is in place in every state is that you have an infrastructure where the federal government can command an insert itself to support that response. that sort of framework is totally absent. . >> you need the coordination

from the united nations to leave that response. that makes it more difficult, because the folks coming in that need -- that no that terrain, which again, that knowledge could have been facilitated by existing plans on the ground, which again, or nonexistent. >> i don't think the rest of your constituencies are going to support that, so i don't think we have any option but to try to rebuild the haitian state structure, one that is more resilient, more capable than what we have today are had a year ago. therefore, i do believe that state building is the core mission of the post relieved facef phase.

>> in "the washington post" today, it says haiti government its minimal 8, less than a penny on each u.s. dollar is sent to leadership. that is almost certainly true. none of this money that is pouring into haiti is going to the government. it is not my area of expertise, but just a few examples from the last two weeks in haiti, before the hurricane, looking at the budget of money going to the un presence there, the budget for information technology was larger than the combined budget of the ministry of health and the ministry of education together. during the hurricane were we

told the roads were blocked and there was no one there, that was not true. the roads were not blocked, and the director of public health was at his post, but he had no tools to do any thing. right after the recent earthquake, i was with the minister of communication. she did not have a phone. i gave her my phone. this kind of absurdities go on and on. the university hospital, when we got there late at night, at 10:00 at night we found the director of the hospital and the director of nursing who had herself just had a branch of the day before and had lost their family and home -- just had a grandchild the day before. they were there at work, but they have to have the tools. i would say that in addition to appropriate skepticism about the capacity of the now devastated

government to implement some of these necessary interventions, we also need a healthy dose of skepticism regarding the way over aid has been funneled so exclusively to the non- governmental sector. >> so of the recommendation is more aid to the government officials to give them a chance in addition to the ngo's and the rest of the work. >> we thank you immensely. i have been joined a good relationship with this man -- enjoyed a good relationship. even prior to the events of two weeks ago, having grappled and worked in haiti going back to my peace corps days, even absent over what has occurred in the

last two weeks, and countless occasions, those of us on this committee have worked various times to try and provide assistance, and we have had the obstacles of refusing to provide assistance to governments that were questionable in their effectiveness, or the levels of corruption that existed in haiti. the point of eating -- dealing immediately with the problems of getting resources to get people through this time, and to suggest the idea that given the magnitude of this tragedy, this offers an opportunity to do some things that people have talked about for decades in haiti, yet for various reasons have been unwilling or unable to grapple with. that is to start about the long- term ability for this country to become self-sufficient. that is the opportunity we have been offered, not just our country, but the community at

large. the question is, how we do this? we ought not to get into the debate of whether we ought to continue to provide for the immediate needs, but we need to get into the discussion very quickly as to how we are going to emerge from this tragedy with the opportunity to do some things that we have never been able to achieve before. if he asked me who i should call in haiti if i wanted to talk to someone about this, my impression is, there really is not anyone to talk to at this point. we are down there basically wandering around trying to provide assistance where we can. we are introducing legislation today that deals with the issue of pushing back the time in terms of the barriers to trade. it goes to the heart of what paul farmer is talking about, getting beyond the immediate need and getting to the question

of how we can start to provide -- i don't know why we are not suggesting that just putting people to work to clean up rubble. you could be paying people not to dollars or $3 a day and doubling their income just to create the arteries so assistance can get to the people. is it to what the suggestion to be talking about at least temporarily, some sort of -- 2 wild a suggestion to talk about some sort of receivership? some sort of international receivership of this country to begin to provide not only the immediate relief, but start to provide assistance for them to build. i am fearful it will go right back to the handful of entities that have run the show for years and years. a small group of families run the country. we know that at the end of the day. i am fearful will go right back

into that situation again, only the conditions will be worse. what about the idea of some sort of receivership for haiti for the next couple of years, so we can provide the immediate needs and start to provide that kind of support and assistance to construct a set of institutions that would allow them to provide for their own self sufficiency? >> there are provisions for that. in cosimo, and in water to other situations like that -- in kosovo and east timor. we have done that in cases where there were -- were there was no government. i don't know of any case where we have displaced an existing

government that was universally recognized. i think it would be controversial and difficult to simply impose an international administration in haiti, unless there was a pretty clear demand within haiti for that kind of -- there is a clear demand in the haitian american community, but that is a little different than a clear demand in haiti. there are precedents, it has been done, but frankly, we do not do this all that well. the un missions in kosovo and east timor have been successful, but they have had difficulties. this is not easy to do, so i do tend to think that a supportive role, clearly the international

community will be providing most of the public services in haiti. they already were before the conflict, but went -- whether you want to formalize that, i would be little skeptical. >> i think that given the extremity of the circumstances, i would not be surprised if you would hear support on the streets in haiti the same way he did among haitian americans. i think there must be another way to do this accompaniments of an extremely fragile civil service and government. the problem as we have discussed is all the seesawing policy over the last two decades. it has taken a toll.

if the policy is we are going to bypass completely the public infrastructures and only support -- we are harvesting some of that now. that is why the government was week before january 12. i am not qualified to comment on receivership. i do not know enough about it. i think there'll be resistance to that, and i think we can find a means of a compliment. the example of gainful employment for the hundreds of thousands of people who need employment. i am troubled by the title cash it is so absurd. we were to put significant amounts of our support into cash for work programs around watershed protection,

agricultural endeavors, and make sure there's gender equity or focus on women in these efforts, we could have substantial transfer of resources to the poor and needy, and if we do that with an eye towards strengthening the local government structure, i think that would be better received. people are at the end of the rope, as you said. >> my only comment would be to refer to the group that was put together. as i mentioned in my testimony, those recommendations are very much alive and could be very useful as we move forward. >> i want to thank our witnesses. my sense is that haiti is a place where we have an opportunity.

there is universal support for the people of haiti. all of us in some form or fashion have been touched by haiti. i can absolutely say i would not be in the united states senate today without having been to haiti in 1982. i know there are americans all across the country that have been involved there and certainly are touched and saddened by what has occurred. it does seem like we have an opportunity to get this right. i appreciate the analysis that has been given and also appreciate the comments by my friend from connecticut. there is no question in my mind that we need to do whatever is necessary right now as far as supporting the resources in. the international community is in charge. there is no question that all of our efforts in the past to do good things in some ways

undermine the government's. every volunteer group, every ó ngo, does what it does in haiti in spite of the government. we work around the government. that is what everyone does. the notion of building the government up in some form or fashion, that is an important concept. i think your reference to rwanda, which was dramatically different leadership -- it is a great example of what can happen. as i listen to the very good analysis about some of the things that need to occur, i still have difficulty understanding how we are going to transition from what we all need to do, whatever it takes now, to causing haiti to actually take the lead. well maybe receivership is not the right word to use, i have to tell you, for a period of time,

i think something far more draconian than just us working behind the scenes is going to be necessary. i think we are saying the right things as far as concepts, but i find it difficult to believe with the type of leadership haiti has had -- we see people here in haiti flourish under good government. we know that government has been an absolute disaster for generations in haiti, and unfortunately it has held wonderful people back from reaching their potential. i sense that we are going to have to do far more draconian things to cause the country to function. i wish you would expand a little bit more. the concept you have laid out our great, i just do not know how we get from a to b without taking a much stronger role as

far as rebuilding. there is tremendous opportunity just in how we lay out infrastructure and change the city'ies that can never flourish in their existing condition. there are things we can do that the government of haiti will never have the ability to do in the short term. >> it is important to understand that haiti, we are now superimposing a relief and recovery operation on top of an existing post conflicts stabilization and reconstruction operation. there has been an international operation in haiti with 10,000 troops and about $1 billion a year of assistance since 2004, which was actually beginning to make a difference. it was set back first by a series of hurricanes and in this latest and largest disaster. there are in fact reform programs that are agreed

internationally and in many cases with the haitian government that are in place and were beginning to have effect. we now need to redouble our efforts to complete those reforms. we need to evaluate whether there are new and more ambitious reforms that could be put in place as the result of the greater flexibility it -- flexibility of the patient system created by this disaster and the initial resources. we need to make sure that the new operation operates synergistic plea with the old operation and the old structures that were set up. i do believe that somebody in the u.s. administration needs to be made responsible for the overall american policy toward haiti, integrating their policy with other governments, representing it with the haitians, and working with the congress. i think the congress needs to

provide that individual with the resources necessary and the flexibility so that they can choose carefully those targets for assistance of that sort. i do think that in the question of infrastructure, bricks and mortar stuff, our experience in iraq suggests that simply building things for people is of little enduring value if they have not invested -- if you do not have a contractual plan in which there is a funding stream for maintaining that infrastructure what you have built it. we build a bunch of electric plants in iraq. iraqis were not charging for electricity, so there was no resources stream going to maintain those plants once they were built. when the world bank bills and electric plant, they require a plan that has built-in and resources streams to sustain the project. we need people who know how to do these things to take the

lead and set the#jhz criteria, establish the conditionality and use our political influence and our money to make sure those conditions are met. >> thank you for your testimony. we seldom candidly have a way to make a lot of difference on this committee. i hope that somehow or other, we will keep a focus on this. the fact is that this is an opportunity for us to continue to put pressure, to make sure that more draconian steps are taken. >> i could not agree with you more, senator. i do not disagree with you at

all. i think it is going to take a tough hand of leadership. in true senate fashion, we are drifting along here. if we can extend the time a little bit. >> i prefer to think of it as an opportunity to finish my questions. i want to thank each each of you for being here and for your insight in this human -- is to rid the human tragedy. i share my colleague's ratification at the outpouring from not only the united states, but from the rest of the world to try and respond to this tragedy. my first question before i ask more about the long term is, if each of you are satisfied that everything is currently being done that can be done with the

short term relief efforts. dr. farmer, you talked about how slow the relief efforts are because of the lack of infrastructure. is there more that should be done right now to address those relief efforts? >> thank you very much. i think there is a mishmash between the degree of interest and resources that we as a nation are putting in and the ability to absorb it, which is the fruit of failed policies in the past. in the middle of an emergency like this, you are not going to spend a lot of time diagnosing a problem. i would say yes, there is more we can do, but it is very specific. for example, you bring insurgents, but you have to also bring in supplies and long-term nursing, etc.

i used the word accompaniment. the relief work is not going to be over in the next week. if we have the patience to accompany properly the various actors on the ground, which include ngo's in church groups, but also the remnants of the haitian public health and public education space, we will have to reward. if you had a division between the ngo's in haiti and the international financial institutions like the world bank, and you said to the ngo's, part of your job now is to find a way to help accompany this shattered public infrastructure back, and 85% of schools and 80 or private. that is one of the reasons haitians are not very literate.

they are like lottery schools, because you take your chances when you go there. it will take a patient kind of relief accompaniment. the same for health care. i would like to sound a note of great optimism. for the first 15 years of my engagement in haiti, we did not do this the right way. always there sunday morning and it was spotless. there were people lying on the floor who had intended to. all the beds were full. i was very proud. what we really needed to do, which we did over the last decade, was to say how can we do the same thing in the public health sector with the ministry of health? we created thousands of jobs and strengthen and rebuilt the public hospital.

i endorse that not just because we didn't, but because it is an effective way up addressing this in the public sector. it is more difficult with agriculture, but at least for health and education, ngo's have to do this. one of my colleagues said that the haitian government is looking for $3.4 million just to pay rent for office space. who can deny that they have no office space? all other federal buildings collapsed. haiti does not want to be dependent on foreign aid anymore than rwanda does. by 2020, there'll be no foreign aid going into rwanda. i have been working a lot with the inter-american development

bank, and last fall, all the hotels in port-au-prince were full of people who had come in to invest in haiti. you cannot get a hotel room. we were going to have a meeting this week in the montana hotel, which unfortunately has collapsed. it was for investors. there is good news out there, it would can just marshall our resources. >> to follow-up on what senator corker raised, if you look at longer-term, is the first priority governance, assistance with governments in haiti? if that is the case, who should we look to to take responsibility to do that? is it the international community, the united nations -- is that the entity that will get

that done? is it oversight from this committee and our state department and the united states that will get it done? is it pressure from the haitian american community? it is governors, who takes the responsibility to get that done -- if it is governments? >> the general political support of the parliament, i think the un is the best place to do that. in terms of resuscitating ministries like the education and transportation and agriculture ministries, it is probably somebody else. it may vary. a single country may decide to fund public education in haiti. japan or the united states or someone else will say that is our sector, we will do public education. it has to fit in a broader framework, or the world bank may

take a major ministry or recreating downtown port-au- prince as their focus, and become the main funder and coordinator of other funders in that. i think the united states can be very influential, but an american czar who sits in haiti in makes these decisions would be counterproductive. >> let me thank our witnesses. i think this is been a very helpful hearing. congress is looking at our foreign aid programs in order to use foreign aid more effectively in carrying out u.s. objectives internationally.

in a previous hearing, i raised the issue on gender issues to help many of the countries we do business with. the record on gender equality is very poor. how can we focus our foreign aid program to be more effective in carrying out that objective? we look at haiti and look at our previous commitments in that country, we were not terribly successful as it relates to the governance issue. what can we learn from haiti as we look at trying to restructure our foreign-aid programs internationally? what can we learn from rwanda? i was impressed by the observations of progress being made in rwanda. how do we learn from our experiences so that we not only focus on what needs to be done in haiti from the point of view of long-term sustainability, and

on the overall strategy, what can we change to try to avoid another haiti in the future? >> i believe that change you are referring to has to begin inside haiti. when we talk about governance and leadership, again, we have to remember that this country rose to become independent back in 18 04. i am personally skeptical about trusting entities that in my opinion have not delivered. all you have to do is look at the response or lack thereof

from the leadership in haiti. as we move forward, i believe that we need to partner with leadership that has the utmost integrity, leadership that puts haiti and haitian people first. >> here is the dilemma. the governments are what they are. we can try to impact them and the way they develop the institutions of democracy that can protect the people from not only natural disasters, but from abusive practices of the government. that needs to be part of our strategy. my point is, how we structure of our foreign assistance budget that does not become a tool for anti-american intervention in the country, but uses the right incentives so that when we put money into a country, we know we

will get to the purposes we intend? >> we do not have a very introspective, reflective foreign aid bureaucracy. the defense department spends a lot of time and money trying to find out what it did wrong. after action report, tactical and strategic lessons are a major element to military learning. if you look at the military in iraq, dc 30 substantial improvements because they reflected on what they did wrong. the british aid agency spends a lot of money on research and analysis and gets people to tell them what they are doing wrong and how they can do it better. there is no money in the budget for that kind of retrospective. this is a self-serving analysis. that is what the rand corporation does. we do it for the pentagon all

the time. >> i do not work for the rand corp., but i want to echo what you say as a volunteer. i am lucky enough to be a volunteer in haiti and rwanda and have a job at harvard. what you suggest is not at all self-serving. there is no real critical feedback loop in foreign aid. we can easily develop that. we can use ranch or universities or other people who are not just trying to be part of the scene, but are saying how can we improve the quality of aid and not have us looking back and saying haiti or rwanda -- prior to the genocide, rwanda was called the switzerland of central africa. there is a book about how the

aid that was going in, mostly from france and europe, actually set the stage for the genocide. some would argue that the massive amounts of aid going into haiti have served it birtley to weaken food and security. -- have served inadvertently to weaken food and security. what are the ground rules and job creation for women and a grant to do with help, small business investment, agriculture improvements? half of some of the big grants goes to overhead. i have done studies at harvard looking at major grants in health care where more than 50% does not leave the united states.

i just think that is way too high. integrating this into the district plans of these places, into the local plants, is difficult but critical. >> i would just like to ask a couple of things. some haitians have complained that they have not heard or seen very much of president preval since the earthquake. is that a fair criticism? >> chairman, i have watched quite a bit of news on this tragedy. i have not seen presidents preval but once, and what he said was that he lost his home.

again, understanding the magnitude of this earthquake and what it has done, i can certainly understand that there would be an initial paralysis in any leader, but from my perspective, crises are were good leaders to find themselves. >> there are a number of questions we wanted to air publicly that would be very valuable, but what percentage would you say of port-au-prince has to be rebuilt now?

>> just as an eye witness, the majority of it. >> are we talking about 75% or 80%? >> nedney by%. the standing structures -- 75%. you'll have of building our home upstanding, surrounded by collapsed buildings. beck'>> it boggles the mind juso think about the level of clearing of debris, where to put it, and then to find a place to rebuild it. you are looking at several years of major investment, construction process, correct? >> maybe receivership is the wrong term, but i do not know how to get this done with any semblance of normality in terms of the approach. this has to be -- it is almost

like a d-day invasion. you have to have so many moving parts coordinated. you have to come in with the new city planning concept. you have to have a vision for what you want the place to look like, and what kind of government buildings and where to put them. i do not see any entity at this point, or movement, that suggests to me the global community is coming together a realm that kind of organizational effort in a way that it ought to. -- are around that kind of effort. >> as someone who has been opposed -- someone who has underlined the dignity of the people of haiti and their struggle for 200 years for basic social and economic rights, and

underline some of my own country's previous and less than truthful engagements, i still agree that you are right. this task is so massive, we need the international a-team on this case working with the haitian people. in haiti, i went to a meeting where i saw 40 or beat the haitian architects and urban planners working under a tree. they are trying to work. >> i am convinced this can be coordinated. i believe it can be pulled together. i have to go and vote, so i apologize. >> it can be done in a way that empowers haitians. i do not think they would balk at the notion that there is expertise and a level of planning necessary

[unintelligible] i think he can develop this. if there is an active effort not to just leave it all to the outside contractor, but you are bringing the haitians into the rebuild sufficiently, you can create wealth and confidence and building their future. otherwise it is a diminishing sense of urgency, a diminishing sense of attention, and you wind up with an unsustainable situation. we are not going to let go of this. we will stay very bogufocused.

there is a willingness to put a lot of aid into it. the best chance for haiti in all the definitions we have given it is to take this moment and create the kind of joint, internationally cooperative recoreffort to create sustainab. we will talk with the administration about, and we look forward to following up with you. we will try not to burden you with written questions. >> it is refreshing to not have

the pressure coming from both sides of the aisle. this is a very hopeful sign. >> i am convinced that unless we get this thing into a bigger coordinated concept, we are just buying into the same old same old, and then everyone will just walk away. i think there is a uniqueness to this challenge, and hopefully we can take it into hand. i apologize, i have to get over there for the vote. we stand adjourned, and i thank you. [captioning performed by

national captioning institute] [captions copyright national cable satellite corp. 2010] >> on this week's prime minister's question time, questions on the economy, the iraq war inquiry and this week's eight conference in london. sunday at 9:00 p.m. eastern, here on c-span. the senate today approved raising that debt limit to a little more than 14 trillion dollars. senator confirmed ben bernanke for a second term. the house is not in session today. republicans are meeting in baltimore for their annual legislative retreat.

president obama is scheduled to attend a meeting tomorrow. >> saturday, the history of executive power, from george washington to george w. bush. author john yoo talks about his book on "afterwords." >> listen to c-span radio in washington at90.1 fm. it's also a free app for your iphone. c-span, covering washington like no other. >> now look at the 2010 federal budget outlook. the cbo is projecting a 1.35 trillion dollars budget deficit this year. kent conrad chairs this 1.5 hour hearing.

>> the ring will come to order. first we want to welcome the cbo director to report on the latest cbo estimates. before we begin that, i want to publicly thank the director for the really extraordinary effort he and the people at cbo have made over the last year with an unprecedented workload. i know firsthand that he and his people have worked nights, weekends, repeatedly, under extraordinary time pressures and with real complexity. i must say, even though there have been times i disagreed with his views, sometimes strenuously, i absolutely

respect his independence and his integrity. i think he is -- he has won the respect of people on both sides of the aisle who have seen that he has tried to call them straight. that is the best that we can ask for, and it really is high professionalism from director elmendorf and the people at cto. we have had our disagreements on things that matter a lot to me, but what is important is that we do have an independent scorekeeper that has integrity. certainly he has proved that. let me just turn briefly to my remarks about the subject at hand. the jobs situation across the country is very much in the

front of everyone's mind. if we look at the changes in payrolls going back to july of 2008, we can see we reached a peak of job loss in january of 2009. in january of 2009. virtually every month we have seen some improvement. and in november we actually had no jobs lost, no net jobs lost. in december, 64,000. so a dramatic improvement from the 700,000 that were being lost a month in january. the same pattern can be seen in terms of economic growth in the economy. first quarter, a negative 6.4%. improving each quarter.

so the fourth quarter according to blue chips, we can anticipate growth in the fourth quarter of last year of 4%. some are now saying it may be even stronger than that. so things have moved from the edge of the precipice, i believe very strongly. we were on the brink of a global financial collapse before actions that were taken by the congress, the president, and i would include the previous president. because the actions of his administration at the end, i think were part of the response from the government, both the administration, the congress, and of course the federal reserve. taking actions to provide liquidity to prevent the collapse. those actions did forestall, i believe, what would have been the worst recession since the depression. but it leaves us with a long-term budget outlook that is

truly daunting. and we cannot flinch from that. we cannot deny it. we have to face up to it. the ten-year budget outlook, worst-case scenario, is as this chart depicts. we see improvements for the next five years. but then it starts to turn and move the other way. if we don't act. and act, we must. the gross debt now is approaching world war ii levels. and let me just indicate that i know the economists like to focus on debt held by the public. i like to focus on the gross debt. because for budget purposes, all the debt has to be repaid. and debt can only be repaid out of current revenues. and so, the fact is, if we're looking at what is going to have to be dealt with from a budged

standpoint, we have to consider gross debt. those borrowings from the trust funds are real. they must be repaid. they are backed by the full faith and credit of the united states. and when i look at the gross federal debt, i see it exceeding 100% by 2020. and in fact, before that. the world war ii high was 121.7%. now, to put this all in perspective, other countries, industrialized countries do have higher debt to gdp. japan, i believe at this point, is in the 189% of gdp range. but there are real consequences for that. i believe japan is about to have their debt downgraded. because people see the risk of debt of that magnitude. more alarming and more concerning to me is the long-term trajectory. and if we look at the long-term

budget outlook from cbo, we see debt with all policies extended, all current policies extended. reaching 400% of gdp by 2059. there's no one that thinks that's a sustainable course. so anybody that tells us, well, you don't have to do anything, you don't have to worry about these things -- we can just continue as we are -- they're not telling us the truth. and this isn't just my judgment or the judgment of senator gregg, the ranking member here. this has been the testimony before this committee, of this head of the cbo, of the previous head of the congressional budget office. of the head of the office of management and budget. of the former head of the general accounting office. the chairman of the federal reserve. the current secretary of the treasury. of the previous secretary of the treasury. so it's critically important that we honestly describe our

circumstance. our circumstance requires action on the debt. mr. president, or colleagues,let me quote from cbo on the budget outlook. the federal fiscal outlook beyond this year is daunting. accumulating deficits will push federal debt held by the public to significantly higher levels. with such a large increase in debt, plus an expected increase in interest rates, as the economic recovery strengthens, interest payments on the debt are poised to skyrocket. without changes to federal fiscal policy involving some combination of lower spending and higher revenues, rising costs and health care and from the aging population will rapidly drive the size of the federal debt. now, i don't know what could be more clear. i don't know what could be more

clear. yesterday, or perhaps the day before, i used a chart on the floor that showed the historical context of our spending and revenue. that chart showed that current revenue is the lowest it has been in 60 years. we look at last year and this year. revenue as a share of the gross domestic product, the lowest it has been in 60 years. spending, the highest it has been in 60 years. as a share of the gross domestic product. the difference, the difference between a revenue level of about 15% of gdp and an expenditure level of 26% of gdp, that's an 11-percent gap. we would not kwaul for membership in the european union with deficits of that magnitude. they don't permit it. they don't permit entry for countries that have deficits of that level.

yes, i think their limit is 3%. so, look, this is the reality that we confront. the president was right to focus on this last night. and it's our responsibility to focus on it as we put together a budget for this year and the years beyond. with that, i call on the distinguished ranking member, senator gregg. thank you, mr. chairman, obviously i second everything you've said about the problems we have as a nation, and that we are confronting relative, especially to the debt, as you have said, the debt is the threat. and it's more than a threat now, it's a cataclysmic event facing us, which is basically going to give our children a nation they can't afford and a lower standard of living than we have had in our generation. i want to put one chart up. i think it's the most telling chart that i think i've seen in recent years. this chart takes the cbo numbers and projects them out. what the chairman was talking about are the two, is the line

that's through the middle. the axis line. which shows the red line at its height and shows the blue line, the red line being spending. and the blue line at its nadir, which is the taxes line. and that's where we are today. this massive gap. which is generated in large part by the recession, but also because much of the spending is recessionary-driven and obviously the drop in tax revenues is recessionary-driven. but what it also shows in stark terms, is that when we return to some level of normalcy, to use i guess it was herbert hoover's term, no, it was harding's term -- when revenues return to their historic levels, we still have a massive gap. because spending is not returning to historic levels. which makes the obvious point,

that the problem is primarily a spending problem. even if you get your revenues back to where they've been on average, for the last 40 years, you don't solve our problem and we continue to pile on this debt. and we get to a position regretregret ably in the very near future, where the debt is so large, that like a dog, we won't be able to catch our tail. we won't be able to afford the interest payments on that debt. the world community and our nation will be suspicious of our capacity to pay the debt down. which will lead to an inevitable crisis of significant proportions. relative to the value of the dollar. relative to our ability to sell debt. and relative to the productivity of the nation as we have to dramatically raise the cost of government on the productive side of the ledger. so this is a problem of inordinate proportions. and it is in large degree, a

spending issue. and thus, we have to start addressing it. on the spending side, obviously there are others who wants to address on the revenue side. but i believe we've got to address the issue where it lies and this chart unequivocally points out that it lies in the fact that we're taking the size of the government from its historic level of 20% of gdp, up to 25, 26, 27, potentially uptoo 37% of gdp. how do we address that? last night the president related that he wanted to freeze on discretionary. that's good language, but not a lot of money. i mean it's a lot of money for us individually, it would actually be a lot of money for the state of new hampshire. but in the context of what we're facing in deficits, it's not a lot of money. the lot of money comes on the entitlement side, not on the

nondefense discretionary side, and that's where we've got to set our course and try to do something. unfortunately, i didn't hear anything about controlling the entitlement accounts and in fact on balance, if you take all the new programmatic ideas that were put on the table last night. and there were a whole series of them that were put out. i haven't added them up yet. but i'm sure they far exceeded by a factor of what i suspect by four or five, as what would be represented as saved by a nondefense discretionary freeze. so actually spending under the proportionals from last night go up again. and we need to face up to this it's like the old tv ad for the framm oil filter ad. you can pay me now or pay me later. but the end is coming fast. it's on the horizon and closing fast. i'll be interested to hear from the director what he thinks the closing date is.

when does the nation hit the wall? we know that japan is hitting it right now. their debt is about to be downgraded, it appears. and when are we going to get to that point? and is it not a predictable event right now, that that will occur in our nation. and when that occurs, that's when you basically stepped off the insolvency cliff. and it's very hard to catch yourself as you fall off an insolvency cliff. so i'll be interested in hearing what the director says. i also want to join with the chairman in thanking him for his extraordinary work and his team's extraordinary work over the last few months. incredibly intense period. with the scoring of the health care bill and the integrity and fairness of cbo really gave the whole exercise a lot more -- well it made me feel comfortable that we were at least getting good numbers on a bad bill.

and we were getting honest and fair numbers on a bad bill. and that's what cbo should do. it should be the fair umpire around here and you've done an extraordinary job of being the fair umpire and we thank you for that. >> director elmendorf, just before you begin, i want to amplify something that senator gregg said. i have had people suggest to me that any commission that would co i think we have to look people in the eye and say yes, there is really no alternative. medicare is cash negative today. the trustees tellus it will be insolvent in eight years. so security is cash-today, and in your report of the day before yesterday says it will be cashed negative every year except two

for the future. you say in your report it will go cash negative and a permanent basis in 2016. anybody that says you did not have to make any changes to those programs, programs i strongly support, and i know i lost my parents when i was young. i got so security that helped me go to college. so i understand its importance in people's lives. i understand the importance of medicare in people's lives. i have seen in my own family. . .

@ @ @ ,b number of people who are eligible for these programs, you're going to have to do something on the revenue side as well. so i again welcome you to the committee. and again, thank you for you and your team's extraordinary work your team's extraordinary work during t many months. >> thank you, mr. chairman and senator gregg for your very kind words about our work at cbo. exactly one year today i testified before this committee for the first time. as the newly-minted director of the congressional budget office. and on behalf of all of us at cbo, i want to express the appreciation for the support that senator conrad and senator gregg have shown for our work over the past year, it means a great deal to us. to you and all the members of the committee, i appreciate the invitation to testify today about cbo's annual outlook for the budget and the economy. under current law, cbo projects that the budget deficit this year fiscal year 2010 will be about $1.35 trillion.

or more than 9% of the country's total output. that deficit would be only slightly smaller than last year's deficit. which was the largest as a share of gdp since world war ii. we expect that revenues will grow modestly this year. primarily because we expect a slow pace of economic recovery. we expect an outlays will be about even with last year's level, as a decline in aid to the financial sector is offset by rising outlays from the stimulus package and other purposes. debt held by the public will reach $8.8 trillion by the end of this fiscal year, or 60% of gdp, the largest burden since the early 1950s. looking beyond this fiscal year, the budget outlook is daunting. again under current law, cbo projects the deficit will drob to about 3% of gdp by 2013, but remain in that neighborhood through 2020. by that point, interest payments

alone would cost more than $700 billion per year. moreover, maintaining the policy embodied in current law in those projects would not be easy. it would mean allowing all of the tax cuts enacted in 2001 and 2003 to expire next year as scheduled. and not extending the temporary changes that have kept the alternative minimum tax or amt from affecting more taxpayers. but as you know, many policy-makers have expressed their intention not to let current law enfold as scheduled. if instead they extend it all the 2001 and 2003 tax cuts, index the amt for inflation and made no other changes to revenues or spending, the deficit in 2020 would be twice the size the deficit that we project under current law. debt held by the public would equal 87% of gdp and be rising rapidly. the baseline projections also assume that annual

appropriations will rise only with inflation. if instead policy-makers increased such spending in line with gdp, which is about what actually happened over the past 20 years, the deficit in 2020 would be two-thirds again as large as we project under current law. in sum, the outlook for the federal budget is bleak. to be sure, forecasts of budget and economic outcomes are highly uncertain. actual deficits could be significantly smaller than we project or significantly larger. we believe that our projection balances those risks. one set of factors contributing to the bleak budget outlook are the financial crises and severe recession, along with the policies implemented in response. analysts define the end of a recession as the point at which output begins to expand again. by that definition, the recession appears to have ended in mid 2009. however, payroll employment, which has fallen by more than

seven million since the beginning of the recession, has not yet begun to rise again. and the unemployment rate, as you know, finished last year at 10%, twice its level of two years ago. unfortunately, cbo expects this the pace of economic recovery in the next few years will be slow. household's spending is likely to be dampened by weak income growth, lost wealth and constraint osen their ability to borrow. investment spending will be slowed with a large number of vacant homes and offices. in addition, although aggressive action by the federal reserve and the fiscal stimulus package helped moderate the severity of the recession and shortened its duration, the support to the economy from those sources is expected to wane. employment will almost certainly increase this year, but it will take considerable time for everyone looking for work to find jobs. and we project that the unemployment rate will not return to its long-run sustainable level of 5% until 2014.

thus, more of the pain of unemployment from this downturn lies in front of us than behind us. the deep recession and protracted recovery mean under current law, lower tax revenues and higher outlays for certain benefit programs. cbo estimates that the automatic stabilizers will increase the budget deficit by more than 2% of gdp in both 2010 and 2011. in addition, cbo projects that last year's fiscal stimulus package will increase the deficit by roughly 2% of gdp this year and by a smaller amount next year. as the economy recovers, and the effects of the automatic stabilizers that legislated policies fade away, the budget deficit will shrink relative to gdp. however, as i have noted, the projected deficit remains large throughout the decade, even under current law. and if current law is changed in some way, that more closely matches current policy, as many people perceive it, the amount of government borrowing relative to gdp would be unprecedented in

the post-war period. a large and persistent imbalance between federal spending and revenues is apparent in cbo's projections for the next ten years and will be exacerbated in coming decades by the aging of the population and rising costs of health care. that imbalance stems from policy choices made over many years. as a result of those choices, u.s. fiscal policy is on an unsustainable path, to an extent that cannot be solved by minor tinkering. the country faces a fundamental disconnect between the servicings that people expect the government to provide, especially in the form of benefit payments to older americans, and the tax revenue they're prepared to send to the government to finance those services. this fundamental disconnect will have to be addressed in some way, if the nation is to avoid serious long-term damage to the economy, and to the well-being of the population. thank you. i'll be happy to take your questions. >> well, first of all, thank you

for that. sobering, but truthful. i wrote you sometime ago and asked you to analyze and have your people help analyze various measures to help strengthen the economy and help create jobs at this time of continuing economic weakness. and you came back and your people came back with an analysis. and i'd like to talk for a few minutes about your views with respect to what measures to help the private sector employ more people, would be most effective. and would be most effective in a way that's timely. as i read your analysis, your

top three most impactful policy changes for increasing jobs in 2010 were number one, a tax, tax assistance for businesses that would hire additional people. additional tax assistance for small business through small business expensing. and as i read the report, the extension of unemployment insurance. that those three would have the biggest bang for the buck and the most immediate impact. is that correct? >> i would just distinguish among those three, mr. chairman, in our view the incentive for greater business investment would be less effective than tax credits for firms that increase their payroll or additional benefits for people who are

unemployed. for many years, the economists have believed that temporary tax incentives can have a powerful stimulative effect because of their temporariness. and thus, the need to take the action now. i think unfortunately the experience of the last decade, when these sorts of incentives have been tried on several occasions, has somewhat dampened economists' enthusiasm for those approaches, because they appear to be less successful in stimulating investment. and i think one piece of intuition for that is that when firms have a lot of unused capacity, as they do today, and a lot of uncertainty about the course of the future demand and the use of that capacity, they may be less responsive. even to cut-rate opportunities to do more investment. so that would be the least effective of the three you mentioned, according to our analysis. >> which would be the least effective? >> the business incentives. the incentives for business investment.

which i think was one of the ones you mentioned. the ones that would be more effective in our judgment would be increasing payments to people who are unemployed, particularly because they are very short of income and likely to spend a large share of the money they receive very quickly. and secondly, incentives for businesses that increase payrolls. because that puts money into the economy, but also provides a particular incentive to do more hiring. and the effectiveness depends a good deal in our judgment, on just how that incentive is structured. >> i was perhaps not hearing you right. i thought in your original response you were putting the jobs credit in the same camp as the small business expensing. what you are saying, what i hear you saying is the two things with the biggest pop would be in essence, a tax break for businesses that hire people.

number one on the business incentive side. and the other thing that you see in your analysis that would help is the unemployment insurance extension. why would that be of assistance in terms of jobs? >> the chain of reasoning is basically that if people receive money and they spend it, that that demand for goods and services then means that those businesses that are selling products have the revenue to hire more people and see a need to hire more people, because they need to step up their production to meet this increased demand. that's the normal process through which extra demand increases jobs. >> i'm running out of time here. i want to go to the third element that we talked about. the small business expensing. as i read the report, that was seen as positive in terms of helping with the job situation in the country today. >> well i think that's right. i didn't mean to say it would

have no effect, it just in our judgment would be less effective than the other two items that you mentioned. we think there is some effect of reducing the price of buying investment goods, particularly for a limited time-limited period. which then would encourage businesses, if they were thinking of doing investment in the future, to do it right now. >> are there any other things that would be as effective as those three or more effective for 2010? >> those are the ones that we think of as being most effective. one thing i would just broaden a bit, the increased aid to the unemployed. one can just give money to other people in the form of tax cuts or increased benefits. the effectiveness depends, in our judgment, the effectiveness in spurring overall economic activity and job creation, depends on how much of the money is spent. and thus, giving it to people who are unemployed is particularly effective. because they're likely to spend a large share of it. but one could achieve effects

that will be somewhat smaller by giving benefits to other people as well. >> with respect to infrastructure, as i read your report, that would be more effective in 2011 than 2010? is that a correct reading of your report? >> yes, that's correct. our judgment, and it was our judgment a year ago and it has been confirmed by the experience of the past year, is that most infrastructure dollars move into the economy somewhat slowly. there are projects, resurfacing of roads, and i drive on some and i appreciate that they're resurfaced. that can happen pretty quickly when money and it is a question of pure machen and -- macroeconomic impact. >> i thank you for that. >> you have highlighted the fact

that one of the primary drivers of the growth in the government and the spending is health care costs, especially as it relates to the asian population. is that correct? >> yes, that is right. >> you send us a letter saying it wanted to control health-care costs there were two primary things that you suggested. one of them was that help insurance should reduce the amount -- the amount of debt ability should be reduced so people were carrying more of a share. insurance should be reduced, so that people were actually paying more of a share of their health insurance, rather than having it tax-ded t tax-deductib tax-deductible, isn't that correct? >> "should" is your term. we don't make recommendations. but we did write to you there were a few levers that the government could control. >> when we hear the house leadership talking about

changing health care so that less of it, so that insurance is fully deductible, and so that the cadillac plans are not given, are given advantageous tax. >> it's a widespread view among experts that reducing the tax subsidy for more generous insurance is one of the very important levers the government has. and that taking, and that not employing that lever then reduces the extent of cost control, all else equal. >> you also in the health bill that passed, there was a massive savings expected in medicare. i believe you estimated $500 billion over the first ten years. $1 trillion was our estimate over the first ten years of full implementation. $3 trillion over the first three years of full implementation.

that was used, transferred from the medicare, medicare savings, when we used to expand other activity of the government, specifically the expansion of medicaid and the new entitlement that was in the bill. if those dollars were used, which were saved from medicare, to shore up medicare in some manner, a medicare reserve fund or something, that basically be paying down debt, could you give us a thumbnail estimate as to how much that might help correct the structural problems we have? >> i can't do a quantitative calculation in my head. but your logic is certainly correct, senator, that we estimated $500 billion in medicare savings over the ten-year projection period. and increasing amounts over time. that amount we have not

separately quantified. >> let me try to combine the question. if you didn't use it to expand the government, but you used it instead to try to shore up the medicare system by reducing the debt, wouldn't that significantly, have a significant positive event for medicare, but also for, because it would make it more solvent theoretically. but also for the debt situation? >> yes, senator. if you use those same savings to pay down debt, that would be a significant improvement in the budget outlook. >> there has been a lot of talk about the fact that t.a.r.p. money is available to spend somewhere else. first, the law doesn't allow that. it's supposed to be used to reduce the debt. but i just want to clarify the fact that there is no t.a.r.p. money. that all this money has to be borrowed, right? every cent of t.a.r.p. money is borrowed from china or from somebody, right? >> it's just one pool of government money. and everything else is sort of counting treatments to keep track of various purposes.

but yes, if more is spent through the t.a.r.p., that's just more that's spent. >> and more that's borrowed? >> and more that's borrowed. >> and more that goes on the federal debt. >> and more that goes on the federal debt. >> so there's no piggy bank over here that somebody has a reserve fund over here in some desk draw over at treasury that they can use to create a new small business program or a new housing program, or whatever they want to do it has to be borrowed from somebody, right? >> that's right. >> the freeze that the president has suggested -- i give him credit for using the term "freeze" and for stepping forward on that term. and i thanked him for doing that. but i'm trying to quantify it. because you know, the deficit this year, you projected as $1.34 trillion, was that your number? >> for this fiscal, yes, $1.35 trillion i said, but yes, that's correct. >> if we were to do a nondefense

discretionary freeze, give me the number that that would be adjusted for inflation and not adjusted for inflation. >> so, if we did a full, our report shows what would happen with a full discretionary freeze. so if one froze discretionary appropriations for defense and nondefense -- >> just nondefense, the proposal -- >> unfortunately, we don't have enough details about the president's proposal to do that calculation. i know only what i've seen in the newspapers. when we received the president's budget next week. we can do that calculation. but until we know exactly which categories are -- >> how about a range? it would range, wouldn't it, between $15 billion and say $25 billion, somewhere in that range? >> well so in the again it depends crucially whether, what happens after the freeze. so if you freeze for three years, if you then go back up the level you would have been at otherwise, then the savings are adjusted in those three years. and they're small.

if you maintain this, if you freeze and then grow from the end of the freeze, but don't jump back up, then you can achieve significant savings over the remaining years. and that's obviously a policy choice that the congress will have to make. >> what i'm trying to get at here, obviously, is compared to deficits this year, which is going to be $1.35 trillion, we're talking about this year saving, if you did a nondefense discretionary freeze of maybe 1% or 10%? >> yes, even less than that. we think a freeze of all discretionary appropriations would save $10 billion in fiscal year 2011. >> so it's a step in the right direction, but that's a lot of money. but it has a marginal impact. >> the share of the total deficit problem, it's a small step. >> thank you. >> senator feingold? >> mr. chairman,let me begin by thanking you and the ranking member for your bipartisan efforts to get our long-term fiscal house in order. and in particular for your

fiscal commission amendment to the debt limit measures. as you know, i had some concerns for the concept of a special fiscal commission. i don't think we should be outsourcing the job. that we should be doing. but i share your frustration at the consistent failure of congress to confront our long-term budget problems. and is the case for many issues, that we considered, there comes a moment where you have to decide. and in the senate, you can't vote maybe. so even though i am not entirely comfortable with this approach, i decided to support the amendment. and while it didn't get the 60 voetsz it required under the unanimous consent agreement, i was encouraged that it was supported by the majority of the senate. of course, it is obvious from doctor's testimony, it will only get tougher and in particular when we finally have to consider specific spending and revenue policies to correct the problem, there will be enormous pressure to resist such a correction. and that's appropriate, it's the way of a democracy. but when that day comes, and i hope it comes soon, our country

will be best served if that date concentrates all of our minds. i think, director elmendorf, i thank elmendorf for all of his work and the work of the cbo. please know that some of us truly appreciate the work of the cbo. and i acknowledge as the chair and the ranking member did, the pressures you face. perhaps because we are responsible for a whole lot of that pressure. i also want to acknowledge the limitations of any economic forecasts and especially those under which the cbo operates. keane said never predict, if you do predict, predict frequently. congress won't allow you to obey either of these admonitions. you are wise enough to recognize the spot in which we place you and include language in your report regarding the uncertainty of your projection. in that regard, i have a place in my bookshelves for the budget and economic outlook report that the cbo issued in january of 2001. it was the first report that included a rather stunning summary figure about the uncertainty of cbo projections. it showed a shaded fan of

possible budget outcomes with the darker central areas of the fan being more likely and lighter, outer areas being less likely. even under the worst scenario in that figure, at the faintly-shaded low end of the fan, the budget was still projected to be in rough balance. of course, the fan was based on what the current policies were at that time. and that's important. because as it turned out, that report was also the last budget and economic outlook prepared by cbo before congress enacted what would be a stunning set of policies. that led to the biggest fiscal turn-around in our history. in less than three years after that report, congress enacted two massive tax cut bills, it authorized two wars. and it enacted a massive entitlement program under medicare. and none of those enormously expensive measures were paid for. each and every one of them was added to the bill we are leaving our children and grandchildren. and sadly, each and every one of them remains with us today.

as i read the report, cbo projects that extending the bush-era tax cuts in just indexing the alternative minimum tax for inflation, would cost, would add over $4.5 trillion to our deficits over the next ten years. and while it's difficult to project the costs over the next ten years, of the legislation which credited the medicare prescription drug benefit. medicare's chief act wary predicts that it will end up costing $534 billion, more than a half-trillion dollars over its first ten years. one of the policies with the biggest potential impact in future budgets of course is the cost of the ongoing wars in iraq and afghanistan. as i read the cbo's report the outlays projected on the baseline for the wars in iraq and afghanistan are related to activities for the next ten years are $1.4 trillion. of course, that's the baseline. and the cbo is constrained in the assumption it makes for that baseline. our actual policy is not likely to be the one which is reflected

in the baseline, the cbo anticipates by providing two alternative budget scenarios. but even under the alternative, which cbo estimates will produce the greatest savings relative to the baseline, reducing the number of troops deployed in iraq and afghanistan to 30,000 by 2013, over the next ten years, will cost about $400 billion. and under cbo's middle-ground alternative, reducing the number of troops deployed by 60,000 by 2015, over the next ten years the cost is nearly three-quarters of a trillion dollars. mr. chairman, every penny of those costs is added right to our deficits. it's been our policy for the past ten years, and it continues to be our policy. we aren't paying for those wars. we're just running up the enormous tab we're already leaving our children and grandchildren. and director elmendorf there's a telling statement in the budget and economic report which notes that cbo assumed that all expiring tax cuts were extended beyond 2010 and not paid for, the long-term effect would be to lower future gdp because of the

greater accumulation of debt. is it not also the case that the greater accumulation of debt that results from failing to fully pay for the wars in iraq and afghanistan will also mean future gdp will be lower than it otherwise would be? >> yes, senator. >> thank you, mr. chairman. >> thank you, senator. senator bunning? >> dr. elmendorf, welcome. >> thank you, senator. >> when you appeared before this committee last year at your confirmation hearing, i asked some questions about cbo's practices. now that you've had a year of experiences as director, i would like to ask you about these policies again. current cbo practice assumes that any law that increases spending will be permanent. on the other hand, current cbo practice assumes that any tax

decrease will not be permanent. do you have any plans to address this inconsistency? >> no, senator, we don't. as i understand our policies, they are consistent across spending and taxes, in the sense that when a proposal is put forward, if it is enacted to be a permanent policy, then it is scored at that time as the effects it would have over the ten-year budget window. if it's enacted to be temporary, then it is scored as having those effects. and -- >> that was not my question. >> the baseline. >> that was not my question, and my question was, current policy. of cbo. on spending that any increase in spending would be permanent.

on the other hand, cbo's practice assumes that any tax decrease will not be permanent. is that the current policy of cbo? >> i think it is common sense that tax relief helps business grow. when the business grows, it will pay more taxes. as i'm sure everybody knows, factoring this into budget estimate is known as "dynamic scoring." do you have any plans to use dynamic scoring at cbo? >> we do not intend to incorporate the attacks of policies on the macroeconomics -- effects of policies on the natmacroeconomic level. it will be directed to them for

that particular branch. we do not intend to incorporate those attacks. we tried to provide analysis for you and other members. we do not intend to incorporate those in our particular legislation. >> then your answer is "no?" >> that is correct. >> do you think extending the bush tax cuts will have a positive or negative impact on the economy? >> we think that extending the tax cuts would have a positive affect on the economy in the year at the beginning. economy in the year or two at the beginning. because they would encourage spending and thus, encourage job creation of the sort that i was discussing earlier. over longer period of time, if those tax cuts are extended permanently and no other changes

are made to spending or revenues, then we think that the larger debt that would arise would lower the economic debt. >> if they were extended on not a permanent basis, but a temporary basis of two or three years, do you think that would help the economy? >> that would certainly help the economy in the period in those first few years. again, there would be even for those few years, of course, there would be a good deal of additional debt accumulated. and that would have some drag in later years, if it were not offset in some other policy change. >> okay. during my time in congress, which has been unbelievably l g long, 24 years, i have worked to advance the creation of a strong domestic fuel industry that would provide our government agencies with a safe, secure supply of fuel regardless of policies, global policies of

oil. >> to this end, i have authored legislation that would provide incentives for this through a mix of loan guarantees, and tax credits, as well as providing multi-year procurement contracting authority for our government agencies. aside from providing marketplace stability through price certainty, i believe thisconsis process. as the energy demands within our government agencies continues to grow, do you believe it is important to provide our government with the authority to enter into these multiyear procurement contracts? >> as you know, senator, we don't make policy recommendations, but i understand and agree with your point that uncertainty in future

cost is all else equal, complicates the budget process, but i can't judge the specific ways in which you would make those costs. >> i understand. thank you. thank you, mr. chairman, thank you. >> thank you, senator bunning. >> first i want to thank you for your ongoing leadership. you and the ranking member and focusing us on long-term deficits while at the same time talking about what we need to do in the short run to create jobs. i appreciate your balance on both of those, which are so critical. i wanted to take a moment and just ask that we relook at two charts, mr. chairman, that you had put up. one of those, because i think it's important. let me start by saying it is important to look, not for the purpose of blame, but for the

purpose of understanding what works and what doesn't work, to look at the last eight years and to look at before then. so what has worked, what has not worked. when i came into the budget committee in 2001, we were debating what to do with the largest surpluses in the history of the country. largest surpluses in the history of the country. that period was focused on innovation and education, but very much on balancing the budget and in growing jobs, 20 million new jobs plus. eight years coming in, different economic policies were put into place, ones that focus on tax cuts at the top, hoping they would trickle down to middle class families, two wars not paid for, prescription krug bill not paid for. we go from huge surpluses, largest in the history of the country, to largest deficits.

so i don't think it's insignificant as we now look at different policies, now we are looking at how do we go back to in some ways what worked in the '90s what created jobs and surpluses, to look at what has happened in the last year. the first thing is the fact that -- excuse me, senator nelson -- the fact that this is not insignificant, mr. chairman. that we are, in fact, moving in a direction of less people losing their jobs and hopefully we are going to see people beginning to have a net plus in terms of creating jobs. that's not insignificant. i also don't think it's insignificant, mr. chairman, that the economy is improving. we have, in fact, put in place different policies in the last eight years.

and at least part of that when we look at the recovery act, i was very pleased that the effort i championed on cash for clunkers had an immediate impact in a small amount of time. some economists credited that with some of the short-term boost in gdp, but it's not insignificant. so i think it's important to stress that different policies are beginning to swing this in a different direction, and i think that's important. now we are focused on, again, as we were in the '90s, middle class tax cuts. we are focused on investments, innovation, education and in jobs. i think that's very significant. i wanted to ask mr. elmendorf and want to thank you for the

incredible judge your staff have done, particularly on health care, which was an incredible, incredibly stressful 24-hour-a-day effort and thank each of you for doing that. >> thank you, senator. >> but you talked about infrastructure spending has a delay. what i assume the dollars we passed last february in the recovery act would have more impact this year than last year? >> so the infrastructure dollars, yes, that's correct. it's more generally for the program, but there is more impact this year than last year. >> so you would expect in 2010 that we would see more impact and more jobs created as a result of that? >> yes, that's correct. >> okay. could you talk about how growing the economy, just a little bit more in terms of creating jobs in the economy will help us reduce the deficit? it's different than a top-down approach, but how putting money in the pockets of americans,

middle class people and creating jobs grows the economy? >> so as you're saying, senator, increased economic growth, declining unemployment would increase the revenues the government collects under current law and decrease the benefit payments that go out to unemployment, the food stamp program and so on. in rough terms, we and the staff of the joint committee of taxation think about a dollar of extra gdp or total income raising government revenue by about 25 cents. so there's a substantial feedback effect. we show in our outlook, if economic growth is stronger than we project in the next year or two or three or four, that would lead to smaller deficits. if it is weaker than we project, that would lead to larger deficits. we think risk on both sides. >> right. so it would be fair to say, and

i appreciate your critique in terms of what would be most effective for us, but focusing on some kind of jobs-specific credit for business as well as unemployment extension, as well as some other investments that we can make, that that not only creates jobs, but that also helps us tackle the deficit, is that correct? >> that's right. it does. again, you know, you understand scale the deficit now this year and next year and so on is very large. we would have to be unbelievably far off even by the standards shown for interest in economic growth to take that problem away, but it is a step in the right direction. >> i'm certainly not minimizing what is a huge issue for us. finally, i just wanted to reemphasize in all the work we did last year and we continue to do to tackle health care costs, which i believe also creates jobs. it certainly does in my state of

michigan and i think across the country. if you might just reiterate again your feeling in terms of tackling health care costs as an important part of addressing the deficit, and in fact, the work of your great staff indicated that the bill as passed in the senate would reduce the deficit by i believe $132 billion in the first ten years, and then a much larger amount, i've heard different numbers now, but certainly a much larger amount in the second ten years, and do you still believe tackling health care costs is a critical part of bringing down the deficit? >> certainly reducing federal spending for health care is almost a necessary part of pulling the budget into a sustainable trajectory over time because of the significant part of the growth of the budget gap, the deficit comes from rising health costs.

whether particular sorts of health reform are effective in reducing the government's spending in health depends on the specific reforms. you say our estimate is a bill that passed the senate and a bill that passed the house would have a small effect of deficit reduction in the first ten years. again, as senator gregg indicated, the $130 billion is large by many, many standards, but not by the standard of the size of the deficit we project. by our estimation if those bills were allowed to unfold as we predict, it would be a small step, but a step. we think in both bills they would slightly reduce budget deficits in the second ten years. we've not given dollar values, but express these ranges of gdp. that's because we want to emphasize the vast uncertainty that surrounds that. our view is both bills were allowed to unfold as written,

they would represent slight reductions to the budget deficit over the second ten years, as well. >> thank you. thank you, mr. chairman. >> senator grassley. >> thank you, dr. elmendorf. i got here late, i hope it hasn't been asked by other peop people, about the bank tax. widespread agreement with president among taxpayers, members of congress, financial institutions should repay every dime that they received from the government for financial stability. the president recently proposed what he calls a financial crisis responsibility fee to help facilitate the repayment. obviously, a lot of us agree with the goals that the president articulated before congress is asked to vote on legislation imposing such a fee. it will be very important to understand the potential impact on consumers, the criteria for applying the fee to some entities and not others and the

implication for security and stability of these institutions. so, does the cbo know if the fee will get passed on to consumers in any manner? if so, how will we pass on to consumers, and secondly, will the fee reduce the amount of bonuses paid by financial institution subject to the fee? >> so senator, we and the staff of the joint tax committee are hard at work trying to answer the many questions you sent us regarding this fee. we hope to get back to you more shortly on at least some of them. other questions will have to wait until we get more details ourselves about the proposal in order to answer. i don't think i have a good short answer to your questions. the incidents of the fee, who it is who will bear the burden, and somebody will, right? we understand. there is no other pool of money in the sky for it to come out of. it will be borne by somebody. how much will that be passed into loan costs or into lowering interest rates paid on deposits

versus how much we could pass to the shareholders or to the managers. that is a very hard question and we don't have an answer to that now. i doubt even at the end we'll have an answer that we will have great conviction about because it's an uncertain business, but we are working on that analysis. i'm afraid we don't have any useful answers to that question. >> i'll be glad to wait. thank you for your consideration. more importantly, thank you for studying it in depth. hopefully you'll have concrete answers for us. i want to go to interest rates in publically-held debt. your baseline projects debt held by the public will receive 0% of gkp 2010, then approaching 70% of gdp by 2020. those are your figures. i happen to have read other places where some people expect at the ten-year window they might even get up into the high

80s or 90% gdp. interest costs on this debt are estimated to rise over px@@@@@ r i read this. we discussed the outlook. i said you were not able to be here. if laws were changed, people think of it as current policy. the debt would be substantially larger. borrowing by the government has different costs. borrowing by the government has different sorts of costs for the economy. one is that that debt crowds out

investment in real capital, in business plans, equipment, and is more productive and raises income over time. that happens year by year every time more debt is accumulated. debt also poses a risk of some more cataclysmic event in which investors might decide they are not willing to hold treasury debt at anything like the current interest rates or became unwilling to hold u.s. dollar assets the way they have at this point. that is a risk. economists are very bad at trying to analyze how big the risk is or what a triggering event might be. all we can say as analysts is that risk increases as the debt rises relative to gdp because that means debt would have to become an increasing share over the portfolios of investors and that raises the risk of their reassessing their decisions.

whether there is a tipping point, and if so at what level of debt relative to gdp it would occur? we just don't know. all we know is the risk is rising. as we move our debt from the 60% of gdp will be the end of this year, higher over the next decade. we are moving increasingly into territory we have seen in this country in more than 60 years and we don't see in very many other developed countries. i think there is a warning in that but it is not a warning i'm able to quantify in any way. >> thank you, senator grassley. senator carton. >> thank you, mr. chairman. certainly a sobering analysis. i think we all need to deal with this. i want to make one observation first about the ranking member's comments and your response that there's just one pool of money, that whenever we change your baseline assumptions, whether it's on spending or on revenues,

if it increases spending or reduces revenues, it means more borrowing. i think that's the point you made and that is true whether we change your assumptions on t.a.r.p. funds or extend tax funds not in your baseline, means more borrowing. we think about new tax cuts and increase troop levels beyond baseline. all that means is more borrowing and makes the forecast even worse in the future. i thank you for your reminding us of that constantly. i want to follow on the chairman's point about how we can stimulate the economy, which could then increase the forecast and help us deal with the long-term fiscal dilemma we're in. i was interested in the response to the chairman's point about the most effective ways if we can help businesses hire more employees that, will obviously help us on the forecast.

last night the president brought up dealing with small businesses. i was pleased to see him say that because historically, most job growth will happen with small businesses. it seems to me coming out of this recession, the more we can help confidence with small business put on more employees, the faster we can see the job growth that is going to be necessary for our economy. so targeting the tax credit for new hires to small businesses seem to me will have a very positive effect. i want to go to one additional point, if i might. you mentioned that the expensing, although positive is not quite as strong as the job credits for new employment. i want to go into the area of credit. i could just tell you in maryland, small businesses that want to expand don't have access

as readily to credit as larger companies do. that's just a fact. many of that's because they don't have the same type of relationships that larger companies have with alternative financial institutions that could get them through this period. so one of the proposals that's being made is to try to ease the manner in which small businesses can access credit, not by changing the ground rules that would allow them to get credit, but easier to obtain that in hopes that would help expand our economy. i would like to get your assessment, if i might, as to the availability of credit as that one factor, if we can make it easier for small businesses to access credit so that they can carry out a business plan that's also reenforced by a jobs credit for new hires, how that could have a positive impact on

our future outlays. >> a couple of observations. you're certainly right that small businesses have been -- their access to credit has been particularly hurt by the financial crisis of the past few years. we can see that in the reports of small business owners themselves. we did not, as part of this project, about stimulating employment growth focus on ways to improve access to credit. it wasn't an area we considered. i don't have much to say specifically about how one might help that and what particular means might be effective at addressing that problem. i would say on the general question of encouraging employment, a lot of jobs made small businesses, a lot of jobs are lost to small businesses, as well. they are very volatile, some succeed and unfortunately, some do not. there isn't anything in the economic analysis that suggests one should focus employment incentives on small businesses.

if you can encourage large businesses to hire more, those count as jobs, too. those can bring down the unemployment rate and creating demand for other goods, create additional tax revenue and so on. so there is nothing that says, regardless of how many jobs are created in which sector under normal times, there is no reason to think that focusing job credits on small businesses would be more effective dollar for dollar in raising employment than allowing the same credit for big businesses, as well. >> i clearly agree we need to focus on our entire economy. i just tell you anecdotally that extra dollar is so important today in making their decisions. in some cases it means whether they'll decide to go after that contract or not. i guess it's the incentive difference between a small

company and large company is much greater than historically we've seen more job growth from smaller companies, but you're correct. i agree with you. we've got to concentrate on the entire economy. i was just pleased to see the president recognize the need that we have not yet reached small businesses in the economic programs as effectively as we need to for stimulating our economy. thank you, mr. chairman. >> thank you, senator. senator enzi. >> thank you, mr. chairman. first i want to thank director elmendorf for all the good work he did on health care and an appreciate all the time your staff had to put into analysis day after day, night after night, weekend after weekend. now we get into budget. i am concerned that the federal government has not been a good partner in the economic recovery. businesses need stable

environment to make plans in the future, investment plans, purchasing plans, production decisions, hiring plans, strategies to manage cash flow. they can't be made in a vacuum. how can the business community plod a path toward growth in recovery when the future is clouded by uncertain fate like health care reform, forced paid sick leave, expiring income taxes, state tax and business stacks? is congress's failure to lack on these initiatives had a negative impact on the job creation and economic growth? if so, is it possible to quantity tud the magnitude of that impact? should government be a better partner in this recovery and move quickly to address some of the low-hanging fruit such as the business tax extenders, would that have an effect? >> i think you're correct the uncertainty about future government policy is weighing on business decisions. i can't quantify it, and i think

it is not as important an uncertainty about the uncertainty about future demand for product which are sales, which is the pro dominant uncertainty weighing on businesses. on the business front they do report problems getting credit, they report their biggest uncertainty is whether they'll be able to sell their goods. i think that's the biggest uncertainty which is weighing on business decisions to invest and hire, but i think uncertainty about government policy is playing a role. >> continuing that theme of taxes and uncertainty, there is questions in the business community about the fact the fate of the income tax congress passed in 2001 and 2003, and as you know, small businesses, the engine of our economy, i agree big business plays a role in that, too. a lot of the jobs laid off at big businesses are picked up by the small business. many of those businesses file their taxes as partnerships or limited liability corporations and subchapter s corporations.

they pay income taxes according to the rate schedule for individuals, which puts a lot of them in that over $250,000 category. consequently the fate of the marginal rate cuts in 2001 are very important to them. you do talk about some of the impact of that on page 45, and i appreciate that. cbo's current policy forecast for real gdp growth in 2011 is 2.4%, the blue chip forecast is 3.1%, federal reserve is 3.4%. is it correct to say that the cbo predicts our failure to extend all the 2001 and 2003 tax cuts will reduce economic growth by 0.7 to a full 0.1 gdp next year? if the government wanted to be a good partner in recovery, it seems logical congress should act quickly to permanently extend all the tax cuts,

especially those rates that affect small business. what would be your take on that? >> senator, we do think that if you were, you and your colleagues were to extend those tax cuts on a temporary basis that could provide stimulus economic growth next year. if you were to extend tax cuts on a permanent basis, that would actually supply even larger stimulative effect next year. people would tend to spend a larger share of taxes they thought would be cut for some period of time. the problem is, of course, that if you do that and take no other steps the deficit outlook is quite a bit bleaker, and over time, unless other steps are taken, extra debt would hold down economic activity. just as our estimate for a stimulus package last year had an increase in economic activity in the short run but dampening effect toward the back half of the ten-year window, an extension of the tax cuts with no other changes in policy, would have an important

stimulative effect up front but would depress economic activity later on in the ten-year projection window. we do think that a large share of the gap between our economic projection of the next couple of years' growth and that of outside forecasters probably stems of this difference in fiscal policy assumptions. we stick with current law and they are making some guess of what you will do, which we should not and do not ourselves. if we don't quite know their assumptions, but if we changed ours to include a permanent extension of the tax cuts, that would raise economic growth for the next couple of years in our forecast by more than a percentage point, but again, that's the long, baseline projections that would show deficits twice the size that we are showing now at the end of the ten-year window and that's the other part of the problem you and your colleagues are confronting. >> switch quickly to education for hopefully a short question that is using the 2009 baseline.

cbo scored the savings in fiscal responsibility, $87 billion and a subsequent estimate provided to senator gregg estimated only $47 billion in savings when the market risk was factored in. however, given your revised baseline estimates and the fact number schools switched to direct loan programs, how much it is true that the switch, because more people have already switched to the direct lending, that has affected it. we have lowered our forecast for the next decade. i do nothing we have done a complete estimate yet. the work in progress suggests not much net difference from what we reported last year. there is a significant

difference between the official score and an alternative that tries to a corporate retreat in corporate market risk. >> -- incorporate market risk. >> if you would just hold a minute. i want to thank you for your strong support of the initiative that center greg and i advanced. no one was a stronger advocate for that. i want to publicly acknowledge the world that you did, the death control commission. >> the only -- fact we only got 53 votes. i think that is a shame. we had to reach the 60 vote

threshold under the senate rules to get it. . . e threshold under the senate rules to get it and we only got 53 votes. and there were how many against, 46 against. having a statuary commission to having a statuary commission to get the national debt problem under control. that says a lot about the willingness of folks to get our fiscal house in order. i wanted to thank dr. elmendorf, you've done yeoman's work in all the requests we had to you to come up with as we consider this

health care. let me go back to the chairman's, one of his charts. now, is it true that if we took the senate health insurance reform bill and call it broader, the senate health reform bill, that that debt, the long-term federal debt, that would come down. >> it would come down by a little bit, senator. >> well, i want to ask you about that because you said in the second ten years, if i recall, your projection was if the senate health bill passed the second ten-year period, it would come down from a range of $650 billion to $1.3 trillion. >> the way we put that was a share of gdp, senator.

some people have taken to doing their own calculations of gdp in that decade. that chart is still relevant. actually, if you can bring the chart back up, we said that the bill would reduce deficit between 0.25% and 0.50% of gdp. over a decade that, amounts to ten times that. that would be 2.5% to 5%. 2.5% to 5% gdp. you can see on that chart, take the end of that second decade at 2029. debt is going from 100% gdp to 200% gdp over the space of, i can't be sure, but a decade or two. we are taking five percentage points off the level for that second decade. it's lower, but i think if we were to hold up a chart next to that chart, to be honest, you

would have trouble detecting the difference. >> well, now, is it not true that one of the things that you cannot score when you do a score about the senate health bill is the insurance reforms? things like that insurance companies can't suddenly cancel you for pre-existing conditions, and we're going to set up accountable care organizations that are going to follow to the patients through medicare, the emphasis on primary care doctors so that they have to get a doctor that will go and say you need to go to this specialist, electronic records, so that one physician to the next knows what the other has done and therefore, you don't have to repeat all of these tests that

we find in the medicare system right now, where the medicare recipient goes to this specialist, this specialist, they're all not knowing what the other specialists are doing and they're duplicating tests? that's something you can't score, isn't that right? >> well, we try. estimating the effects on those kind of changes on a budget is very difficult. certainly there are other analysts who think we have produced estimates of a budgetary effects that are too pessimistic and other analysts who think we produced tests that are too optimistic. either group could be right. the uncertainty is great. we do think we balanced the risks and projections we provided. >> well, you certainly agree that health care is a big part of our federal spending, and it's going to affect that huge

debt in the future. >> yes. absolutely. >> so maybe there are things like on the private sector, these insurance market reforms that we've got to get into, some of which i just mentioned, that's going to affect the federal budget that it's difficult for you to score. >> yes. it is certainly difficult for us to score. everything we do is uncertainty, and the uncertainty here is particularly large. as you're suggesting also, the budget deficit is not a summary measure of everything that might matter in legislation, it's just one aspect, but it's the aspect on the table at the moment. >> today, and i'll conclude with this. today we're going to be voting on a so-called pay as you go amendment. that sounds awfully good, but there are going to be certain exceptions for it. there's going to be an exception

for the amt. we're not going to pay for that two years. all bringing doctors up to what they should have been getting under medicare that has this acronym called sgr. that's not going to be paid for for five years. i wonder if it is a pay as you go amendment. the whole thing, we're going to forgive about $1.6 trillion that we're not going to pay and the consequence of that when you add the debt service to it is going to be about $1.9 trillion. >> we've not done those estimates precisely, but that does sound like the ballpark we expect those numbers to be in, yes. that is, those previsions, those

exceptions, those adjustments as they're called in the legislation do suggest the deficit will be larger than if you and your colleagues passed a similar bill that did not have those adjustments. >> thank you, mr. chairman. >> i understand senator whitehouse is headed in this direction. does anyone else wish to ask questions of the director? we have a vote starting at 10:30. does the director mind waiting for a couple of minutes? >> as long as you like me to wait, senator. >> i can ask you something while we're waiting. >> good. >> following up on this pay-go issue, do you have an estimate how many times congress has waived paygo in the last two years? >> no. i certainly wish i did now, but i'm afraid i don't.

>> would the number, total gross amount in waiver that occurred under items that should have been subject to paygo would be in our estimate approximately $400 billion? >> i'm sorry, senator. we can't do that in our heads. >> i will hypothsize it gets avoided. >> in the 1990s when there was a bipartisan concern about the rising federal debt that the paygo rules and spending caps helped to restrain actions that might otherwise have increased the budget deficits. by the end of the 1990s, as you know, when the deficits were turning into surpluses, then

those rules were widely ignored. so they are not by themselves binding, but they can be helpful, again in our judgment, when people are are willing to -- >> when the will is there? >> i think that's right, senator. >> senator whitehouse. >> thank you, chairman gregg. >> thank you. >> dr. elmendorf, thank you for coming back. the president's questions on economic advisors calculated that the excess cost and waste in the health care system is in excess of $700 billion a year. the new england health care institute calculated it's about $850 billion a year. the lewenn group and the former

number former troshy secretary paul o'neill used bought it put the excess cost and waste in health care annually at $1 trillion a year. do you believe those studies are in the general right order of marring tud? >> i think that seems the right ballpark. as we noted in our letter to seminar gregg and senator conrad in june, there is a widespread among analysts that a lot of money is not being used effectively, judging principally a lot of parts of the country and judging those that don't. it's impossible to quantify. i would not use calculate. educated guess. certainly hundreds of billions of dollars. i think that's right. >> in your written testimony you state the recovery will be cam penned by a number of factors including a declining support from fiscal policy as pt facts

of mira. would you be prepared to state the proposition in the positive? >> as we wrote in our report on policies to stimulate employment growth, we think appropriate fiscal measures can spur economic activity and job creation in the next few years. an alternative positive version is we believe, we have written this many times, the stimulus package spurred economic activity and has increased level of employment relative to what would have occurred without that legislation. >> so it's been good in terms of getting us out of the economic ditch we were in? >> we think it has shortened the duration and reduced the debt of the recession what would otherwise have occurred. >> that, i would suggest, works under the general category of good? >> yes, i think that's right, senator. >> not to be too fussy about it,

but i think that's right. what are your observations about the extent the foreclosure crisis continues to operate as a drag on the economy and to what extent if at all, do you believe that a sort of clear market solution like resort to bankruptcy court for families who are in trouble on their home first mortgages, on their primary residence, might help provide clarity in the market so that banks and everybody else can respond, and would that move the foreclosure crisis behind us more rapidly if we had that kind of a clear market signal coming out of bankruptcy courts as people had the chance to get their cases called and heard,

rather than sit on the phone for many hours with banks finding every new corners of their telephone answering system to be thrust into? >> we do think that the foreclosure crisis continues to be a very serious problem. obviously for the families that are involved, but also in macroeconomic terms. there are analysts who worry a good deal house prices will take another turn down as more foreclosed properties appear on the market. so that is a drag. i think that greater clarity reaching the end of that process would indeed help to stimulate economic growth. we have not analyzed, however, particular ways of achieving that clarity. i think in general the experience the last few years suggests that the greatest clarity can be achieved with a large injection of funds and that achieving clarity with a smaller injection of funds is challenging. so i think those are the issues one would have to weigh. we have not done a study of that

at this point. we are in the process of working on that topic and may be able to report to you on that shortly. >> as an observer of markets and economic behavior, if you give banks the opportunity unilaterally to decide how much they're going to lose on a mortgage that is under water, rather than allow any market neutral process to make that determination, what effect does that have on getting quickly and accurately to the real number and enabling the economy to move on? >> i think whether your other process is faster than the current process depends on what you set up and the incentives are of the people running it. i don't think i can answer that question in general terms. i also think there is an issue. we have a process under which contracts are negotiated and signed, and i think their

legitimate concerns about changing those contracts and the process which problems are resolved. doesn't mean we should not, i am saying there are complexities about the effects over time, as well. that's why it requires an analysis we haven't done yet. >> the efficiency of the american bankruptcy system has been one of the great assets of our economy. there was a very good piece on this in the "economist" magazine a few weeks ago. it's one of the prides of the american economy. bankruptcy is nothing new and existed as long as the republic has, and it applies to every single type of debt, including debts that the banks hold except for one kind, and that's the poor residential mortgage holder who years ago for political reasons was carved out of that and denied access to the same quick established resource that every other debtor has access

to. i just want to push back a little bit against what i thought was your implied theory this would be something novel or peculiar if we allowed it to happen. it lifts a novel and peculiarity out of the system and restores it to its traditional general basis. >> that's right. it would be a novelty in the mortgage market. there are studies that suggest that particular novelty or peculiarity of mortgages has helped to keep mortgage interest rates down so there may be a trade-off one is doing for people who end up in trouble versus people who do not end up in trouble. i'm suggesting why i don't feel like i can off the cuff analyze your particular proposal but i understand your concerns. >> thank you for your testimony. i appreciate very much senator gregg's patience allowing me to have this time.

>> you and your staff, we would like to thank you for the extraordinary job you do. the amount of work you folks have done in the last few months has been exceptional, and the quality of it has also been exceptional and the integrity of it has been exceptional. we thank you for it. >> can i say, senator, i feel very fortunate to work with such a talented and dedicated group of people at cbo and i >> the u.s. senate confirmed ben bernanke for a second term of federal reserve chairman. senators added an amendment to require most new mandatory

spending of tax cuts enacted in a year to be offset by tax increases. the measure goes to the house. the house is not in session. republicans are attending their annual legislative retreat in baltimore. president obama is scheduled to visit the republican meeting tomorrow. next month marks one year since congress passed the economic stimulus money. of the $787 billion approved come under $330 billion has been committed. $172 billion have been paid out. to learn more about those projects, go to c-span.org /stimulus. >> this weekend on "book tv". andre schriffrin on political

cartoons. also on "the neocons". find the weekend schedule on booktv.org and get the latest on twitter. listen to c-span radio. in washington at 90.1 fm and xm satellite radio channel 132. it is a free app for iphone. covering washington like no other. >> today, first lady michelle obama and others outlined plans for reducing obesity in the u.s., particularly in children. besides the first lady, we will hear from health and human services secretary kathleen sebelius. this part of the event is 30 minutes. >> i am dr. judith paulfrey. the surgeon general's report challenges us as a nation to turn the tide on obesity.

as a practicing pediatrician for over 30 years, i can tell you firsthand that we have experienced an alarming increase in the number of children and adolescents who are overweight and obese. today, most physicians are dealing with overweight and obesity in 20% to 30% of the children we see. contrary to the vision that dr. benjamin said, our obese children do not have a healthy childhood. overweight toddlers have trouble toddling. they do not have the strength and coordination to carry off that extra weight. overweight and obese children have higher rates of asthma. when we take x-rays of their chests, their families are astounded to see that little tiny red cage surrounded by layers of fat. -- rep cage surrounded by layers of fat. no wonder they struggle to run

and jump and they succumbed easily to asthma and other respiratory diseases. school-age of stairs to work overweight and obese have a high risk of bone and joint problems. the most serious of which can be -- a major a medical emergency. other problems range from diabetes to sleep apnea. for all these children, social and emotional concerns are very common. many children and adolescents who are overweight or obese actually suffer from clinical depression. now, it does not have to be this way. we have proven early interventions that can keep children healthy in the vision that dr. benjamin showed us. the keys to that are healthy nutrition and regular physical activity. good nutrition in childhood sets the stage for lifelong healthy eating. and celebrating eating.

pediatricians encourage mothers to breast feed. we encourage child care providers in schools to serve healthy food and families to have colorful, well-balanced meals together. in addition to counseling families everyday, pediatricians are now involved in a wide range of programs to promote healthy eating. we are developing a mcdyess with nutritionists and reading cookbooks to hand out to parents and grandparents. along with nutrition, physical activity is fundamental to good health. play, after all, is the work of children. it not only helps them grow and build strong bodies, but for educators and everyone else, it improves their education and ability to learn. working with schools and boys

and girls clubs and the american academy of pediatricians urges that every child has the opportunity to be active at least 60 minutes every day. let me say that again. active at least 60 minutes every day. our young pediatricians in training at the university of mexico have developed an exercise group and they literally get down on the floor and john brown like frogs -- jump around like frogs with the kids. there is a strong relationship between screen time, television, computers, and videos, and the development of overweight and obesity. limiting that to two hours a day can help kids. we're working hard to prevent obesity before it ever starts. we need to meet people where they are. be sensitive to the different needs of various populations, no

single solution will work for everyone. as the surgeon general has said, it is a challenge. we know we can surmount it together. our nation must commit itself to a long-term campaign to transform our children's health. the american academy of pediatrics is proud to stand today with the administration in working to ensure a healthy future for all our nation's children. it is my distinct pleasure to introduce our next speaker, secretary of the united states department of health and human services, kathleen sebelius. she has been a leader on health care and help families and children for over 20 years. as governor of kansas, she was recognized for her work to improve access to health care and since taking office in april, 2009, she has been a leader in some of the top issues for children, including reform of our nation's health and response to h1n1.

we're very proud to be working with you. please turn me in welcoming secretary of health and human services, kathleen sebelius. [applause] >> thanks for that introduction and we have an illustrious group here on the floor. certainly we are pleased to be joined by our partners and congressmenan moran has been working with us and mayor euille, we are glad to be in

your city. i cannot imagine any child not wanting to go in the room next door and hang out. it is fabulous. there is the y here addnnd to te y's across the nation, congratulations. we had the opportunity to live in the governor's recorresident. we are trying to sort that out. i am pleased to be joining in this effort with my friend and our wonderful first lady, michelle obama. we have some good exercises -- got some good exercises last

night. all that sitting down and standing up. it is a thrill to have her take on the role as the leading advocate in this country for healthy living. dr. benjamin cares a lot about the lives and health of americans. she used to focus the attention in her clinic in alabama, and now it is a great opportunity to have her become america's doctor and focus of attention around the country. -- focus that attention around the country. we used to have a whole set of rules which were given out to people. if your kids out from behind the computer, go to the gym, but often that fell on deaf ears. while those are important things to do, if we are serious about turning the corner on this issue, we need everyone to be involved. we need to make this a national crisis and a national issue. it has a huge national impact. the president last night pointed

out so eloquently that health- care costs for average families are continuing to skyrocket. making it very hard for families to pay their bills, the ability of small businesses to keep affordable health care is getting more and more difficult, and that often impact's their ability to keep good employees and expand their businesses. the and healthier we are -- unhealthier we are, the more costs will rise and the less competitive we are in the world. we have not only a moral obligation but i would say an economic imperative to began to make the change. let me just give you a couple of alarming statistics. according to the centers for disease control and prevention, we already spend one out of 10 health-care dollars on obesity and its complications. overall, we spend twice the amount today that we spent on

obesity in 1998. that is how bad these trends and. nearly $150 billion a year. to put that in perspective, that is more than we spent on treating all the cancers in america. almost half again as much. a lot of the money that we're talking about goes to treating the chronic diseases which have obesity as an underlying cause. we know those include heart disease, stroke, type 2 diabetes, and certain types of cancers which are directly related to obesity. medical care for diabetes and its complications alone costs more than $116 billion a year. health-care costs related to heart disease costs [unintelligible] all of which are tied to obesity. that is just what we're spending today. right now, we have more children who are overweight and obese then we have ever had before in this nation.

four times higher than it was 40 years ago. so many children now have type 2 diabetes that we no longer refer to it as adult onset diabetes. it is just referred to as type 2 which is a recent an alarming change trade we have the first generation of american children where, if we do not change the trajectory, they will have a shorter life span than their parents here in the united states of america. the fact that some of these consequences do not show for 10 or 15 or 20 years should not make this any less of a crisis, although dr. palfrey did a great job of outlining what happens in the unseen impact of childhood obesity. the administration has already supported some major changes in policy to help reverse the growing trend of obesity. one of the most historic steps is the recovery act that the

president signed almost a year ago, which is going to have a first time ever $650 million investment in prevention and wellness aimed at obesity and smoking cessation. committee -- community projects will be experimenting with what it takes to make changes. the surgeon general has recognized that there are a range of factors influencing obesity. what we have already done with those grants is begin to allocate them to states, but also to ask communities to come up with creative strategies and some of the ideas are really encouraging. we are way oversubscribed but we will have 38 projects under way this spring. we are also fighting another factor, which is advertising. one of the reasons that it is good for your child to move away from the television is not just that against him or her up and around. it is they stop being bombarded with ads that are particularly

aimed at children on kids' tv. we know that a recent study indicated that if you are watching a child program on tv, every eight minutes, you will have a junk food at. it is not surprising that children can identify most of the brands of unhealthy foods. companies are spending a billion and a half dollars your marketing those products. those ads have spread to videogames and web sites. not only on television, but they are coming through in a variety of media. that is another initiative that we have got to take very seriously. if a child has diabetes because he turns 18, partly because when he was younger, he only eight foods he saw every day on tv and the internet, -- ate foods he saw every day on tv and the

internet, it is not his fault. last night in the state of the union address, president obama recognized the urgency of this issue. and nominated our next speaker to lead a national movement to address it. the first lady is not only -- has not only been on the national stage a relatively short time, but she has become the most visible and respected advocate for healthier lifestyles. she is everyone's favorite vegetable gardener. she has had a healthy kids fair last summer on the white house lawn, she has been talking to america about choices they can make, she is launching a national campaign to reverse the epidemic of childhood obesity. we look forward to being a good partner in that effort. it is my great pleasure to ask you to give a great come a warm

welcome to our firstly, michelle obama. -- a great, warm welcome to our first lady, michelle obama. [applause] >> thank you. [applause] >> as you know from last night, i did get embarrassed when people stand up and clap. the wave? just sit down, everyone. good afternoon. i am thrilled to be your on the floor. -- here on tehe floor. let me begin by thanking the new first lady. she is already very engaged and supportive of these initiatives.

since she is so close, i am counting on her to work alongside on some of these issues. we will see you in a month. at the governor's gala, so be ready to dance. congressman moran, i look forward to working with you and our staff is talking about some things to happen working on for very long time so we are grateful for your leadership and concern and focus. there you'll -- mayor euille, you have done wonderful work in this area. we had a terrific time addressing the national conference of mayors and we got a good response from your colleagues. i know that the mayors in this country stand ready to work on this issue. they are seeing the effects of

what everyone on this floor has talked about in terms of childhood obesity. they are ready to make some changes. also, dr. palfrey. it is an honor to have you with us. as i have shared before, it was your relationship with their pediatrician that we even began as a family to start thinking about these issues. -- our relationship with our pediatrician that we began as a family to start thinking about these issues. we are grateful to your support. -- for your support. this is not an easy issue for you. i hope our attention to a mixture job a little bit easier. i also want to thank all the folks at the y, for all your doing. for your work as a national leader. i know that you know the will work happens on the ground and these fine facilities throughout the country, the y has been a

leader in ensuring that families and communities have access to places to play. your mobile physical unit, your unit that came to the south lawn helped me did you might skills -- debut my skills. the y's are showing that they are thinking towards the next stage. the room that we're in is the next generation of what y's can be. it is something i did not grow with. you are keeping up with the changes in cultures and communities in a way that will make a huge impact to the work that we have to do in our nation. finally, i want to thank my body in crime, secretary kathleen sebelius for her tremendous leadership and her tremendous friendship. we're glad that you moved out

of [no audi[inaudible] i know it is hard. i will work on him. it can come over for dinner. -- you can come over for dinner. if your work is at the forefront of addressing some of our greatest health issues and it will take continued commitment. we have been working with your department in getting them done. your staff is been tremendous in moving quickly in getting that money out. i am anxious to see what that hard work leads to. we're grateful, not just to you but all of the thousands of people in your agencies that make us all look very good. and finally, i want to commend our new surgeon general, dr. benjamin, who i finally got to me. three months on the job, and we

are making you crazy. you are doing us a terrific job, jumping in to report -- your report is not only timely, your way of looking at this issue is refreshing and on point. it is presenting the dangers of inaction and a vision for health for this country, it is -- is incredible steps in a long journey that we will have to take. we want to thank you for your important work. we have seen -- as we have seen, a surge of an obesity is threatening our children. it is threatening our families and more important, it is threatening the future of this nation. higher rates of obesity are directly linked as you have heard to higher rates of chronic illnesses like heart disease and cancer and diabetes. even the type 2 diabetes is rare

among young people, more than three-quarters of those who haven't arby's. in fact, the health consequences are so severe that as the secretary said, medical experts have warned that our children are on track to be less healthy than we are. there has never been a generation of young people who are going to be less healthy than their parents. if we're honest with ourselves, it is not hard to understand, i tried to track this to my own life. parents have told me and i have seen it myself. it would love nothing more than to feed their kids more healthy foods but if you do not live anywhere near a place that sells fresh produce, it is very hard to accomplish that goal.

more and more families are busy and tired and you pick up the phone and order pizza. or you go to the drive-through. it's just easier. our modern-day life makes it difficult for us to sit down and prepare the meal. a lot of times, it is affordability. in these tough economic times, by a healthy foods unfortunately feels like a luxury. for too many families. they cannot afford it. we have seen stories, we have heard stories of people who know that buying that large gallon of is cheaper -- of juice is cheaper than buying milk. at schools and our committees,

often times, it is budget cuts that make it more difficult. recess and p.e. are gone for many kids across this country. parks and playgrounds and after- school sports are few and far between i into many neighborhoods. and for most people, the cause is a combination of all these things. there is no one. together thing. is everything -- is everythint s everything together. it is easy to live healthy when you live in the white house and you have staff and people who are cooking for you and making sure that it is balanced and colorful. i had a hard time doing it before lived in the white house. that was not so long ago. barack and i were like any working couple.

as a working mom with a husband who was busy, so many times, i was the one balancing that load and wrestling with those challenges, and there were plenty of times when you come home tired and you do not want to hear the kids fuss and you pop something in the microwave or pick up a burger. it was a godsend. we were fortunate enough to have a pediatrician as i have mentioned who raised a red flag. basically cautioning me that i had to take a look in my own children's bmi. we went to our pediatrician all the time. i thought my kids were perfect. they are, and always will be. [laughter] he warned he was concerned that something was getting off balance. he was a pediatrician that worked in an african american urban community and he knew

these trends existed. he was watching very closely in his client population, his patient population. my children were perfect. i did not see the changes. that is also part of the problem. or part of the challenge. it is often hard to see changes in your own kids when you are living with them day in and day out. as parents, we all know and we will readily acknowledge that kids in general, we will say we do know they do not eat right. we know they do not get as much exercise as they should. we often simply do not realize that those kids are our kids. our kids could be in danger of becoming obese. we always think that only happens to someone else's kid and i was in that position. we all want desperately to make the best choices for our kids

but in this climate, it is hard to know what is the right thing to do anymore. even though i was not exactly sure at that time when i was supposed to do with this information about my children's bmi, i knew i had to do something. i had to lead our family to a different way. the beauty was for me, over the course of a few months, we started making really minor changes and i shared this story because the changes were so minor. we did things like limit tv time. our kids were already fairly active. we cut tv timeout during the week and that helped increase activity because they're running up and down the stairs ignoring me more. we paid more attention to portion size. we did not make a deal out of it but said, listen to when you are hungry and when you are full,

stop. we reduced our intake of sheree drinks and encouraged our kids to drink more water. i just put water bottles in the lunch and we have low-fat milk. it did not make -- we did not make a big deal out of it. we just made the change. we put more fruits and vegetables in our diet, try to make for a colorful -- trying to make for a colorful mall meal. it tried to balance it with something at dinnertime. it was minor stuff. this small changes resulted in significant improvements. it was so significant, the next time we visited our pediatrician, he was amazed. he looked over the girl's charts and said what are you doing? i said, not much. that is the good news. we want to share with family.

particularly for kids. small changes can lead to big results. they are not destined to this day. they are not in control with what goes into their mouth, usually. we know what has led to the obesity epidemic. we know inside. we are still learning. we kind of know. we know what we need to do to solve it. we just have to make a commitment to do it. each and everyone of us needs to make that commitment. we need to provide parents with better nutritional information so they can make better choices. we need to give our kids healthier options at school where many kids are getting most of their meals. we need to make sure they are spending less time in front of the tv and playing video games and more time exercising and having fun in doing the work of children, which is played. we also know that the solution

cannot come from government alone. that is something we just have to remind ourselves and for many, that is a great relief. everyone has to be willing to do their part to solve this problem. everyone has to work together to turn this pattern around. that is what we hope to do through an administration wide initiative on childhood obesity i will be launching in the next couple weeks, along with the number of important partners. we will be bringing the federal government together, those resources in partnership with business, nonprofit, and the foundation committee. all of whom are thrilled to be a part of this endeavor. it is refreshing to see so many people recognizing that this is the time to step up and make some changes. we are going to do a number of things. again, some of them small things. we want to create what we are

calling more help the schools. these are schools that are offering more nutritious meal options during the day. they're providing nutritional information to children as part of their curriculum and they are ensuring that children are getting increased exercise that we know they need. we also have to focus on increasing the amount of exercise outside of school. noplace like -- no place like the y knows we need to make these changes. it has to be affordable and accessible. that will be the toughest things we need to do. we need to do this in all communities. urban and rural and everywhere. they have to have access in order to make healthy choices. there is nothing more frustrating that will frustrate apparent more than to say that you have to buy more fruits and vegetables but to see the cost

out of kilter and see those goals out of reach. these are just some of the things that we hope to do through this initiative. what we know is that we have to be ambitious. the approach has to be ambitious. it cannot just be lockstep. it has to be something meaningful and powerful. the other thing that i will say and say again and again, this will not be easy. let's begin with that. this will not be easy. and it will not happen overnight. i will not happen simply because the first lady has made it her priority. that in and of itself is not enough. it will take all this. thank god it will not be solely up to me. [laughter] it will take all of us. parents, schools, communities working together for a very long time over a sustained time, over

generations of children. we will need to keep doing this. i have every confidence based on the level of energy that i have seen, based on the willingness of people to deal with this issue across party lines, the willingness of the business community to be part of the solution, every sign that we have seen over the course of moving to this rollout has been nothing but positive. of course, parents are ready and willing. we all want to make the best choices for our children. we just need to know how. if we continue to do that and work with our physicians and work with our surgeon general, if we have the federal government working together, businesses ready to make the sacrifices, that we can tackle this problem. we can do something really important for our kids. we can hand them the future that

we know they're going to need to be successful. i am excited. i look forward to working with all of you over the next years to make this not just a dream, but to make this movement are reality. thank you for the work you have done so far. we have a lot more work to do. thank you so much. [applause]

[inaudible conversations] [inaudible conversations]

[inaudible conversations]

[inaudlblible conversations] >> in the nation's capital and across the country, listen to c- span radio. it is a free app for your iphone. c-span ready a, covering washington like no other. -- radio, covering washington like no other.

>> our estimates are 500 camps, larger camps. i am talking about 50 people. the smallest and the largest between 15 and 20,000. >>

>> [speaking foreign language] >> this is the emergency phase. we have the reconstruction phase afterwards. this donors' meeting on monday, the donors meeting which is not

scheduled yet but should be in march, these are important windows that we must get the funding to make sure these tent cities do not become part of the reality and landscape. >> we examine president obama's jobs proposal discussed in the state of the union address. our guest is jim mctague. then the tenet kernel ready -- lt. col. rudy atallah. then elizabeth kneebone on american poverty trends and the growth of poverty in the suburbs. "washington journal" at 7 eastern on c-span. earlier today on capitol hill, the senate voted to confirm federal reserve chairman ben bernanke for a second term. 70-30.