that may be needed for a specific period of time at a surge level. so it's very much in the interest of government's efficiency to make sure that you have the flexibility to surge and deal with specialized requirements in a very specific way. >> therefore, the law should deal with this issue if government is going to continue to hire? >> yeah, if you're going to expect the contractors to do the work, you will have to give them the legal protection that is

necessary to allow them to do it. >> i want to bounce one more thing back to general hayden and then talk to jack. so when you took over as the head of the c.i.a., there was a time shortly before you took over that the c.i.a. workforce was close to half, private contractors. you brought it down by 15% to a figure that i have now heard is pretty authoritatively 20%. and the press release said 60%, an error, i'm sorry, don't blame me, but it is 30%, which is incidentally still pretty high, but why did you do that? what was the concern? was it that the c.i.a. was hemorrhaging qualified people? i mean, i think 5,000 c.i.a. officers left the agency, you know, by around, you know 9/11 and shory after to go private, to be hired back the next day by c.i.a. for a whole lot more

money. >> what we did, joe, number one, keep in mind what i've said about contractors and the important contribution and what the secretary just said that the legal structure has to protect them and i should add too, not just contractors, the american intelligence community gets a great deal of benefit from what we call cooperating domestic entities and they're not contractors, they're just patriotic americans who are willing to help and if the legal system is such or has been misused in such a way that these people feel they are no longer able to assist, that's a blow against american security and against american freedom. ok, so we had contractors and it was clear to me that we had expanded rapidly, the said -- and let me be kind but the set of individual decisions made throughout the agency, i need a contractor here and i need a contractor there, and a contractor there, created a macrocircumstance in which we had too many contractors and we

were probably competing against each other to hire contractors. >> so it was a matter of government efficiency? >> exactly, it was a matter of government efficiency. so i had no sense how much that extra layer was, and so steve capus and i picked a number, 10% and said do 10 -- >> cut by 10%? >> cut by 10% and, actually, we did it pretty comfortably. and we said, great, cut another 5% and at that point i move out of the picture and so there may be no more room to cut the excess that grew out of government inefficiency and not contractor inefficiency. in addition what we did, we had folks who were leaving the agency, who were resigning, not retiring, who were resigning from the agency and turning back and getting hired by contractors and sold back to us by the contractor because we still had needs for the skillset that the government elployee had. i put -- employee had.

i put a stop to that by saying that the agency would not clear a -- a contract employee would not grant access for an employee who resigned from the agency for a period of 12 months. that's not retired from the agency. if you put enough years in the agency to be eligible for retirement i said, god bless you, you've put your time on, you can move on. but for resignations, the one tool we had was the clearance process and we simply said if you left here, resigned in the last 12 months you're not getting a clearance. i did not want to become the triple-a farm team for a bunch of organizations around the beltway and provide them trained personnel to sell back to us. that too is government efficiency and it doesn't say anything about the contractors. >> right, right, so basically you were losing all these people that were coming back and had to pay for them. >> yeah. >> jack, in the old days this

idea of retiring from the c.i.a. and going back and working for them was, i believe, called double dipping, right? it was kind of frowned upon. and now everyone is doing it. what happened? >> let me put a marker down before we get too far into it. i did spend 32 years in the c.i.a. and when an autopsy is done you'll find that part of my heart contains the c.i.a. stamp. but there has been a huge historical shift that i don't think is well appreciated. i ran the afghan program in the mid 1980s and i was the director of operation at c.i.a. and i served abroad in five stations. i really do think that i understand the operational world. i don't know what to tell you, for the last 25 years of my career, i left in 1999. if you mentioned the word assassination inside the c.i.a. you were expected to resign. i remember a d.d.o., one of my

predecessors saying at a meeting i attended, i wanted to fire all the contractors and now that was rather a naive statement, as much as i respected him, but it was the sense of the role of contracting inside the operational directory. and now in the 1990s we brought down and i think that many of us felt that the cold war was over and there was a peace dividend and we brought down the agency by 25%, its budget, its personnel. so when you arrived at 9/11 you were gravely understaffed to deal with it and i can understand the push for contracting to fill the gap. there's two points i'm making and i'll answer your question. >> thank you. >> the first point is i do know government contracting works, ok? just so we're clear on where i'm

coming from on this and i'm want opposed to it at all, it's just that i'm in a different space. the other thing that i would tell you is that i was surprised this morning when i read the "washington post," i had not gotten "the new york times," and that the -- and, again, we get into the semantics of this, that the assassination program was outsourced and i just tell you that it's with my experience and i'll leave it to that. now the question of double dipping which is a phrase that i haven't heard in a long time and i think that mike actually addressed this as well, that he was dealing with a situation where some of his best people were going out the door because there was a program set up that allowed them to return the next day and continue working at their full salary and half of their retirement, and, again, during an emergency situation how long you want to extend that is an arguable point, but i will

tell you that it's quite different from the 32 years, it was the last 25 that i can tell you that the@@@@@@@@@ @ @ @ @ @ both mikes have made the point that there was a technical requirement. when we went into the internet, and i remember when we actually had index cards with names of it and we were so proud of the best index card system in the u.s. government. i mean, you really need to understand the impact -- all of you do because you're in the same information business. what that internet meant. you really did need contractors and you needed the technical area. but westbound in the history of the age -- we have had serving detailees from d.o.d. search capability and that capability seemed to work well. i don't know all of the ins and outs. i have not been in any program

with the agency since i left. but it does raise for me issues both historical and the times we live in and i must say there's parts of it that make me quite uneasy. quite uneasy. >> jack, there's a guy named allen stanford who has not gotten as much attention as bernie madoff, a texan now living in the virgin island whose was charged with running a massive ponzi scheme, sort of a junior bernie madoff. i was looking into this case, it's research for a book, and i discovered that allen stanford had hired a private intelligence firm, crowell, to do what they called in the trade self due diligence, ok? they asked them to -- he hired crowell to vet him for potential investors. the court records that i've looked at say that allen

stanford paid crowell for this self-due diligence on this multibillion dollar fund, $15,000 for a full background check. so what kind of background check can you give someone for $15,000? >> again, let me round the question out for you a tiny bit. jules crowell took the magnum p.i. off the street and creating a professionalization of the p.i. investigative world. and formed the first company in -- it's well known in the industry. i've read the "vanity fair" article and i am a reader of"vanity fair," they have great articles in there, and i must say that i don't think that jules and the leadership were happy with the way that this unfolded, i don't know that firsthand -- >> but for $15,000. >> i'm slowly getting to these

points. i live in new york so i have jules as a friend -- >> i'm sorry. >> let me cut to the chase, if you look at a bernie madoff or a figure of that size and stanford, and, again, remember i'm on madison avenue, $50,000 is a going price to take a really serious look at somebody. $15,000 you're probably looking at a very heavily weighted database research which is a very useful and a basic underlining part of any investigative reporting work, but you really have to get out and tweak it. the one thing that i read in the article that i saw and i also looked at those documents, was that they looked at the company but didn't look at the person. >> so they investigated the company and not stanford himself? >> and the report, which is attached, is more about the company and not about stanford, i think that you have to look at the principles because there's a

little lawsuit that came from this. >> but, jack, the lawsuit is the point here because one of the major investors in this firm, they hired crowell to vet allen stanford whom stanford had hired himself so the reason for the lawsuit is the guy is suing because he lost, whatever, $6 billion, how do you protect yourself in a case like this, and should you be hired to do one job, you know, with dual purpose like that? >> i use it as a teaching tool, this particular case -- >> really? >> because this is a problem having the private sector that we didn't have so much in the public sector at times is that they come in and they say i only want to spend $15 now how to and i want all this -- $15,000 and i want all this, and if the budget is low you'll do it and you'll give them a product that is substandard and you have to hold

the line and you say, you want me to do this, i have to do all this. >> you could be sued, right? >> i could be sued on every report that i make and that's why i want to make sure that i'm authorized and funded to provide the information that the client is requesting. the reason that i like the business i'm in this regard is that it's not that much different than the business i was in the c.i.a., give me information, validate that information, stand by that information, and take the consequences. the difference and one of the things that you learn quickly in the private sector as many of you know is that if you're wrong the results are immediate and accountable, you're fired. or sued. >> are there things you can do that the c.i.a. can't? >> there is a world out there and i've talked to my colleagues and having been on the other side of the table i know when their eyes gloss over and i know that mine would have glossed over as well, and i sat with one

of your predecessors and they took copious notes and i know that i'd have to rummage through the trash and they thought i was trying to sell some product to them, which i wasn't. there is a world out there of talent and investigative skills that is huge. people that leave all the foreign services and leave the police and people that are journalists and not in the united states, of course, but that are out there and available to collect information. and i have everything from psychiatrists to record tollers and how you get in and swim in that water is not rocket science, how you utilize it is a different, a different matter. there are things that i can do that i don't think that the agents do because of its official position. what do i mean? in russia and china it would be very hard for the agency to

conduct surveillance. or to request certain types of information. >> from the secret services? >> from the holders of information. >> ok. >> ok? and in the private sector that actually can be done. i was asked once, i thought it was the most challenge -- i'm always intrigued by how quickly a very difficult task seems to be managable. i didn't execute it so i want to be very careful but someone came to me and asked if i could do a surveillance in iran. >> iraq? >> iran. iraq is easy, in that regard, ok? >> in a denied area then? >> a denied area. and it's interesting how you can put these things together, and it's awkward, i'm telling you that it's a different proposition inside and i understand it, but there's a rich world of capabilities thought that i think -- it's not

well enough understood, i think that there's a growing awareness to it. look, the agency has immense capabilities and they say the services are good as anybody else and mike can attest to this, there's no one that gets close in terms of real capabilities, so i'm not saying this, but there's times and places that there's unique capabilities that can be brought to bear through the private sector. >> but there's technology, right and there was a time when, you know, if you wanted to really tap a guy's phone and you really needed the stuff that only the c.i.a. had, you know, these kind of fancy actuators, right and now i can buy stuff on the internet that is probably as good as what the c.i.a. can use in surveillance, is that right? >> one of the trends is that it's much harder in the intelligence community because 95% of the overt information right now is available instantaneously and dealing with the foreign government we were

the only game in town. and much of our equipment was made in house and it's inconceivable that you could keep abreast of technology from in-house capabilities. i remember, i mean, not to date myself unduly as a 32-year-old man, but the communications, i sometimes slip in my emails and write cable, and instead of saying i will do it you say will do. >> it's called twitter. >> so it's coming back. [laughter] so you didn't have the capability to do that. and i was giving a pen by technology and i was so proud of myself coming out of training, i went out and i paid someone almost half a million dollars when that really mattered and i had an invisible pen to sign the receipt and i brought it back

and it dutifully disappeared and when i sent it to accounting and they didn't tell me that the paper disindisintegrated after . so communication was so hard, and short-range communications and today if you look at your equipment from blackberries and cell phones, i was in the sinai -- >> google earth -- >> there you go, gooke gookel gi can look at your backyard and this is why wherethe law, and a lot of people don't understand the law and there's serious laws involved with privacy and what you can do and it depends on the state and you break a wire and you're violating a wiretap in the state of california if you're taping a conversation between two parties. if one party in new york knows that it's being taped it's legal. i mean there's a whole range of

issues that are legal and there's a lot of people in this space that legal be damned and that means cell phone records and bank records and there are people out there breaking the law and because you as a consumer say, look, i'm outsourcing it, i'm not responsible, you sure are responsible. >> you can do it, you can get it. >> and my partners as many of you know is a top end lawyer and we have legal counsel at our left hand, why? because this is a very hairy business that you're in and i know that both mikes are in it and they'll look at it differently than the private sector in terms of liability and legal exposure. so the short answer is, yeah, technology is huge out there and it's being -- there's a trojan horse and i'll stop on this one, i find it fascinating that here you're sitting on your computer and you can go down to the corner, it was $120, and you can buy something for your kids, so you can monitor your kids'

computer but for an extra $100 you can get a package to monitor his computer when he's off at college. now, the problem with that is that it's a nice marketing thing but you're sitting there and saying, wait a minute, why don't i use this not on my kid but use it on someone else. so the capability to monitor your key strokes by people who are prepared or don't care about the law, the capabilities are at our fingertips. and whether it's an audio device that you can put in the lap or somewhere else, there was capability that the c.i.a. didn't have during much of my career and i'm amazed by it and it can be bought in new york or from any major city. >> joe, can i have one point to what jack already made and talking about the c.i.a. being a very competent organization but there's tremendous capability in what he called in the private sector. and let me -- language is important here and sometimes we use words that trap our thinking and drive us to conclusions. let me suggest then a couple other words that we might want

to use. you have inside the agency government employees, the agency routinely makes use of what we call surrogates, ok? these are people who are culturally or linguistically, and access wise and fill in the blanks and i'm not talking about this morning's story, just in general and we use surrogates and they're routinely briefed to congress and much of the activity of the agency is done on our behalf by surrogates. and i would simply suggest to you as you think about what we're talking about here today and outsourcing and so on, keep in mind that surrogates come in a variety of flavors and that an intelligence service like the c.i.a. has the ability to choose among those flavors for different missions. so please keep that in mind. not everything that the agency has done is black and white binary world, contractor, government employee. but i'll end this point by

simply saying even when something is done by surrogates on your behalf you are as responsible for it as if it was being done by a government employee. >> we used to call agents and the world called spies and we never called ourselves spies, we called ourselves spy masters. but there is a trend that is very important, the intelligence community is now looking to try to trans-national issues that require investigative, almost police-type of gritty tactical collections, it's a trend that is changing and we didn't anticipate it, let me put the burden here, as well as we might have. and the private sector world is moving from the investigative world to the high-end intelligence collection and there's these two trends that are running side by side. many of my agents were str strac agents, ok, but they were not in