a lot of different parts of the health sector. secondly, our framework recognizes we have to recognize it was a related part of the health sector, because everythin time we work on health care reform, it goes towards hospital and primary care work force, the long term -- primary- care work force. we are beginning to see this with elder care. specific attention needs to be paid to this long term work force if we are going to develop this over the next 20 years, particularly with the baby boomers, where we are going to see significant demand in the future. third, we have to respond to new

philosophies of care. we cannot do better integrated care without the work force to do it. . failed not because they cannot have an integrated system, if it failed because the people to not know how to integrate. it is the people in those models. it is the people that need to be taught and supported and have competencies around that type of service. it is the people in transitional care. an electronic medical record will never solve our problems in transitions. if it is about the people knowing how to communicate and share information and knowing how to hand off and take responsibility and be accountable. it is about developing that support and those models. it is about developing competencies. if we do not know what a medical director has to do or a social worker has to do or a therapist

test to do or a front line caregiver has to do in various settings, how can we expect those people to produce? competence is essential. the implications for a long- term health care work force are essential. we need to expand this. i would argue without the things i talked about before, without the investment, without the competencies, it is very difficult to expand the supply. nobody wants to go into long- term care. how do we turn that on its head? just as long term care is going to be the economic driver in the 21st century in most communities, that is the sector that is growing the fact -- and to growing the fastest. where are we going to get the work force to do that? investing in work-force development, this is a serious issue. i want to say that we have to

make these jobs more competitive. that is not just for the front line, which is an abomination in what we pay our front-line givers. if you look at nurses, if you look at physicians, if you looked at social work, if you did an analysis of the wages and pay and benefit the, there is no clarity across the sector. if you do not make these jobs more competitive, it will be difficult for us to create the work force that we need. it is the people, stupid. if we want to get the quality, if we want to support economic development in the 21st century, we need to invest in the long term care work force. thanks. [applause] >> thank you, all three of you, for framing these issues in an extraordinarily compelling way. we are going to have some time

for q&a for many of you in the audience. i am going to take him moderator's point of asking the first question. as per said it earlier, we have a major provisions of long-term services in the health care legislation assuming the enactment on at least one big piece. no money goes out the door to support caregiving for five years. we have plenty of leave time to gear up the system that will be able to execute the kind of support that the class act will extend to families. there are other provisions that will kick in sooner. the class act is a compelling goal to shoot for, or least the day in which the dollars actually flow. i want to ask all three of you

what you think the nation needs to do in addition of the legislation to get ready for this day. if we begin to think about the initial next steps the policy- makers are quick to have to begin to take so that we have the kind of community-based system in particular as well as a transitional care system that you can see the opportunity is supported by the formal legislation, where do we start? we will start with you. >> i make the case in our article and i will continue to make the case, that a least in part, it is a short and long term investment in the people that do the caregiving. that concludes if i was going to write an article not our brown

family caregiving. the family caregiver what have been included. the family is really the first caregiver. we are starting to see with some of the legislation, so i think it is just the tip of the iceberg, targeted investments in this work force to prepare them and to set a standard for attracting a pipeline. in the short term, we have to deal but -- with what is, which is incumbent staff and getting people in. in the longer-term, whether it is coming into play in five years when we see the expansion of a need on the older and younger disabilities side, we need to get that pipeline ready. our educational institutions and our investments are so ask backwards in terms of preparing people to do this and supporting

them with good wages, good salaries, and good benefits. at least creating a framework for that is important. >> i agree with rob and a lot. -- robyn a lot. too often that health-care workers can be perceived as, not enemies exactly, but working against each other. they are those absolute essential partners in this. we need to do more to make families and their health care workers work better together. i could never have survived 10 years of caring for my husband at home without the health care workers that i said. in 17 years, i had five people.

that is probably some sort of a record. it was not always easy, but we work at yet. -- at it. at all levels we need a recognition, not just in rhetoric, but in reality that the patient is not an isolating -- not isolating an individual all alone in the world. from every level of service it works as an individual and needs to involve the family to the extent that it is appropriate and possible. we already have two programs that are federally funded. why cannot we put more money into them? a family caregiver support program which is fully under funded.

one of the queries on my article, it was 2.5 million for the life span rest but. it seemed too low. it is too low. it is what it is. let's work to deal with but we have and then try to get people to understand that care coordination and integration of services is not easy. it is not something to say that we can give you more money and do that. we need to figure out how to do it on an operational basis. it is fairly complicated because everything is so fragmented. let's figure out the way that things can be done and make those accountable. this is my personal thanks. why do we not hold hospitals and nursing homes and home care

agencies accountable for the medicare regulations and the conditions of participation and that say that you must have a discharge plan in place, you must do this, you must do that. when i talk about having a providers, they looked at me and laughed. poor child, you do not understand. we do not have time to do that. that is regulations. why do we not make providers more accountable to do that? they just think it is not important. >> i can do a soap box, too. i wanted to say that i think the next policy step is the community choice act. i think the class act is good.

it will mean that middle-class people will be encouraged to be prepared to take care of their long-term care needs or at least have been subsidized at some point in the future. as i said, half of the population need long-term care services lives in or near poverty. i do not think that population is very likely to pay into the program. in any case, a lot of people need services now. as long as the states have optional and not required home and community-based services, they will do what is happening in california and many other states and the times of financial crisis. they will cut programs. they will not cut institutional services because those are required.

health care reform is the community first choice option. it is still an option. an option is not enough, at least according to my coat- authors and me. it needs to be mandatory -- co- authors and me. it needs to be mandatory. it incentivizes states to do this. good. maybe some states will actually do it. it is still optional. >> also want to commend your attention to two other articles in the journal. one is an up close and personal look into the lives of two cult care workers. a piece on the debate over the class act that was written by a

founding member. that is an entry point issue which attempts to shine a spotlight on a contemporary policy issues, one that has crept up on the agenda, long after we conceived the issue of health affairs as it is published. let's open it up to questions or comments from those of you in the audience. please introduce yourself by name and affiliation, that would be extremely helpful. let's get the microphone over to you. >> i would like to pick up on things that carol ann roberts spoke of. -- and rob spoke of. we are talking about care and coordination when we are talking about the formal terrace side.

we're calling about the need to train the staff at all levels. -- talking about the need to train staff at all levels. we need to train the staff and how to do teamwork. the only way we can do care well is through teams. the only ways they make change depending on the needs of the patient. and maybe informal care working with formal care. we know that these are formal combinations exist in the community. we do not have team work and we cannot train aides to do teamwork. if we do not train nurses to work in teams what they typically pass them in long-term care and to not do much else is the general approach unless it is an unusual place. we need to think about teams and

we need to think about training beyond clinical training and in terms of communication and prevention. we need@@ and we need to bring long-term care up into the 21st century and help all of this happen. >> let's direct that to robyn. would you comment? >> i totally agree with that. i mean i think at every level we need to understand what is needed and we need to train and support and reimburse and everything needs to be tied together. right now incentives are not in line with a system that we would want and whether it's on the development of the workforce side or even, quite frankly, on the split institutional and community-based services so we definitely need to have a system

that supports the concept of teamwork at the individual level is sort of a microcosm for the way that we want this system to work. it is a real systems approach and quite honestly most of the training and education that people get does not move in that direction. areas. it is so inter-disciplinary print -- the disciplinary. it is a model about how you could build an optimal system. >> what does that mean in terms of the individuals making the systems? >> probably the folks in the room that are from the various disciplines can speak better than high. -- than i. a licensed play nurse is what

they call me. most of our training is not in that direction. in addition to that, there is not a focus in specific places in the long-term care sector. it is the notion that somehow by osmosis, the focus on other parts of the sector will somehow translate into the long-term care sector. there are some competencies that are needed. there are some that are generic. we need to figure out what both of those are. in the under 65 population, there is almost no literature, except some work that has been done on the support worker side. we are a long way from having an educational and training and support system that provides the framework for a system that we keep arguing that we want quality. it always seems crazy to me that

if it is sold heavily human capital oriented that you would not have the investment in the human capital and ordered to make that happen. >> another comment. let's take that here. >> this is bob. you said that the institution can be non-institutionalized had roughly the same needs. that is a quantitative difference. is there a qualitative difference that might require greater services? >> i am sure there is in ways that i cannot tell from the data. i can tell from the fact that certain kinds of interments are more likely to be present in

institutional settings. i do not know what in particular that would raise the cost that much, so i have not quite worked that out in my mind. >> some of the costs are room and board costs, which you do not have a community-based setting. some of us have argued that the act gets to this. we have an entitlement in nursing home care which is an entitlement to room and board services. we do not have a similar entitlement on another side. the failure and growth and assisted living has been that there is no real investment on the room and board side. there is only an investment on the server side in this program. you are not really comparing apples with apples. that is part of the problem. the big chunk of shelter is only

addressed on the nursing home side. that is a big part of the cost. if we are going to be honest about this and talk about the community-based infrastructure, we need to talk about the shelter piece of this. we do not put into the cost of what people pay out-of-pocket. their mortgage and their property taxes and whenever. they are paying for the room and board over their head and then the services are subsidized. we need to get at what the true costs are. >> we will take one final question or comment back here, please. >> thank you so much. i am a dietitian. this is a very exciting issue. and most of the literature that i read, and never see the word

dietitian. we deal with people's basic needs. i hope the when you talk about the work force in the future, you will, registered dietitians. i hope that you have a group that focuses on health and aging and there are several hundred dietitians, thousands of dieticians working in long-term care. we are looking at non-nutrition. we can see when someone is failing to thrive and point that out to the doctors and nurses. we can be a team member. we are dealing with issues. -- term care is not sexy. they note that the agent group is, how do we get entry-level dietitians to come in the golan to something more glamorous? part of that is work-force development.

>> we will work on making long- term care sexy and the next edition of health affairs. we will give it a shot. what we have heard on the first panel is that we have a long- term care system of balance. we have heard from carol loving that we have patches in the long term care -- carol levine that we have patches in the long term care system. if they say that it is the people, stupid. the investment in the people will be the key part and what makes it better. thank you very much to our first panel and to the authors for their contribution. [applause] it is my great pleasure to introduce our next speaker. she is a policy director for disability and special populations for the u.s.

committee on health and pensions. she has been the lead democratic staff person, the lead person for the class act designed to help adults with severe functional impairment obtain the services and supports that they need to stay functional and independent. she joined ted kennedy's office in 1996. if she was the senior policy analyst in the office of the assistant secretary for special education and rehabilitation services at the u.s. department of education. while working up the department, she was the fellow of the coordination for children with disabilities and served as the liaison for the secretary of education and all areas related to help them children, including representing the secretary of health's interests. we are fortunate that we have a

new health care reform debate. we are fortunate that long-term care is a part of the debt. we are delighted as all get out to welcome you here today, connie. >> thank you very much. thank you for making this issue a priority in this debate around the health-care forum. this is a tough, uphill struggle. i want to thank everyone in the audience who has worked so hard, from a family point of view, to make sure that long-term services and support stays on the agenda for long-term health care reform. i have an article that i wrote. i am here to talk about an idea and a vision that came as a result of a lot of work with senator kennedy that began back in 2003.

i will stall a bit of this notion that we had a five-year resting. in the bill. the will give you a little bit of why senator kennedy felt so strongly that this was an important issue. we had a trip up to massachusetts at the end of 2002. we went around to the western part of the state. we did stop that in number of nursing-home said and assisted living facilities. he came away with a couple of funny things. one is a joke that he told. i am not sure if it is a joke or something that was true. she told me the story as we were dropping into the parking lot of a trip that he had made with one of the presidential candidates are around the state. he got into one of the nursing homes and visited what everybody. when walking up the door, he

stopped to talk to three older gentleman who were playing cards at a table towards the front door. i am not sure what he was staring at them for. he did not recognize them. if he said, do you know who i am? he said, no. the lady at the front desk and those who all of us are, she will tell you. he thought that was the funniest thing. there was not a time that he told that that he did not break into laughter, whether it was 2002 or later on. it was a very high-opening trip for sen. he has -- i opening trip for him. he had watched how important -- eye-opening trip for him. he had watch how important it was. this is the cold core piece of

this paradigm as they were trying to put out there as a new idea ted you either have to throw it out there and see how it works or you'll never try it. in the development of the long- term services and support system, it is for individuals over 65 as well as under 65. we look very carefully at the marketability of that. we look at the connection that we will never rest this idea of long-term care. it will always be long-term services and support. it takes me back. i have a very good personal interest in this. i have seven kids that i have. the one i do have that is disabled. i know what it is like to not be able to get here until 9:00 in the morning because she has no transportation to work. as a practicing nurse practitioner, i know how

important the staffing issue is. if she is absolutely correct. it goes back not only to the philosophy of where we are in this country, because it is not the same in european nations and terms of the value system of taking care of your arm. if the other system is the educational system. i remember the first time in nursing school when you went on rotations and you go to a nursing home trade when you get hit with is how awful that particular rotation is. you hear it before you get there. you walk in and everybody says you have the bedpans over here and this is the water sank. i had been a candy striper up in philadelphia before i went to nursing school. if it is the only job i got fired from. the reason was i did not have any brothers. i have four systems -- sisters. i filled the water pitchers.

i did not know the difference between the water pitcher and the urinal. i filled the urinal with ice. there was a tremendous greene became part of this gentleman's broome. -- a tremendous scream that came out of the 10th man's -- this gentelman's room. any experience i had in that arena, it was never positive. it was almost like what happens to p e teachers when they get stuck with the special education kids. it is always dp class that the teachers do not want to have -- the pe class that the teachers do not want to have. it was what it had with his mother with rosemary.

that was not the way that individuals with disabilities in this country were looked at. @@@@h and on the other hand, what he saw his mom struggle and how hard she struggled with the dignity issue and it wasn't about nursing homes being a bad place, it was about the better place for her, wanting to live out her final days in a place that was familiar, that made the memories for her. just like people in the hospital. they don't want to stay there. we draw straws for who will work christmas day. nobody wants to be there. they want to be home and with what's familiar for them. it is not act iting nursing homes versus staying at home. hence we tried to develop a model that was a choice model, the beginning of a cash model so people had a choice to do what

works for them. not what we think would work for us. ha was very difficult was that we were spending an enormous amount of time on disability and why is it in this country that the number of people that we have with functional limitations, number of people that we -- qualified with people being poor have to be significantly disable before they can get what they need. why do we have a reverse incentive that this is what we force people into. it does not matter where they are in the continuum of life. if you are poor enough, you can qualify for medicaid. if you are really poor, you can qualify for the nursing-home benefit. why are we doing this? we took it all of the way back. i ask you to think probably about what we do in this country in terms of public policy.

if we did what we really do it in terms of forces. i go back into that room and the gerber baby is not the gerber baby anymore. the entire family is turned upside down. what happens when they leave the nursery? but happens when they cannot get an education, a job, a house? what happens to the family we are speaking about? that young person becomes an older person and they have the same functional limitations. they just happen to be a different age. we set up public systems where you have to be poor, if you have to hide your assets under the mattress. we have to do something with grandma's money. that is when we put people -- what happens when we put people for a general responsibility -- responsible people. the amount of tax dollars is a lie. what happens when the boss does

not come anymore? the first day of the school year, up to get a social security flyer. there is not enough support for young people and disabilities to get the job. you are seeing the crisis of a large number of young people who are going to be living with the implications of the autism sector, more than you even know. we have medicaid and social security and watching tv. these are in addition to the kinds of services and supports that we need. it becomes much more of a medical model. it should blend together. i heard a lot today that deals with the aging population. for this particular piece of the health care, for us, it does not about that. it is about the functional limitations that anybody has. how can you merged this population and the investment

populations together so you can create a system that works together. there is not a person in this room that can guarantee what they will look like 24 hours from now. we have not internalize that as a guy you system in this country. that goes from the education that people get, the value where you put your money, and the value and a long-term system. i had learned what a tough issue this was and continues to be to get on the radar screen for a variety of reasons. it is not global warming. short of dying, this is going to be me perianth this is the heart -- this is going to be me. this is the hardest part of the negotiations. we had to keep it a voluntary

nature and try to make it as close to a 401k opt out. how could we make it simple so it was not complicated? you could do a cash model where is your money. it is not the taxpayers' money. it is different than the poverty case model. this is an insurance-based model. these are the principles, these are the policy objectives. to work with people under 65 as well as over 65. we want that allegedly -- eligibility to be about function. even if it means being in assisted living and having the extra kinds of supports that you need to function in your day there, or in the nursing-home if that happens to be where you need to be. it is not about the perks and the mortar.

-- bricks and the mortar. we visited different nursing homes. i talked to the nurse, i would like to see your vending area. we did this in 12 areas. the coax and the diet sodas at work in that machine -- cokes and the diet sodas in that machine were up $1.50 per can. that was more than the allowance is that people had. .

they took a snapshot in time. they scored it. they had different bail be different variables the book that. to recount on that? it is a snapshot in time. -- do we count on that? it is a snapshot in time. the administrator of it can manipulate the triangle said that it works well to maintain

solvency and kick a respectable benefit to people. i believe $75 a day is a respectable benefit. it can never be less than $50 a day. the administration needs to come back with a scale. although you see this is what it is, it is not really the case. you see a reflection of the snapshot in time they took. that is what we have to work with. there will be range according to what the functional limitation is and how the model is constructed. the next policy objectives we had was about providing services. that was a big piece. one of the big choices that we had in the development of this bill was family caregivers.

we were trying to determine if family members could be reimbursed for the care they gave. that caused a huge uproar. we had discussions with members. there are people that do not understand. they are not negative, they just cannot understand. why would you want to give money to your mom? she is there. it was hard to explain that. i said because she could be working. she could be a tax payer and contributing. you do not know what this is all about in particular. there was a genuine question as to 5 which you want to pick a family person. they are family.

it is not about hanging but giving them resources that they probably could not get in other ways. that was not an easy piece to get into this bill. it does not allow you to reimburse your family caregivers. the other piece be put in here was when it all rolls out, where do you go? there is some protection for those who need help in sorting out where they need to go. that is important. the other piece is we do not want to create new stuff. we do not need to develop certain series -- certain centers in the d.c. area. what we need is documentation that you have with your hand,

you have that functional limitations and a check to make sure it continues. this is your money. we think this program will be self-sufficient on its own. it is your money. it is not a federal strings attached to it. let's use existing agencies. it apart of the independent living system, you should use that. the combination of aging and disability is perfect. we want to use existing mechanisms that are out there. we want to pull together because there are other resources. it is similar to when i did early intervention. i went to delaware because nobody was doing anything. it has the highest rate of infant mortality.

the highest rate of breast cancer. i went to the governor's office. you have a pregnant teen that could be an early registrant. you can bring all of these pieces together. use the existing community centers that are out there already. the second thing is, robin is so right about the work force. i remember what i first went to get my master's degree. i've wanted to do long-term care of kids. i went to the prestigious university. of what to create a different thing. -- i want to create a different thing. long-term care nursing home is

with older people. you cannot put that together for kids. people said it did not make sense. finally we saw that young people with brain tumors really do have long-term needs. long-term care does not have to be just about 65 years of age and older. the curriculum's in the nursing schools are not there. i have argued a medic kit institutional place that is three blocks from george mason university. why you not bringing the special ed students and nurses over there? why don't you hire some people?

there are people that are functional but because of the way society has done things, they get what and to certain places. you can kill a lot of birds with one stone. how to you impact medicaid in a positive way? what can we do -- nobody takes medicaid away in this bill. this program does not impact your eligibility for that. that was big because he did not want to go into a certain model to get what you got paid on your paycheck for. how come impact medicaid? if for example you have a fivedl's ad;'

if for some reason you need to go into a longer term care facility, if that happens to be what works for you and that's where you are, the cost is the average $600, $700 a month. this pays first before medicaid pays. they still are providing you a roof over your head and food and someone there. now quality is another issue but that's how we felt that should go. the second piece is if you access your medicaid and use it as a home and community-based option and -- and the package of options in state really include the tough stuff and the tough stuff is going to be assisted technology, personal care attendants, if it includes that then you get to keep $1,500 of

your $3,000. eed $1,500 to do other things in your house. whatever your acute bonus injury is, this is on top of it. that is how we try to leave this. the last beasley tried to do is swear senator kennedy had been all wrong. this was never meant to put certain people out of business. we did a lot of exploration as to where this has been our of the last few years and where they are right now. they need a jump-start in order

to work. this program is not the end all be all. it is to go together with the long-term care products that are out there. we had the five years in here for a reason. it was to make sure that the government that the participation they needed. we want to see how many people we have in here before we make promises that we cannot keep. you really need to know what is going on. if you need to pull the plug, -- that is why we have this language in there. we are confident that you have to give it a shot. we believe people will vote for this. what we actually tried to do is say that is what the five years

are for. i would be smart about three crafting rapper brand -- wraparound products. there is a lot less risk to me covering the first five years than at the end. i would do it wraparound for people like connie 117 kids. this will help me all along. at the point where i may be significant, i and -- this will not help me there. they make it so that it is affordable. the question is what happens. there are ways and we will continue to save. we want to work with them.

they have increased their market share 25% by doing something like this. that is a new struggle. there are lots of different things you can do. the objections to the bill, interesting to watch as i look at the whole thing, the obsession with the finance industry. there has been so much focus on financing. half the time you have to wonder if it is financing, because everything is projection. you do not know how many people are going to sign up. he did not know what the degree of disability may look like years from now. it may go down. you do not know what that degree of disability will be. you do not know what the adverse

selection rate is. some wondered what happened with the long-term care program. i was told there was people that we thought were going to die did not die. what ever the projections were about adverse selection had to be a lot different. none of us know about it. until you do it, you will not know the types of the variables that will matter. a lot of focus on the financing model, we wonder what that is about. if you get below the financing and talk about what that 24

hours is like for an individual or what it is like for that individual who significantly has something on the autism spectrum. what is it like for them when they cannot get a fair cuts. when you get below the financing, you have to think about what it is like. i think people get the little they afraid of that. can you keep a meaningful benefit and keep it solvent long term? that is what we want. adverse selection, you are going to cover everybody?

we are going to have episcopal big enough to enjoy that. we do not have the overnight -- overhead cost for this. there are things that you do not need to do. it attracts the middle-class population because we had the financing peace. we had to get the money for the premium. one population is kids in college. one was to make sure we do something to raise the level of awareness with the young people that you cannot guarantee.

you do not know if you are going to hit the front end of that but the board in the sand. -- bookigie board in the sand. for a parent, it would behoove you to want to pay that premium for them if they cannot pay it themself where pay some of that, because you are in the window where they are not going to get the full protection that you would normally get if something happens. that is a phone call home.

it is during the most volatile decades of people's lives. we felt strongly about that. individuals who are under poverty and working. to i get medicaid or try to continue to work? we gave it to them for $5 for that purpose as well. you have those folks covered on the sand and the middle class people covered as well. we have to see who is in the pool. we have talked to 10 ashbery's.

every single one is different. except for one guy who says you need to know all of the projections. all we have to work with its current existing data. the last issue is to say we felt very strongly that when we talk to parents, grandparents, and young people in school, they think this is important. many of it is tied up in how it is marketed. when i first started with the government's, they had a fair were you son of for your benefits. the flier for long-term care head a woman sitting in a nice

garden. that did not register with me at the time. at the flyer as someone who fell off a ski lift in colorado, i may have felt differently about that. this is about you getting a functional limitations not necessarily age related. the marketing of this together -- it needs to be marketed in a way that a guess the message out. marketing along side of what the other industries are doing. bad as important. we do not want to put anybody out of business. we want to jump-start a flat market.

it is not disability insurance. this is money over and above your income. this is not disability. that is clear. we do not know where the employers are. there is no mandate on employers to contribute. they may want to and they may not. that is how we got where we are. it is a new and different idea.

i was with senator kennedy for so long. throughout his life he would call. it was not about his sister or his mom. he realized how important it was that the care givers came to his house every day and allowed him to have what is most important in his life which was to get on that celled every day. it became of a more will issue to a people when he actually experienced it. the final phone call that i got from him not too long before he died was this has to happen. we have to put in the hands of people what they need in order to have the choice and decisions about how they want to live and how they want to die. that is the background on how we

got where we got. we gave it our best shot. frankie. -- thank-you. [applause] i do not know if we have time for some questions. >> yes indeed. [unintelligible] >> let's say somebody drops out and wants to rejoin. is it advantageous for them to see if the premiums come down or should they stay in? >> we@@@@@ @ @ @ )'@ @ @ @ @ @

and continue to pay your premiums, can you get out or get in? that was a big problem. we spent some time on that.

>> we have a question in the back. >> be a very clear and people being interested in having a systems with peril. in the thoughts about that? >> there is a big piece about help that is available for family members who are working with someone who cannot do it themselves. there is a big piece in there on that. one of the pieces that we have in their -- who are the people that are going to do the pay --

care? we have asked that when they submit their state plans for medicare, they have to do a survey in their state to get a sense of what is the work force look like based on what they are offering. i think we will have to pitch in part on that. we really want to help. you need to know who is out there. that is important to community choice. you cannot make the case to the state government unless you say you do not have any people out

there. you may not have anybody trained. you need to have that to make the argument to be able to support this stuff. if it will be interesting to see how much resistance we get on this. >> one more question. >> >thanks for coming to speak here today. i hope we all take a moment to understand this. so much of health care reform [unintelligible] is -- this is the one piece that

i think as a transformative quality to it. it brings a new model to the table which is important if we are going to involve. i have a question with that in mind. what can you think are the strategies to help the long- term insurance industry see the value of this? that is an important piece of the transformation. people change jobs over time. do you have a sense for how managing my benefit kind of a for a one question. -- 401 question.

>> that was one of our questions. the other was how to simplify this in a way that an employer does not have to fly, so much data on different people but how to make it more simple. the easiest way to go is to have a whole the federal plan. there has to be a place for everybody according to kennedy. this could be good or bad. we tried to write it broadly enough. we think it is the better way to do it.

there are gap products that are included in the statutory line. i think in all of the stake holders at the table at the very first meeting. the the the but the oversight should be fine. it is targeting people to say of a. that is my suggestion. >> another is a meeting going on as we speak. what do you think the cuts that it is going to survive the final bill? >> that this tough.

don't you have the camera on for me to answer that? the focus is on if you have on one bill but not the other. what we are careful to watch is the structure and the basic underpinnings from the policy objective does not change. this was not above giving a free-lance ticket to the administration to say crack whatever you want. they have lots of room to move. that is not about here is a ticket to create something new and different. we want to make sure that the contract that is in here does not get pulled apart. there are a lot of providers and people and different groups on

board. we will keep a pretty good eye on that. we believe it should go. we believe it will go at the end of the day. hopefully it will be in a form that everybody will benefit from. kennedy was so clear. if you're going to do health care reform that is not just about acute illness and and triggered if he did not give them what they need to maintain a function and prevent them from slipping backwards, you have not done anything. the long-term care piece is help

in our eyes. they are split philosophically if it is a disability bank or a long-term thing. he was cleared to sire if you're going to do health care reform you have to do acute injury and prevent people from slipping backward. decide what you are doing. i remember that. if we can control it at all, it will be she -- it will be in. >> i have a feeling that when we are in that place where we hope there is a lady at the front desk that remember our name, there'll be a lot of people out

there who will remember yours. thanks very much. [applause]

ow live now to the carnegie endowment. >> and teaching courses at johns hopkins. i am also a non-resident scholar here. this is the first seminar of the year. the title is "happy new year." the world economy in 2010. there is a question mark behind

it. the meaning i think will become clear. the recession we are struggling to get out of this unusual. that is the reason for that? behind the happy new year. -- that is the reason for the question mark behind happen here. these are all heavy hitters in the subject. in order, sitting here -- uri dadush is the director of the international economic programs here. before that he worked for a long time at the world bank or he was responsible for research and trade policies. and for the publication of the influential will economic

outlook publication. next to him we have philip suttle who is the global head of economic research at an institute here in washington, responsible for developing their economic work. and for product develop them. he is the author of many articles published. next to me on the left is jorg decressin, the head of the world economic studies division in the research department of the imf dechlorinates the outlook. he has led a the imf policies division and a mission to israel. his published widely on capital

markets, reform, and stability, and european gross bank. he is also the author of a recent book about integrating europe's financial markets. on my immediate right, desmond lachman. he served as managing director and chief emerging markets strategist at salomon, smith barney. prior to that he was deputy director in the imf, in the policy review development department, and has written extensively on the global economy, u.s. housing market, u.s. dollar. his work at the american enterprise institute is focused on global currency issues. on my far right is hans timmer who is director of the world

bank's development prospects were. under his management they produce the annual publications, global prospects, developing finance, and motrin reports. in addition there is a wide range of forecasting publications that come from the world bank under his supervision. you see we have a panel of heavy hitters on the panel for this seminar. the procedure is slightly different than normal. there will be no lengthy presentations or slides. instead i will ask five different questions. i will ask each of three of the panelists to address each question. they do not know ahead of time which questions i will ask. that is deliberate in order to create an atmosphere of real discussion to make this summer different from the conventional

presentations. after that we will have an opportunity for discussion. that will be for the audience and questions also from the larger audience. the first question -- i will ask three panelists with three minutes each to address it. the first is, as is announced in the program, why did 2009 to not to be better than expected? the persons to my address the question are hans timmer, uri dadush, and jorg decressin. jorg? guest>> was 2009 better than we expected? let me begin with the

observation that 2009 was not a good year. it was one of the greatest recessions we have ever experienced. it is true that we have avoided@ positive growth we see at the moment is largely driven by temporary factors. by all means this was not a good

year even if growth was positive. if you look the forecast, and i cannot talk in detail, because there will be published later on january 21, then you will see that the kind of recovery we're talking about is relatively muted given the size of the decline we have seen. then probably later in the discussion we will talk about the major risks out there still. going back to the question, why was 2009 much better? and would answer with the observation that actually 2009 political reawas a year that grl huge problems and will take several years to solve them. >> thank you. uri dadush? >> first of all, i agree with

hans that 2009 was an awful year. at the same time if you reel back to six to eight months ago we were considering the possibility of the following question -- the bush and now looks remarkably different. we have just finished the third quarter and do not yet have full data for the fourth quarter yet. production is on a sharp recovery path. one of the fastest growth rate recorded.

before i actually explain this better than forecasted of come, there's a marked acceleration in developing countries. if you look of a consensus forecasts made in the middle of 2009 the industrial countries by march are doing better. but only a little better than anticipated six months ago. on the other hand, in the emerging markets particularly, china, india, brazil as the largest, but several others, the exploration has been

significant. the numbers are to% stronger estimated for -- to% stronger for 2009 than estimated in the middle of the year -- 2% stronger. four reasons i will mention briefly. first of all, and the policy measures that were taken were unprecedented, both the financial rescue, fiscal stimulus, and monetary stimulus. they have a virtually no precedent. the aggressiveness of the policy response was extraordinary. the second reason is these policies by and large worked. not a foregone conclusion.

many were very controversial. but if you look at the numbers, the spreads, etc. -- any number of indicators, you have to say we are in enormously better shape then nine months ago. the third factor is the fundamental strength of asia going into this recession and the fact that they were able to respond aggressively. a lot of it had to do with policy in asia. basically the banking sector and household sector and the corporate sector in asia was in very good shape. and has been able to provide a major source of support for the world. and at the fourth and last

factor is that the world avoided the worst contagion effects. what am referring to? to financial contagium. we avoided a serious massive debt crisis. at least so far. this crisis and the past really exacerbated the problem. we avoided under the contagion heading a surge of protectionism. we have had quite a bit, but it has not become a generalized phenomena as it did in the 1970's. >> the last person addressing the first question is jorg decressin.

>> let me first explain what we originally expected to happen. about one year ago, january 2009, we forecasted that the advanced economies would be moving out of recession sometime in the middle of 2010. what has actually happened is quite different. if you look at the advanced economies as a group they posted a growth rate of about 2% in the first quarter of 2009 already. this is a good deal earlier than we expected when year ago. at the same time, traditionally used to be said that if the u.s. catches a cold, then emergency economies catch the flu. it has been different this time.

now in the second quarter of 2009 and a third quarter you observed growth rates of around 8% in them as a group. it's a big difference between asia and latin america. but, hold it is a picture a good deal better than we expected. why is that the case? uri has already alluded to some of the reasons. going back one year" we all did was to underestimate the debt of contraction of the global economy the materialized in the fourth quarter of 2008. we were all puzzled by the deep fault and attributed it to the fear global depression. so, to confidence factors which are very hard to gauge correctly. we have had a very strong

policy response to this fear. exceptional monetary measures with interest rates cut close to zero in many advanced become is with unconventional support for banks made available. we see this as a stimulus deployed. we also see recapitalization of banks and guarantees to get the financial sector running again. this has changed fundamentals on the ground, but also confidence. it is very difficult to forecast confidence. this recovery is off to abuttera better start than expee year ago. >> we're doing well on time. the second question, do you expect the recovery to continue in 2010, and if so do expected to be l, u, or v shape?

i would like to address this question first to desmond lachman. >> you left out letters like w and square root sons. i'm in the camp of people like marty krugman and marty feldstein, expecting the recovery to be extremely subdued. i commit talking about this both at the u.s. and global levels. i would be rather concerned in policy-making circles before us all with a massive stimulus we have had a fiscal stimulus unprecedented and monetary ease -- 2.2% growth in the third quarter of the year -- the big

question arises as to what happens when the stimulus fades? it certainly will fade in the second half of 2010. there's a real risk for double- dip recession . there are extraordinary strong headwinds against u.s. recovery right now. the most notable is the situation in the labour market. not only do we have 10 percentage points of americans out of work, but if you include those working part-time on an involuntary basis and nose discouraged. and if you look of the labor department's -- we are at 17.5%. that will exert a strong downward pressure on wage and income growth.

without that growth there is no possibility of getting a meaningful recovery in consumption. additionally, what federal reserve officials keep alluding to is that we are on the cusp of another big downturn in the commercial property market which could cause real problems in the regional banks. we have a wave of foreclosures the will still hit the residential market. we could get declines in housing that continue. you have a banking system still dysfunctional. they are cutting back on credit, a special to consumers and small and medium-sized enterprises. i do not see the basis for a sharp recovery in the u.s. a v-shaped recovery is wishful thinking.

what i'm really worried about is the situation in europe. what we have now is real tensions emerging in the . i'm not just referring to greece, but to portugal, spain, and ireland. all of those have really got trouble. they're going into big it downturns with double-digit deficits. it will be a huge drug for the global economy. i would not exclude the possibility of a full-blown crisis in those countries and your head. regarding japan, it makes the u.s. budget situation look very prudent. they of the debt now moving towards 207 gdp and are fighting

with deflation. don't expect them to pull us out. out. in short in the camp of and l-should recovery at best. >> thank you. >> will the recovery continues and what shape will this recovery be in? >> i always get confused about people asking about the shapes of the recovery. i am not certain if we are talking about growth rates or levels. if you look at this broadcast, most of the broadcasts -- we see that we have modest growth in 2008. and it was very negative with

the global growth in 2009 and some of this was already determined -- with a return to moderate global growth in 2010. what is interesting is that the discussion is -- most of the discussion is not about the issue of what will happen next. we take this for granted and most of us would take this for granted. it is really what comes after this. this is the major issue. and this raises a history -- a history of issues that we will come up to in the next half hour. this is the medium-term outlook. i have presented myself as a relative optimists here.

and i have highlighted the aspects that are very important. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] unfortunately, our industry tends to be very extrapolate of. we tend to think when things are going well there will continue to, and when things go poorly, that will continue. i'm not sure that is the right way. here are four factors. first, the synchronized nature of the upturn. we have a synchronized downturn very powerful and the fourth quarter of 2008. we have seen a synchronized upturn about six months in duration. will continue for another six months. it will feed on itself as most do. for the second feature, a point i think very important is the

growing role of the emerging markets in leading the expansion. it is not just asia. it is latin america. it is not just east asia. it is parts of south asia as well. even in emerging eastern europe there are some stronger economy is beginning to show signs of vigor, such as poland. the third factor, a big unknown, is the turnaround level to occur in the corporate sector. one way of thinking about the downturn of 2009 is we had corporates adjusting very aggressively. in so doing turn their potentiafootage a position to of borrowing to substantial surplus. maybe that position will remain for the next six months, but my

suspicion is that will increasingly turn into more corporate activity. whether on the capital spending side or the employment side. the test me to my fourth and final point. we will get a turn in the global employment picture. -- that takes me to my fourth and final point. desmond is the high unemployment and weak labor market as a reason for extended weakness. i would turn it on its head and say as the economy picks up in the u.s. we will see a turn in labor market conditions. we already see it in the high- frequency indicators. it will become global. in some of the hiring surveys we look at we see the global employment picture potentially looking much better by the middle of 2010. that is not saying that unemployment will go away.

we seem to be coming to an election point. >> you have heard two very contrasting views. i'm curious uri would you feel on whether the recovery will continue? >> my view is that of course the recovery i believe will continue certainly in the course of 2010. i'm much closer to phil, probably even a little more optimistic, then to desmond. i have four factors to say that

we have in the advanced economies at least a u-shaped recovery, not necessarily a sharp v. but" easily .5% better than consensus. my four factors overlapped acquitted agree with phil's. the first is the push by the emerging markets. -- my four factors overlapped quite to a great degree with phil's. they did not have a massive banking crisis or a financial

crisis of the classical type. they suffered a large external shock, but by and large their financial sectors remained whole. if you look of the three largest emerging economies -- china, india, and brazil, they are basically somewhere near their long-term growth path. even in to those nine there are a little below, but not much. the underlying momentum in the part of the world is very strong. war is driven by domestic demand. less by exports. -- more of it is driven by domestic demand.

the second factor is that i am very impressed by thought the speed at which the non-financial corporate sector has reacted here in the u.s. there's a lot of evidence that employment has been cut very rapidly and more significantly than warranted by demand. this is reflected -- and so has investment in inventories. this is reflected in much better than expected earnings. earnings of non-financial corporates. but only in the u.s. by europe. this suggests to me along with

many others, unexpected turn in the employment picture. especially given the latest numbers coming from the pmi's that suggests we're still on the strong expansion path. the other two factors devi will point to that go beyond or are different from phil's -- policies remain supportive in 2010. a large part of the stimulus package is still to be spent. rmb -- only about one-third has been spent. financial support to the banking system remains.

i'm encouraged by the fact that the largest banks in the u.s. and europe are repaying the government. unless you are convinced that the new boards and ceos of them are suicidal you have to assume they're looking at their businesses. the third and most important factor in policy is i believe the power of monetary policy has increased very significantly in the last six months. one year ago you could argue that we were in a liquidity trap. lowering interest rates did not matter much because risk aversion was so extreme. all indicators of risk aversion have come down. the historically low rates are now having an important positive

impact on economic activity. and will in the foreseeable future for 2010. finally, just briefly, we're coming off a situation where all deferrable expenditures were deferred. we deferred capital expenditures, cars, as is, the buildup of inventories. all you need is for some improvement in those deferrable items compared to the large declines from to the ninth to seek rapid growth for 2010. >> my next question deals with something various panelists have already commented on.

that is the difference in recover performance between the established, industrialized countries and the emerging economies. my question really is, how do we explain that and what is the outlook for the near-term future for these two major groups? the first person is hans timmer. >> phil said and that the recovery is a synchronized in nature. that of course is true. we were talking about a global downturn and recovered. the fact that is synchronized has a lot to do with the functioning of the markets. given that it is interesting to see there are major differences between the emerging economies and the rich ones.

and their major differences within the developing world. half a year ago in a panel here and made two points. one is that the recovery will be relatively muted given the size of the fall in production. the second observation was that the strength will depend on the emerging economies because they had become the driver of growth in the world. that is especially true for emerging asia. if you look at their contribution to growth, not their size -- their contribution was more than 50% during the time before the crisis. more importantly, a contribution to growth and investment is

significantly larger than that of the other countries. this crisis was characterized by a sharp movement in investments. a huge fall came from investment also. the recovery is driven by the turn up in production in emerging asia to a large extent because of the stimulus in china. if you look at their import growth that is probably faster than in history in recent months, much faster than their export growth. it pulls the region of the recession also. their production levels are now higher than before the crisis. in the high income countries russia's still 12.5% below before the crisis.

despite the fact of the this synchronized to see a big difference -- despite the fact that it is synchronized. within the emerging economies there is a major difference become a recovery we see in asia is not there in central europe. despite the fact that poland is relatively solid and performance. performance. there are still many countries what we see there is that the job -- the drop in production has no clear signs of recovery. the picture in latin america is very different, and the production was also very strong. in a country with very sound

policies, we do not see the recovery just yet. and what we are concerned about is the low income. they were not impacted in terms of the crisis in terms of a fall in production. this was much more the fault line in, then the commodity prices. the impact of the crisis is much more in the medium brown for those and not so much in the short run. they do not have the space to respond and many of the mechanisms that are important to the low-income countries are there in terms of the dynamics of poverty and the fiscal positions. so this is a very diverse picture. what is positive is that in emerging asia, they are playing the role that was also forecast.

>> not just emerging asia, but other large economies. ng economies are doing better. my next panelist is desmond. what explains this remarkable difference in performance between larger emerging economies in 2009 then be established, industrialized economy? what lies ahead? >> before i address that i would just like to go back to some points that have been raised earlier. something being missed is the very different nature of this recession one of its features of is the damage it has done to banking. imf estimates suggest we have still got losses that have to be recognized. the u.s. and european banking

sector or cutting down on credit. despite what the fed is doing we have a reduction in credit particularly to consumers and smaller enterprises. research done by roebuck and reinhardt and their 800 years of financial follies suggest that we have major crises of this sort you're recoveries and tend to be very shallow. you have risk of having another leg down. another point i would like to make is on the employment situation. certainly you're not going to get unemployment continuing to rise. but we will have for 2010 is economies like the u.s. being characterized by unemployment average close to 10%. as long as that exists you have downward pressure on and comes.

that will make it difficult for recovery. as to emerging-market, i greet the fundamentals of many are a lot better than the industrialized ones. most notably, better public finances. the deficits are much smaller. the levels of debt or something like half. in the industrialized countries they are near 100 but the emerging ones are close to 50% of gdp. those in asia and let america -- latin america have learned from past crises is better to have their finances in better shape so they can weather a recession

like this well. the emerging markets are benefiting from a couple of factors i am not sure will persist for 2010. if michael is correct that you won't get much global recovery, that is. commodity prices have boomed in the way we have not seen in the postwar period. there also benefiting from risk taking returning on expectation that you will get a v-shifter cribbing that if you do not get a v and you get risk-shaped recovery returning, you'll begin to see problems are emerging in places like eastern europe. you did the ukraine, bulgaria -- the eastern periphery of europe

is likely to be in trouble. -- you do get ukraine and bulgaria and those types in trouble. china has surprises and a positive way by its rapid growth in 2009. -- china has surprised us in a positive way. the question i have is whether for 2010 we will not see problems emerging for the global economy from the chinese situation. i am referring to much of the stimulus package going to build up additional excess capacity which will come on stream at a time that europe and the u.s. will have high unemployment levels. that may not be a positive

development for the world economy. you will see a heightened protectionist measures. you already have them now. if china will provide additional supply, that will make life difficult for the u.s. and europe. >> my final panelist on this question, what is the explanation for the difference between the large, emerging economies and what lies ahead? >> let me talk first about similarities and then talk about differences. on similarities, if you look at growth rates in advanced economies for 2007 they were somewhere around 3%. in to does a 9 there were - 3%. that is a 6% difference.

-- in 2009 they were - 3%. i would much rather have 2% growth they and - 3% growth of the emerging economies. that leads me to the dissimilar it. fundamentally, the structural growth prospects of the emerging economists are good deal stronger than those of the advanced ones. in fact if you look up what happened to the emerging economies during the downturn they did much better than in previous downturns. why is that the case? many are tapping production potential that has remained bottled up for many years beforehand. that is via market-from the reforms.

they have learned from past mistakes and typically have a conservative approach toward regulation of their financial sectors. the third aspect is in terms of market policies and have also had a conservative approach. as a group that went into the downturn with a broadly balanced budgets. they had plenty of ammunition to practice counter-cyclical policy. all these things together make for a fundamentally stronger performance than that of the advanced economies. this is largely the way it should be. in economiceconomics over israel long periods, typically poor countries grow faster as long as the but the right conditions in place in economics historically over long periods.

there is also a good deal of [unintelligible] you have examples that are fairly successful even in these economies. contrast this with the advanced economies. we're looking at very high, rising unemployment rates the much of this year which will weigh heavily on growth. this will contrasts greatly with those from previous decades. what is the repercussion of these differences in their outlooks?

capital increasingly is knocking on the doors of emerging economies looking for investment opportunities. the growth fundamentals are stronger and yields are higher. in ways there policies have been quite prudent. >> the third question i would like panelists to address even though you may have already hinted at it or spoken explicitly about it is" really major risks do you seek? and what degree of confidence do you have for your expectations? the first person of like to address it is uri dadush. >> ok, first of all there are downside risks to this forecast. let's take a consensus.

there are both upside and downside risks. i want to stress that. it is not just about downside risks. the second thing, the gamut of possible outcomes is more narrow than it was between six and nine months ago. essentially because the likelihood of relapsing to major recession is much lower. upside risks first, and then the downside risks. the upside risks relate upside"phil said about

synchronized recovery. it's a long history of forecasting records that suggests there is a lot of inertia and economic forecasts so that we miss turning points. when things are going up we tend to underestimate the speed. when things are going down as they did until recently we tend to underestimate that speed at which the go down. we are in a turning point of situation and it is a synchronized recovery around the world which countered the upside risks which are a strong synergistic effect. the implication is you want to worry about the inflationary

pressures building up. you want to worry about the asset bubbles building. this is a country by country situation. it is difficult to generalize. i did want to emphasize the upside risks. the downside risks to the forecast primarily come from economic policy. here i would highlight two things. one is the withdrawal of stimulus and how will happen, and whether the private sector will be by then strong enough to support the economy going for it. the other is protectionism. -- support the economy going forward. on the withdrawal of stimulus i

think the risk coming from the fiscal cider relatively modest. first of all, effect in the advanced countries has not been that large. second, this is a very sticky policy lever which will not turn on a dime. the way the withdrawal of financial rescue is happening is minimizing risk. in the sense that it is responding to market situations. it is allowing the banks to come and say we do not need all this help. i think that is the right way to do it. where de risks are much more significant is in the inevitable increase in policy rates.

history teaches here again that when you are in the situation inevitably will uncover weaknesses. we're in a position where the world economy continues to be fragile. /)@ @ @ @ @ @ @ @ @ @ @ @ @ @ @ the way this is done is very critical. a word about protectionism. so far, we have kept this under control. i have become more and more worried about the china-united states relationship, this was tires and the chinese have done their share as well.

and here, that situation, this needs careful watching. i could say more about this but i will stop right there. >> the next analyst who will address this question, is the institute of international finance. you are emphasizing the hopeful aspects of this situation. >> one issue that is important is the issue of timing of all of this. one thing is that in the near term, there are more upside risks than downside risks. this is what we have been talking about, with the policy attraction inventory. as you look further out, is easy

to see a lot of downside risks. the discussion is very much a function of the horizon that you are focused on. if i can have my cake and eat this, i emphasize the near-term strength. returmedium term vulnerabilities. i will focus on the dollar bill is. the second half of 2010. some of these have been touched on. it seems like four is the magic number. i would like to say hi to all the viewers in poland who we seem to be pandering to at the moment. [laughter] the first which no one has mentioned yet is oil. if you think about what gives you a global recession -- it so

happens that oil and lehman brothers came together so is difficult to distinguish, but if we see a live above it dollars per barrel, that would be something to add significant medium-term downside risk. second, the fiscal issue. we can talk about it all day. . . we should be prepared to imagine the unimaginable. this is not turmoil in the spanish debt market, but the u.s. treasury market.

the issues seem to become so high that this raises concern. one important thing to keep your mind on is the rating agency. they seem to be attempting to avoid problems but they will have to understand that many of these dynamics are going into the smaller countries, and they are not sustainable with the current debt rating. the third downside risk is in the euros zone. the concerns i have are not just about the budget deficits, this is about the tough problems that we have in that region, during a time when we are trying to implement or maintain a fixed system in a difficult time.

when this is tough and the unemployment rates increase, he that is very much of the challenge that europe is facing, not just for the next few quarters or the next couple of years, but for the next four or five years. the final issue that you may expect, working for this organization, is the issue of the banking sector. he mentioned this earlier in the context of the damage that was done to the banks. the effect is being proposed to stop another crisis, and this is legitimate with the medium-term objective. this has been proposed to early, and this is possible. this could actually act as a

severe restraint on the ability of the financial system to finance the recovery. the banks -- of the banking and finance system to finance a recovery. recovery. if we get aggressive if this stops the bank activity, this will affect things in the near term. >> my last question -- presenter on this is desmond lachman. i will rephrase his question since most of you have answered already. are there any upside to? [laughter] >> there are two of sites that i can think of, one of which is that you get a sharp decline in commodity prices, especially oil. that could be really helpful. that could be equivalent to a tax cut for the industrialized countries.

that could be helpful. the other upside risk that i can think of is that policy -- policy makers miraculously get their act together and engage in proper coordinated policy response. i think that is the top of early withdrawal from stimulus package as the downside risk. the upside risk is if we would really started talking about a stimulus package in the united states that was coupled -- and i stress this point -- that was coupled with an indication of how we are going to deal with the united states' medium term budget problems. we will see the largest buildup in peacetime public debt. how we deal with that is critical. i was talking about an "l" shaped recovery, i was not

really focusing on the downside risks that i see. i would say some of them have been mentioned and have a very good chance of materializing in 200010. -- in 2010. the middle of 2010 is the short term. the long term is beyond 2010. the full risks that i would indicate -- the four risks that i would indicate, and i would put them in the order of the way i worry about them. the first is the situation in europe. philip correctly mentioned parallels with the convertibility plan. these countries really have to be dealing with budget deficits that are in double digits in the middle of a recession without having an exchange rate

mechanism or independent monetary policy to deal with it. that is a risk. that is a train wreck waiting to happen. the noises we are getting about greece really should be the canary in a coal mine. spain is the key one that i'm worried about, and portugal. i think we could really get a full-blown crisis in the eurozone. the second i would refer to is oil. i would just note in passing, and i do not want to delve into politics, but the u.s. is fighting two major wars in the middle east and iran is on its way to nuclear weapons. who knows what could happen in the middle east. you could get a supply disruption. that could be the death knell for the global economy. the third list that i see and in which i notice the federal reserve officials keep talking about is what is happening in

the commercial real-estate market. you've got $500 billion of commercial real-estate loans coming due in 2010. if those loans do not roll off, as many of them will not, we will get another leg down in the commercial real-estate market. that will have a damaging impact on the regional banks of the united states. half of their portfolio is in commercial real estate. the last thing we need is to get a credit crunch in with the regional banks, which supply credit to the small and medium -- medium enterprises, which are most of the employment. the fourth risk to which we have alluded is the idea of protectionism. 2010 is an election year in the united states.

a veteran of some of persists in fixing it as exchange rate now -- if china somehow persist in fixing its exchange rate now, it is really a red flag in anticipation to having protectionism ramping up. if we've learned anything from the great depression and, that is not very healthy. for the prospects of getting out of the mess we are currently in. >> we are running slightly over time, so i'm going to ask three respondents to my last question to really discipline themselves. imagine yourself in a meeting where you have a chance to address the g-243 minutes. -- the g-20 for 3 minutes. what is being done and what has already been done to promote the recovery in emerging economies?

if you wish to select any particular country or group of countries for recommendations you are free to do so. the first panelist i was asked to address the question is george decressin -- jordag decressin. >> the first -- tichenor them down to three. the first is to shift from public sources to private sources. the second is to engineer a shift in demand from countries that have had large increases in asset prices and housing booms and have relied on domestic demand to stimulate growth. the two countries that have mostly relied on exports in order to -- to stimulate growth to countries that have most about on exports in order to stimulate growth. and the third challenge is that we need to repair the financial assistance in many advanced economies and up the same time

also affect challenges on the supply side of these economies. realistic and financial services will be less important to asset growth in the future and the resources that are free from the services will need to be employed gainfully elsewhere. these are the three challengers. given where we are right now, what would we recommend a policy makers do? first, fiscal policy in our view needs to stay accommodative. at this stage, private demand is not yet strong enough to carry this recovery. and there are, however, as some have alluded, risks and building up in a sovereign and debt markets and they bear watching. what does this mean for the strategy that governments should adopt with respect to fiscal policy? it means we need to stay supportive now, but the same time address medium and longer

run challenges. i give you a great example. if in the advanced economies you were suddenly to link step toward retirement ages to life expectancy, right, this exist in some economies, but not in all. economies, it would do a lot in terms of addressing future fiscal imbalances, expanding -- expanding expenditures in the future and it would give markets the assurance that the expansion that we see right now in fiscal policy will be contained, that the debt we are building up right now will be rolled back. but at the same time, this type of measure would not depress demand today. demand today. it would still we have to deal with the long- term challenges. with respect to the monetary policy, unemployment will be rising higher, and they will

stay, they did. this is what most of the central banks are doing right now. the third challenge is dealing with the financial sector. the good news is that the banks are paying back with the governments have meant to them. what we are concerned about is that they have rebuilt the capital and they are restarting the landing. progress is being made, but at this stage there is more to be done with the banking sector this year, as a strong supporter of growth in the future. you can see the economy going into a bottle might be for the demand picks up once again. we have to shift the demand from the countries like the united states, to the demand in other countries where this has to be brought down.

this concerns the number of emerging economies. the basic consumption is coming through, with the social safety nets and the non-tradable sectors in the economy. this is a complex agenda. this is good news for the coordinating global policies. >> thank you. next, the chairman of the world bank. you have the audience for three minutes. >> thank you very much. >> the biggest challenge for policy makers, including these in the g-20 is to transition from short-term firefighting, to

medium and long-term growth strategies. this does not mean that firefighting is not important because you can present -- if your house burns down, this does not mean that prematurely you should stop extinguishing the fire. stop extinguishing the fire. but with the turnaround of the global economy at the moment, with the fact that the acute phase of the crisis is over, we really have to focus to the medium term because with firefighting you are not developing the new terms. there are three reasons, i think, by that tradition is so important. the first one is -- why that transition is so important. the first one is that there are series of limits to short-term -- there are serious limits to short-term stimulus programs.

there is still some plested -- some fiscal stimulus in the pipeline. in the u.s. we believe spend one-third of the amount allocated. this year we could spend another one-third. it should be clear that by spending the same amount as last year you are not generating growth you are just preventing, that there is no negative impact of a withdrawal of the stimulus. and we have seen that in the 1990's i just with fiscal stimulus you are not creating growth in the economy. it is only very short-term debt kind of a policy is effective. -- that kind of a policy is effective. but already now, we're very worried about the dollar carried trade and the asset price inflation that might come in several countries. you have to quickly find other sources of gross.

those are the first reasons, a limit to the kind of policies that have been put in place until now. the second reason is that it is very important to restore confidence in the global economy. and you restore confidence not by continuing to spend as if there is no tomorrow, but by being very medium in the credit crunch. by putting on the table fiscal policies that are really sustainable. by making sure you can take away the bottom ask for further growth, that there is enough money for the infrastructure projects that are needed to accommodate do -- accommodate the growth. and a third reason that i think is the most important one is that this is the kind of crisis that has the potential to create lasting structural changes. this is not a normal prices were you have to look for a turning point which is very difficult to miss at the moment and then everything is ok again.

this is the kind of crisis that will change the global economic landscape -- landscaped probably forever. it is true in financial markets. it is true also for production patterns. this is the kind of crisis were whole industries in certain countries can disappear and suddenly lose it against industries in emersion economies. that means that as policy makers -- in emerging economies. that means as policymakers do have to open the way to create new growth. in that respect, i'm very worried that policy makers cannot get a consensus, for example, of effective climate change policies. those are actually the kind of policies that are needed to create a much more stable and predictable environment and there is no decisive action there. and if there would be

predictable and decisive action, you could create in high-income countries new growth industries, the so-called green industries, and you could create new opportunities in the sense that there is a new way of securing -- of creating energy security. it is not just about climate change. it is also about the global policymakers been able to guide the longer-term road forward. >> thank you, haunts. -- hans. philip suttle, you have the last word. what are your recommendations to make the economy more sustainable and more robust? >> first, i agree with most of the points that have been said. i think it is fair that what we need to maintain stability of policies, both monetary and fiscal for the very near term, there are clear indications and costs that we have been talking about for keeping on pushing.

i think the will quantitatively easing strategy, which both the fed and the bank of england in patika there have adopted, is frankly, a bit of an experiment and we need to be cautious as we look out over the next year or so about how the strategy is implemented. i think there are some considerable financial risks associated with what both central banks have been doing. but i think to try to summarize a lot of what has been set, i think there are three sets of principles, if you like. i would play them out today to the g-20 ministers here. they're all very obvious point, but the first is, make sure policy is forward-looking. do not try to fight the battles of the past two much -- too much.

i often hear policymakers making statements about what needs to be done and it is what they really wish they had done in 2004, 2005, 2006. well, that is too late. you did not do it. you messed up and let's move on. [laughter] let's think about what can be done from a forward-looking perspective, taking the existing structures that is given. the second is to recognize consistency and try for consistency. that is another way of saying, try for policy coordination. i think there're two consistency concerns that i have to give you illustrations. one is the obvious one of china running one monetary policy, the u.s. running and other military -- other monetary policy and trying to find a fixed rate exchange between the two. you need to have some give-and- take. in that context, you need chinese currency flexibility. that is an illustration. that is not my main point.

but it is an illustration of at the moment, the g-20 policy statements are loaded with consistency issues. and another illustration picks up on a point that he just made, he just said, the banks need more capital, but they must land. actually, what really must happen according to some of the new rules that are coming out, is the capital ratios will be going up. the simplest way and most like the way of that happening is for banks to restrain asset growth. the reader want one or the other. it is very hard to get them both. do not aim for an inconsistent outcome. in for consistency. and mike -- aima for consistency. and my third point, which picks up on one of hnas' points is that we need to recognize that the world is in flux here. there is a need for supply-side

flexibility. that means giving up certain things as well as gaining things. i think that hans' point about green jobs and the shift to the climate change issue is a perfect example. >> thank you, philip. i would like to thank all of the panelists for their contributions to these five crucial questions. we have about 40 minutes left for discussion and i would like to open it up to questions from the audience. i would like to invite you to state your name and affiliation, wait for the microphone to a rise, and state your question very concisely. and if possible, identify the panelist to whom the question is addressed, otherwise, i will therefore you. [laughter] -- i will do that for you. [laughter] >> first, thank you very much to the moderator and the panelists.

this has been a very rich discussion. i just cannot resist following up on numerous, let -- comments about protectionism. i was wondering if you could elaborate a bit more about the risks. i would like to give you an opportunity to address that issue with a bit more time. >> the first point is that protectionism has been kept relatively under control. virtually all the g-20 countries have engaged in protectionist measures of various types. in the united states, you know, the buy america provisions, and there have been a couple of other issues, and if you go across the g20 -- the d-20, you

will find a number of these -- the g-20, you'll find a number of these in just about every country. this remains a continuing phenomenon. there has been very little of across the board tariff increases. there on specific products, etc. -- they are on specific products, and etc. part of this is wto disciplines. but a buteo -- the wto disciplines a lot more on developing countries ban on their lunch countries. they could raise taxes on water and still stay the buteo compliant. the buteo disciplines are still out there because of the possible threat of dispute settlement. but i think in the end -- wto disciplines are still out there

because of the possible threat of dispute settlements. but in the end, i think it is not the threat of the disciplines that are out there that can be gotten around in various ways. it is about two things. it is about the memory of what happened before and it is about the political pressure. i happen to believe, and i wrote about nine months ago on this issue, that if we had not managed to control the global recession and the possibility of depression that occurred that the protectionist pressures would have become very great and in some cases, perhaps, overwhelming. this is one important factor. if you believe desmond, then be very concerned about

protectionism. it is very contingent, in my view, on the state of the economy. let me say one more thing. while i agree that we need exchange rate flexibility in china and we need some exchange- rate appreciation in the asian countries in general, and this will make it a lot easier to manage the growing gap that exists i think that to make this sort of central question at the moment -- this has a number of risks. one of them is to add to the protectionist rhetoric and so on. and the other s to take the heat off of r