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>> after listening toñi the president, republican leaders spoke with reporters. they were meeting in baltimore for the annual legislative retreat. >> the present accepted our invitation and came to baltimore today. i thought the dialogue one very well. the fact that we want to continue to find common ground. we are not always going to agree. i think it should become clear in the conversation today that there are issues that we do

agree upon. when they are lumped together in 2000 page bills, typically, what we find is a lot of things that we disagree with. the american people want to know where the jobs are. that should be our focus of this year. it should of been the focus of the administration last year. they seem to be geared toward fed this year. let's find the common ground where we can put americans back to work. that is what they expect from us. >> the discussion that all of you just witnessed is a first. it was the kind of discussion, frankly, that we need to have more of.

i am hopeful that leader hoyer in speaker pelosi will call the president's lead in begin to open their doors and and five republicans in to participate in a discussion like we just had. obviously, we heard differences. there are some things we agree upon. offshore drilling came up several times as low as the construction of clean nuclear plants. let's go ahead and do those things. let's do the things we can agree upon and set aside the things that the president believes in that we philosophically do not. that there is common ground, we can go ahead forward with those. i look for reducing the house leadership on the other side of the aisle. we can begin to see some progress toward making things happen for the american people. ñi>>çóçó house republican leadee

grateful for the presence of the united states. and his willingness to come in a freewheeling and open environment and have a frank and çóhonest conversation about the future of this country. it was also very welcome to hear the president finally acknowledge that house republicans offered positive alternatives over the past year of this that ministers and. this summit that is now available links back to alternative the republicans offered on economic stimulus, on a budget, on energy independence, and on health care reform at a lowerçó cost without raising or growing the size of government.

we welcome the dialogue with the president. we especially welcome the acknowledgement that this business about the party of no idea is can hopefully be banished once and for all. >> do you feel like he will be more receptive and you'll be more of a participant in the process? >> i've been president has always been willing to work a little more closely with us, but it has never translated into real action on the hill. we will have more discussions with us.

>> they felt it the president came here in said that you need to do it on a bipartisan fashion. then he turned around and started accusing you of doing just that. what do you think of that? >> that was a candid conversation. we have been very difficult year with a lot of major issues. i am not want to exacerbate the problem that is already out there. today was a good first step in having more of a dialogue. i hope it continues. >> they are saying how republicans to stop talking so bad about the democratic party, but we think republicans did exactly the same thing.

>> when i have issues with some of their proposals, -- listen, i when i describe the health-care bills, i say it because i believe that is the essence of their bill. sometimes i do what i have to do. we are going to try to be honest in our assessment of those policies that we disagree with. every time we do disagree with the policy, you will continue to see as put forward what we think is the better solution i think that is an honest way for the minorities to operate. ó>> what ine for working with you? >> right now there is bipartisan opposition to the health care

bill. it is republican and moderate democrats. ñrçóñiçóthe opposition to the cd trade system is bipartisan. all they have a big majority, and they do not have to work with this. what we have seen over the last year is the fact that the speaker and majo+aáy leader has said we have a 40 vote majority. we will do it our way. when we are not allowed to depart to the process, when you go through an entire year without one open rule, you really half -- the need to assess how they are running the house. this is not a way they envisioned diit happening. >> the president made the point that bipartisanship does not mean that the republicans from one to get 100% of what they want or 80%. he went through a long row.

could i your reaction to what you are saying and terms of how cooperative republicans have been? >> i have been involved in many bipartisan bills. it does not come along in the middle. it is not about taking one republican idea and throwing it in a 2000 building it is bipartisan. we have very different philosophies. we started from the beginning. you saw me sit down with senator max baucus. to do pension reform.

we did it from the beginning. if we are really serious but building a bipartisan project, and you have to do it from the beginning. i have been there. i have done it. we can do it again. >> the present has accepted responsibility for not putting the healthcare negotiations on c-span. what would you see as a concrete example of this but partisanship that the president talked about today? could you give as an example of one thing you would like to see him do going forward that would be helpful? >> the kind of transparency that the president promised during his campaign cannot exist over this last year. it is also pretty clear that the american people are expecting much more transparency from this political process than they have seen. it is going to be incumbent.

you are the people calling the shots? to the extent that there are any provisions of covering the war transparency to the process, i think is what the american people expect.

>> c-span welcomes this decision by the republican leadership to open the event to television cameras. next, at the capitol hill reporter who covered the event is an update. -- gives an update. >> peter baker' witness a rare public meeting today. what prompted today's meeting? why was it open to cameras and reporters? >> this is the annual house republican retreat. the president wanted to appear there to make his point that it is time to work across party lines again. his first years in office was marked by very polarized partisanship in washington.

he wants to recapture the magic he had in the campaign. it was a remarkable moment in front of the cameras. the white house told the republican caucus that they wanted to keep the cameras in there for the session. that is unusual. use of their only there for the president's opening remarks. -- usually, they are only there for the president's opening remarks. >> what issues did the gop members pressed the president on? >> it is almost all domestic issues, particularly health care and the economy. the dialogue went basically with republicans pressing the president on why he did not listen to more of their ideas and why did he not knowledge they had ideas.

he said i incorporated some of them into my ideas. i did not like the other ones. he was upset that they continue to care picture him as a radical. -- characterize him as a radical. we talked to some of these things that were divided. >> how do you describe the atmosphere of the event itself? >> it was civil. it was tense. it was almost wonky. there was none of the shark, bitter resentful politics that we as seen a lot of lately in washington. the british prime minister

regulate goes to parliament in says, give it your best shot. he stands there and he answers the questions. this is what john mccain promise to do. now president obama has picked up that kind of idea. >> what are they saying about continuing the dialogue? >> the president promised to fight republican leadership to the white house once a month for the rest of the year. it stopped when it became clear that the two sides were talking past each other. he is making a renewed effort to make the appearance of consulting. we will see whether it reaches past appearances to something more concrete. >> any chance will seymour these meetings open? >> -- we will see more of these meetings open?

>> we are pleased at the back and forth. they both had a way of airing their long-simmering the use of these things. it would not entirely surprised me to see them find a way to do it again. >> thank you for joining us. >> you can see president obama's comments to the congressional republican treat -- retreat knighted in a cut eastern. president obama since his budget to congress next week. it stars the process setting overall levels for spending. on the floor, the house will be working on a bill that senators passed this week to increase the debt limit by $2 trillion the. this will consider nominations for a public agencies. the house is live on c-span.

>> you think they can spread good will? >> i think so. it is like a religion for th. >> he was the single most important figure in jazz in the 20th century. >> his new biography of louis armstrong at 8:00 p.m. eastern and specific -- but did it on c- span. >> find the entire weekend schedule at booktv.org . the latest updates on twitter

indeed nation's capital, listen to c-span radio in washington at 90.1fm. it is also a free application for your iphone. c-span radio, covering washington like no other. >> now decision on whether the u.s. economy need additional stimulus from the federal government. we would hear from to economists and former congressional budget office director rudolph banner. this is just under an hour. we have to experience people in the debate. market azande is the chief -- he

directs the research and consulting services business. it is a division of the analytics. he was an economic adviser to john mccain's presidential campaign. lest you think of him as a partisan voice, his views are sought by the obama administration and members of the house and senate from both parties. the last time i was with mark was at a session of the democratic caucus where he was holding forth on the stated the economy and policies that the democrats were considering. mark is the father of an expos a of the financial crisis. he has a book coming out soon called "paying the price."

he will not reveal any of his secrets today. you have to buy the book later. >> my system said given that to you. he is in institute fellow. he holds a public policy. he was the director of the congressional budget office. he is also held assistant director for economic policy and office of management and budget.

they release their report two weeks ago and the long-term budget situation and how to deal with it. the format of this session as one in which we get an offer to present their perspectives on the issue. it is what they have heard from the other. i'll ask a question or two. then we will open it up to those of you in the audience to ask questions. when we get to that point, you need to identify yourself and if it is appropriate, direct the question to one of the two participants.

>> thank you for the introduction. i am going to make a handful of points up front. first, the great recession is over. and when to take credit for that "great recession." enough for the recession. -- not for the recession, but for the name. [laughter] it is the title of one of the chapters and "financial shock." i defy you to find anyone who use them before me. i think i will get credit for it. i guess it is only over in a very technical sense.

we saw this this morning. order gdp grew 5.7%. a big chunk of that was inventory gains. we are out of the recession largely because of the policy response. it was reconfirmed yesterday. the other important policy response is that nothing is any accident it ended at the time the stimulus was providing economic benefits.

one key point, the link between the stimulus and economy is the degree of stimulus than the. this is a very large change in a short amount of time. we stayed 89 billion in the quarter. if you do the math, it suggests the stimulus becomes a drag on the economy by quarter for a this year. virgin four o-- courter fourqua.

the recovery, and we are now in an economic recovery, is fragile. i did nothing the coast is clear. i do not think there is a guarantee that the recovery will evolve into an economic suspension and . the odds are uncomfortably high that it will not the most obvious is the job market itself. it is improving in a sense of laos have abated. hiring is not engaged. without hiring, we cannot get net job creation. without a net job creation, we will not have the growth toward consumer spending that is the fire for self expansion. while our business is not hiring? at the it is a lot of things. one is a lack of credit for small businesses.

they are able to finance themselves. let me give a quick statistic. at the end of december, there were three and a 25 billion bank credit cards outstanding. if you go back to the peak of credit card, there were 450 million. that is a decline. 125 million in credit cards çóoutstanding. credit cards are very important to small business finance. many rely on the. ñixdjfi was a small-business ow. i started my own company. i had to put a loan on my home as collateral. it is very difficult for banks

to know what the collateral is worth. it is quite a big problem. i think that is the problem from top to bottom. you do not forget that quickly. results will be very cautious. there is energy policy, finance a regulatory reform -- these a big questions with ferris can begin implications. -- with significant implications. in addition to the lot of hiring, the other serious impediment to the recovery is the foreclosure crisis. i think the policy response --

the one aspect that has not worked well is foreclosure mitigation efforts. they are not working that well. ñri think there is a sick of against risk that we are going to see foreclosures continue to mount in 2010 and drive down housing values again. nothing works of house prices are falling. . .

>> they need to be able to of loan -- offload that into the securities market and it cannot have enough capital to do it on their own. that market is not going to work until they are nailed down. if that does not work, the economy is not going to operate properly. >> we are in a recovery. theikely scenario test that it does slowly evolved into a self sustaining expansion but the risks are too high that it will not condone if we do backtrack, it is going to be a mess. we have a 10% unemployment rate which is moving higher. we have a one.

dollar -- $1.40 trillion deficit. we have to guard against that possibility. it is desirable for policy makers to provide more support to the economy. not a lot more but some support. temporary tax cuts, temporary spending increases. if i were king for a day, i would say stimulus for 2010 and 2011 to make absolutely sure that the recovery is going to involve into a self sustaining economic expansion. more help to unemployed workers. you are not going to get extended emergency benefits. that is a problem. state and local governments are an issue. if they should get more help i think to stall what will be serious cuts in jobs and programs of they did not did that help for fiscal year 2011. a jobs tax credit pontefract if

properly designed, and quickly implemented could be a game changer in the labor market. it could be the one thing that lowers the cost of labor sufficiently to get businesses over their lack of confidence and say it is now time to hire again. for that to happen, the recovery would evolve into an expansion. how would also empower the small business administration so that they could extend more credit to small businesses going back to the earlier point about the lack of credit. point number three, i think it is appropriate and desirable for policymakers to provide additional support. i think this could policymakers have economic latitude to do this. there is no net new borrowing and our economy. zero. look at the federal funds data from the federal reserve board.

in 2009 third quarter, total net new borrowing with a negative. that has never happened. that goes back to when this started in 1950. the federal government is borrowing a ton of money. consumers are diverging and businesses are to leveraging. there is no significant threat of crowding out the higher interest rates in 2010 because of strong government borrowing. you cannot do that forever but into the some 10, you can do it and not cause interest rates to rise. they are incredibly low. it shows no signs of rising. any auction, treasury bonds have strong demand at every option. -- at every auction. the federal reserve has no ability to help further in 2010. that is something that would be

on travel. there are the nation's mortgage lender. there are buying all the debt as part of credit easing. there are effectively the mission cost mortgage lender and that is uncomfortable and i do not think it is appropriate. i do believe that the most significant economic challenge after we get by this great recession and financial crisis is our fiscal situation. i think that is obvious but the math is incredibly compelling. i think it is very important that we address that issue pontiff we should talk about how might one do that. i am more optimistic about this than most people because i think that there are some logical sound economic responses to the fiscal crisis. in my mind, it is about to gain the political will to do it. if history is anyzv guide, we wl

figure out a way. we might need a bit of help from financial markets to get the will, but we will get that to address the fiscal situation. n!having said that, the necessy condition for addressing the nation's long-term fiscal situation is to get the nation's economy growing again in a clear and definitive way the the economy needs a bit more help to that. >> thank you. your fifth point was the most optimistic that i have heard in a long time. i am wondering which one of us is drinking the wrong water. with that, let's go over to rudy. >> we can debate that point. >> too much of a good thing can be wonderful. >> i do not think he was talking

about fiscal stimulus at the time. we start with the situation here where obviously the unemployment rate is too high. the national debt is too high. what do we do? because of the precarious nature of the debt situation and the arithmetic of the government budget constraints, we know that any dollar of tax now or spending increase will have to be paid for eventually. and eat your broccoli now or even later. that is their choice. those advocating stimulus, the broccoli will not be as propulsive as some later date. -- as repulsive at some later date. çc'ñçñrsome politicians keep g

off eating the next vegetable until after the next election, until themy next year, the w3election after that. i do not think the world is going to let us get away with that. if we try, there is an ireland and our future. if you have not been watching what is to win on their, there is blood all over the floor. the bond market got shaky. they are in the midst of slashing civil service pay, decimating social programs and so on. we see the great bond market floundering when they have a gdp ratio of about 120%. they have been trying to kick the can down the road. i have not done anything theory specific yet but i think that there are going to have to start very quickly and go down the same route as ireland. we really do want to avoid that sort of pain because it is going to be very severe.

some might say that i am exaggerating the risks of all this. even if i am, after investigating thousands of financial crises similar to the one that we have just been through, analysts have come up with the rule of thumb that a country of its debt to exceed 90% of the gdp sees a growth rate decline 1% per year. i have a little bit of a problem seeing a bright line like that. nevertheless, even if there have right, the cost of that kind of debt is enormous. it is sobering to realize that it will probably break the

threshold in 2013 without extra stimulus. and judging the trade-off between trying to do something to alleviate unemployment now versus suffering a great deal of pain later if the bond market tumbles or employment slows, and you obviously have to make the judgment as to the seriousness of the risk associated with extra stimulus now versus the amount of good that you can do with extra stimulus now. i do not know if mark and i judge the long run risk differently but i am quite sure that we differ quite a bit regarding how much bang for the buck we get quickly from any stimulus policy. in the report last week, the congressional budget office costs out the stimulus plan and

about $800 billion. they use a wide range of estimates for what the economists call multipliers or bang for the buck. the low end of the range for their whole stimulus package is about one-third. if there is enormous uncertainty here. mark's estimates tend to be at the top and. i would be at the low end. i could see good reasons for being below the low end of the range of the impact. i think it is very curious that the general theory 70 years ago and in the past 50 or 60 years, we have had a whole series of challenges to the basic keynesian paradigm.

much of the recent discussion seems to have forgotten about all of that except for a few op eds and the wall street journal. the major challenges to kansas and through time -- and i think the analysis that is very important that suggests that fiscal policy is totally impotent in a world of flexible exchange rates. then there is the old-fashioned theory since we have been issuing this mountain of debt, households have been buying in and you should large in the amount of it, i wonder but they've been doing with their money if that that had not been available. he and his critics are 82 character. -- caricature.

my bottom line is that i do not think you get huge benefits out of each additional dollar of debt issued. i think the risk attached to east dollar are pretty high. one cannot deny the pain out there that is associated with this recession. i think it is concentrated at the lower end of the income distribution. one cannot deny the huge distortion of that. the constitutional restraints and implied that the recession has an exaggerated impact on what they do and we are being deprived of goods and services from that sector of the economy. i would look at this problem more as one of alleviating pain and correcting distortion and

not one to much about agar met demand. -- aggregate demand. that would imply using safety net programs or what we used to call food stamps or even ssi. i would continue the general eight to this day -- general aid to the state. state and local tax receipts rose and the third quarter according to the nia and i suspect that they are up again in the fourth quarter. my total spending would be about half of mark's, about $95

billion. food stamps $10 million and a tax credit but i would not call my program a stimulus because i pay for it. my first choice of paying for it would be to claw back un obligated funds from the original stimulus. i always thought that was extremely dubious. some of the spending very slowly, i expect there are boondoggles and anything worth doing is worth paying for. i cannot get $95 billion from that source so of legislate specific tax increases to be able to finance my program. ideally, i would like to start on the task of deficit reduction

at the same time. that is probably too much to ask. people are very shortsighted and not count the ways in which i care -- i would pay for these things and you get some increase in aggregate demand as well but that would be an accidental byproduct of what i'm doing, not the main purpose of the huge flaw in my plan, the promise to pay later may not be credible. this is a testimony to the dysfunctional nature of our system right now that promises of this type may not be filled. frankly, i did not know what to do about that. >> on that happy note [applause] [laughter] >> i guess there will be and ireland but the good news is that there will not be in iceland. we have an array of bad prospects in front of the. would you like to make any

comments? >> sure. i think we agree on many things. i did not think my perspective on the long-term fiscal situation is that much different. i would concur that if we run deficits that lead debt to gdp ratios that rise measurably above where there will be if we cannot make changes in the future, then we have a problem. we were going to have some sort of fiscal crisis. it will be very to different and a mess. -- it would be a significant mass. i would not discount that risk at all. that is my second book, "paying the price."

i do think that if we are focused on the debt and gdp ratio as our benchmark for progress, that is a good thing to focus on as an objective. we have stabilized that ratio. it is important to realize that in that ratio, the numerator of the debt to gdp ratio and we have to make sure that is growing. if that does not grow, nothing else to do is going to matter. i think the debate boils down to what is the most appropriate way to ensure that that is growing, gdp is growing, as soon as possible and as consistently as possible. that requires that the job market kicks in. given that, it is very importantxdççsto try to jump-t that job market and to let it go

on its own. we can do that and go down that path. it may work out which is fine. the economy may stick to strict -- said dick to script and be okay but i think -- çstick to e script and be okay but i think we should provide some help to that and then start addressing the numerator and the debt to gdp ratio. >> that reminds me, i was going to ask you a question be a modeler and predictor, too high, too low. as a congressman, i want in number. >> i in good numbers. >> he said we are not into a self-sustaining recovery and the risk is too high that you could not sleep at night. what makes you not sleep?

25 percent son? 40%? >> i would put the brisk at 28.345%. -- risk at 28.345%. >> all kidding aside, i think the risk of backtracking is between one-fourth and one-third but comfortably high. at least in my view. if the unemployment rate were sitting at 7% which was the peak unemployment rate coming out of the unemployment -- of the last recession, of the defined. we take our chances in court down the path. i agree. if we are sitting at 10%. we are still losing jobs. the unemployment rate is almost sure to rise further. w3that makes the 1/4 probability uncomfortably high. my>> let me ask both of you a question. looking into the rearview

mirror, some have argued over and over again that the initial stimulus effort was too smallymç and weaken the monday morning quarterbacks on this but at that time, did youç think it was too small? did you think it was too large? was it allocated the right way? we have a lot of things in that package that are spent out over a long period of time that cannot strike many economists as a stimulus. >> my own view is that it was very poorly designed and that is unfortunate. we created more debt than we have to do to get the same things in the bucket and demand

flaws -- and the main flaws were on the infrastructure side of the highway spending has gone up faster than i anticipated to tell you the truth. if it looks like the spending on energy and infrastructure and things like that was very slow indeed. cbo does not have it going until 2011. i would have had a program that was probably heavier on the housing side which might have cut taxes a bit more maybe even given state and local governments a little more generous aid. >> i think it was too small. i think the house bill was a better bill. it was a bigger package but it is now $862 billion, a chunk of that is they ma amt patch whichi

did not consider stimulus. it is down to $700 million. that is too small. i would have increased the size with a temporary tax cuts. i think the multipliers are lower than spending and it would getçó into the economy much more quickly. i would focus on payroll taxes which is what is being done now in respect to the job tax credit. for in my view, this discussion of his additional stimulus support is doing what we should have done best time last year. it should've been close to one trillion dollars and more heavily weighted towards tax cuts. i agree with the gritty pontiff if you rank order the different elements -- i agree with rudy that if you rank the order, infrastructure spending should be at the bottom. we have a 10% unemployment

rate, you have to generate at least 10 million jobs. we have a big employment problem for an extended period. and the structure could be helpful in that regard as a source of job creation over the next four to five years. i think it is difficult to get it out there but it does have some benefits. >> a minor point that i have not sorted out. mark in the council of economic advisers said the maximum impact of the stimulus is pretty much passed already. kñsóoñri]ç[ççi0/ñçç7=% they say the peak is in the next six months. they did a measure it differently. i am not sure. i have not had time to really cut the lead the difference. it is somewhat important for what you're advocating now. we have not seen the full effect of the past and the less. there is then less need to talk

about more stimulus at this point. >> i am not aware of that. i did not know that about the cbo. the only possible explanation is to have more of a lag in their model relationships. most private forecasters are putting the maximum economic income in the second half of 2009. and still provide some benefit in the first half but in most models i have seen, it is-. >> it may be a difference in definition. >> moving from the past to the future, there is ako billçko fe #g0 billion in the house passed one that is $174 billion. only half of the house bill is

for the types ofç?7ñ3ç thingje broadly construed that could fit into the accessible category. a lot of it is infrastructure spending. to be on the agenda now. it just takes too long. i am not too enthusiastic about employment tax credits for increasing employment. i think they are extremely difficult to design in a way that you cannot just provide a windfall for people that have been hired anyway. that is true even if you have threshold's like to% and so forth. we have all of these spaces in

the r&d tax credit that to not work well ago and there's really -- they are similarly structured. to the extent that it is just a windfall to businesses, i do not think many economists will say thatw3 stimulates aggregate demd very much. çfor some reason, the depreciation proposals you would think would work especially when they are about to expire. the data from the early part of the last decade shows hardly any indication that they increase at all. that troubles me, frankly. the numbers are just not there. >> mark, you endorsed the top tax credits. you can reveal how your tax

credit would overcome the reluctance to endorse the policy? >> i think rudy's point that a jobs tax credit may be inefficient in the sense that you are reporting firms that would have hired anyway is correct. the marginal job creation will be small. the numbers are big. in any given year, if there are 6 million hires, one out of 10 of those is marginal additional job creation. that is 600,000 jobs. if that comes in the spring and summer of this year, i am all for that. if that is a key time for the labor market and economy. if that is the thing that turns on the light switch and it's the economy going again. i did not think you need a large

impact to make a significant and -- difference. the other issue with the jobs tax credit which is a very reasonable concern is the concern about gaming. there is a potential for that. but there are ways to design it so you can mitigate the most serious forms of that. we will hear about those with the administration announces the tax credit today. there are a couple of other versions in the senate. once we take a good close look at that, i think it will become clear that it was designed in a way to address this issue. i think it is -- at the end of the day, i could be wrong. who really knows? it is worth a shot. moreover, cbo when asked what they would do to jump-start the job market, at the top of the list was this job tax credit.

these are all things said they considered and that is at the top. i say let's give it a shot. one other quick point, broody mentioned the bonus appreciation. there is some evidence that it worked in the fourth quarter. if you look at fixed investment , it jumped 13.5%. if you looked at yesterday's numbers on durable goods, there is a huge surge in december shipments which is strongly suggested of businesses trying to get that into place. they thought there were going to lose their tax credit so there is evidence that it worked in this go around. >> they looked at the 2001 and 2003, there was very little evidence. this data is suggested that it worked better. >> i would hope it would. it would confirm an economic theory and we seldom do that. [laughter]

>> you pointed out that one of the significant problems we face is lack of credit available to small businesses. the president in his state of the union said he is directing $30 billion of park money -- tarp monday which is not being used to small community banks with the intention of helping small businesses. is this an effective policy? >> i do not know. i did not have details on this plan. i think they threw it out. it was in the address and i think there is a lot of impetus for this. i have not seen the details. i have seen some discussion of essentially the tarp money used as a loan. it depends on how that mode is structured and what the interest

rates he has jig interest rate is and how that is structured. i am not sure about that. if i had my druthers, i would empower the small business administration to make more money available. there are leavers -- levers you can pull to make it more effective. the temporarily raised the proportion of student loans guaranteed from 75% to 90% and thatçñr was a very significant impetus for lending. i would advocate racing that to 95% temporarily. that this argued against by making bad loans and bad

lending. that is true. i think it is worth taking more credit risk in the near term. the other thing i would do is there is an interest-rate cap of 275 basis points. çthe attack on another three, that a 6%. that is just enough to cover ai] rigid cover a credit risk. i would raise that to more basis points. you get a 7% orw3 8% loan whichs that is a good interest rate for any small business and any time, including this one. you get more lending. if you have the infrastructure in place and that wouldç be muh more effective and quicker and getting that credit out as opposed to this other mechanism. i do not know. >> mark pointed out that there

is a danger that the foreclosure problem will continue as bad or worse than it is now. he also pointed out that our efforts to mitigate them have not been very successful. wei] are unlikely to have a self sustaining recovery if housing prices continued to fall. do you have any suggestions for what the government should be doing in that area? >> first of all, i think it is very hard to design a for closer mitigation program that has much impact. i think 10% or 50% of people that for clothes are just walking away and not leaving any forwarding address. -- 10% or 15%. it is very hard to find the small group that can be helped. i think we have been doing the

right thing. mark bemoaned the fact that so many mortgages are coming out of fannie and freddie and i think it is right to bemoan that but that is our only choice right now. i do not mind pushing them to run a big loss right now. the housing credit was useful, as well. it was mainly effected in pushing sales forward, so now we have extended it and see what happens in the next few months. at least there are a lot of signs that housing has had a floor. housing take it in the winter is very erratic and not very reliable. it will be a while before we see whether the housing market has

really turned for good or not. >> do you have any secret plans? >> yes, i do. first, i think the stability and housing values in the second half of the year is a function of three different policy efforts. it was much more effective in bringing up non distressed home sales in this summer and fall. to my surprise, it was very effective in doing that. of the second, the credit easing which drove down fixed mortgage rates, there were 5% when purchases were at their peak, and a mortgage modification plan. many of servicers and delayed a modification and stopped the foreclosure process as they tried to figure out who could

qualify for a modification. these three things can together in the summer and fall and helped support housing bias. going forward, the housing tax credit expires in april. we are going to get a little bit more jews the spring but not as much as previously because this brought forward a lot of sales. you then have the backside. the fed is ending the credit easing in march. there is a lot of debate about what that means for fixed mortgage rates. they're not going lower. it is a question of how much higher they go. we are finding out about who unqualified for the plan or another modification plan and as we see that, we see more foreclosure sales. my concern is that housing dollars are going to start falling again in the spring and summer when the double this -- double dip risk is that the maximum. given that we cannot extend the

housing tax credit, that is done. there is no impetus to do that again and i did not think it would be appropriate. the fed is not going to raise rates unless something happens. if we cannot do anything about the modification plan, we have a problem. we have to do something about the modification plan or at least prepare for the possibility that we may -- that we need to make a change to the plan. i can stop there or i can tell you what my plan is but the courts tell us what your plan is. >> do you want to know? " ok. this is my view. if it takes too long. >> that is iconoclastic. i am saying we prepare to go down this path. what i would do is i would say

any homeowner who got in mortgage between 2005 and the end of 2008, at the time of origination was inherently unaffordable, and you can define that anywhere you want, say 35% plus income ratio, that is inherently an unaffordable mortgage. if they got that mortgage, it was a regulatory failure. they should not have gotten the mortgage. we failed as taxpayers. the regulators are agents. therefore, we have a fiduciary responsibility. i am not talking about investors put owners. -- but owners. i go to that group of homeowners and i would have a

plan that would involve principle right down to about 105% cltv. you just need to give them a little bit of a hook so that they feel empowered and they are going to fight for that mortgage. that money that i am giving to the homeowner is actually going to float through to the mortgage investor. a big problem in the context of where we are today. i would have clawback. if that homeowner defaults it anytime and the next five or seven years, we get our money back. if they remain current on the mortgage, it is your money. that gives the investor significant incentive to make sure that they work with the homeowner to stay in that home. obvious criticism, you are helping out the banks. yes, i am. but, in my view, this only

works if it is done quickly. you immediately convince these guys to do it and this is a slam-dunk for them. they will do it. we get this behind us and we are off and running. i take the tarp money we are not using for housing because harp is the other program that is not working. the vote that money to principle right down and resolve this problem. convince you? [laughter] >> you heard it here first. >> since you goaded me. irst question would be, i was foreclosed on and left six months ago. now you are doing this for everybody who is line. what about me? >> you are toast. >> every policy step you take,

there are winners and losers. we cannot help everybody nor should we. in a normalç time, i think this is something i would not even dream of. this is not what we should be doing. when you drive your car of the dealer lot, you are already under water. i am not advocating this is a policy. i am saying we should consider this if things are not going well this summer. >> questions. >> i used to work on the hill and now i teach a course at georgetown. i wanted to ask rudy to respond to criticisms of their opposition to infrastructure spending. given that everybody is expecting a very slow recovery, aren't these low spend of rice a virtue rather than a flock? qç-- will spend out rates a vie

rather than a flaw? if you look at an angle and section workers and -- you look at a lot of unemployed construction workers. >> with regard to the first point, we are talking about really slow. i and exempting highways because that would out fast. i guess it is a question of when you think it is needed and where the economy will be a year and half from now. a lot of theçó spending in the energy area maybe even in the health research and some of the other research areas may not be obligated for quite a long time.

if the recession drags on, some of this will be useful. the way it is planned now, some of it will be spent in 2012 and 2013. way out there. i cannot think we will need it at that point. in terms of real resources, there are different ways of absorbing them. construction workers are pretty well paid. the question is where to you want to target the employment increase. again, we are talking about increases in employment, some of which is not the wing to take place for many years. i am not sure what the economy is going to look like two or three years from now. >> can i just say one thing? >> i think infrastructure

spending is in good stimulus. that does not mean it is not good economic policy. construction sector is a disaster and our infrastructure is inadequate. i think the mistake was trying to markets infrastructure spending a stimulus. some aspects are ok. but the school renovations and highway building. but this plethora of things put into the stimulus bill probably was oversold. providing a big bang for a short period of time. >> unemployed but not too discouraged to look for work but to irascible to find it. >> i have to ideas and no wonder if they could be put together.

your idea of paying for a new program through club? rather than new funding. and your emphasis on increasing gdp growth and the importance of that. my grand synthesis, why do we not try to claw back the bailout? i say that understanding that some of the money may be long gone and we may not get it back. it would not only have the effect of undoing the moral hazard we have already done by indicating the would subsidize the downside risk, it is hard to undo that, except this might be a way. even more so, i am thinking about the opportunity costs of incompetent incumbent in the market holding on to capitol. that is a misallocation of capital. it would be better for gdp growth if that capital were reallocated to more efficient rivals. we would not only be saying that you are not too big to fail, the

bigger you are, if you are incompetent, the more desirable it is for you to fill because we could liquidate your assets and let the market does to be -- and let the market distribute to smaller rivals. did not cost direct money and stimulate growth. >> it would be very popular on main street. >> to some degree, the top tax is what that is about. -- the tarp tax is what that is about. it is proposed to pay for the job tax credits and this tarp pool. it is paid for. they are going to pay for it but to the top tax. -- tarp tax.

at the risk of becoming overly iconoclastic, there is a reasonable argument to make the tarp tax permanent. we provide a subsidy to large institutions because they are too big to fail. everybody knows it. their cost of capital is there for lower and they also get more business because of this unpleasant guarantee. i think it is reasonable for taxpayers to ask to get some of that subsidy back. eight tarp tax is so that it is a function of the size and complexity of the organization that raises revenue and reduces the two big to fill risk in the long run because you are raising the cost of capital and bubbling the playing field. the tax currently proposed is for institutions of over $50 billion of assets and got tarp

money. that is the approach for what i am arguing for. i would have a permanent to big to fail tax that could be used as a source of revenue at least in the near term to pay for what i am arguing. i am not arguing to not pay for it. i would not pay for it in 2010 because that is counter- productive. i would argue that if we start this thing in 2012 or 2013 when the economy is running. >> i think the question about something like that is really whether you can design it properly. as you described it as it evolves -- as you describe it, it involves a lot of social engineering involved. that is my concern.

>> to big to fail, the wrong way of doing it in my view is they -- is the volker rule. you do not raise any revenue. the best way is a tax on complexity and size which would kick you the same thing but will raise revenue. >> >> a change of subject a little bit. back to foreclosures. one of the things that i understand about foreclosure prices in your description of how you approach a is the secondary market, secondary

mortgages and home-equity line that there has been an increasing unwillingness to work out those loans and that produces the difficulty with first mortgages. >> excellent point. the point is that when you engage in modifications, in many cases, you need subordination of the second to win over on the home. many of these mortgages that are in trouble have another plane on the home. they appear to be very reluctant to risk subordinate. they are playing a game of chicken. in many cases, have you address

that issue? there are two approaches. both are being taken. i think they need to be taken with more force. the first is that regulators need to go in and make sure that they are appropriately marked, they have less reason to we subordinate. this is now only kidding going as an incentive -- only now getting going as an incentive. it seems as if public pressure, give them a program, well articulated and designed, and put public pressure on them to do it, that seems to be working as little better. if none of these things work,

the next step might be to say something like we're going to let these things go into rbo and the government to step in and buy the mortgage. it is extreme and i would not advocate that unless we are getting into summer and fall and things and not doing particularly well. >> last question. >> you talked about -- >> identify yourself to go where the jobs going to come from? you talked about the the residual jobs that came with the loan originators. you also mentioned in your paper about some of the problems we face in the economy have to do with productivity gains. i think we have it structural employment problem. how we address that? where the future jobs going to come from? >> to you want me to take a crack at it? >> i have been talking a lot.

>> to try to be a little more optimistic about the situation, the one reason for believing that once the recovery gets going that it might be a little more vigorous than the standard forecast is that things are so bad now that housing starts are so far below normal, and car sales are so far below normal, that even a small movement toward normality will imply a significant recovery. that is what i am hoping for. i would be the first to admit that i am disappointed by the lack of employment growth so far. i had hoped that we would start seeing some positive gains toward the end of last year. once that starts, and i still

have hope that it will start pretty soon, and wages grow a bit faster than they have, i think it will make a big difference to the mood of the economy and consumer confidence and all sorts of other things that will lead to self- sustaining recovery. i agree that it better start producing. >> can i end on a really positive note? i think there is reason to be very optimistic. i think if we get by this next 12 months and get into 2011 and to doesn't love, i think the economy -- and 2012, i think the economy has great potential for growth. we are selling 11 million cars annually. demographics say which should be selling 15.5 million. that is a big difference. we are putting up 600,000 homes per year. we should be putting up 1.7 5

million homes. we are going to go to those numbers. that is too weak to be a lot of economic activity. that is probably going to be to tell the 11 and 2012. the real growth in my opinion is going to come from loans with the rest of the world. the strongest growth is in the emerging economies. these are very large economies. the u.s. accounts for 20 per -- 20% of global gdp. the rest of the developing world accounts for about the same. we have to figure out how to sell things to them. it is not just the stuff you think about. agriculture, satellites, defense, movies but it is going to be things like legal services. we have a lot of good lawyers.

accounting services. management consulting services. marketing and advertising. economic consulting services. [laughter] i assure you, we will figure it out. at the end of the day, what makes our economy great is that we have the best and the brightest on the entire planet wanting to come here. as long as we maintain that, we are going to be just fine. how is that for an optimistic and then? >> thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> coming up next, president obama takes questions from republican house members at their annual retreat. the of an incident looks at the possibility of a new stimulus bill. a discussion about u.s. relations with north and south korea at the woodrow wilson institute. you are watching c-span, created by cable, offered as a public service. >> a rare public meeting between

president obama and congressional republicans. just a couple of days after the state of the union, what prompted today's meeting in what was it open to cameras and reporters? >> this is the annual house republican retreat. the president wanted to appear there to make his point that it is time to work across party lines again. his first year in office was marked by very polarized partisanship in washington. he is trying to recapture the campaign promise of somebody rising above the washington traditions. it was a remarkable moment in front of the cameras. the white house told the republican caucus they wanted to keep the cameras in their for the question and answer session. that is unusual. there is usually there for the opening remarks and then there is a private back and forth. >> what issues the gop members pressed the president on? how did he do?

>> almost all domestic issues, particularly the economy and health care. the dialogue went basically with the republicans pressing him why he did not listen more to their ideas and why did he not acknowledge that they have ideas. they are angered at this as a charge of not presenting alternatives. they presented him with a book with their ideas. >> the president countered that he did incorporate some of their ideas that he liked. he was upset that they continued to use the term radical. he said this is not a bolshevik plot. they talked about the substance of what divides them. >> how to describe the atmosphere? . .

>> the president promised to fight republican leadership to the white house once a month for the r@ ñrçóxdñiit stopped when it becar

that the two sides were talking past each other. he is making a renewed effort to make the appearance of consulting. we will see whether it reaches past appearances to something ;concrete. ñrñi>> any chance will seymour e meetings open? >> -- we will see more of these meetings open? and forth. ñrçóñithey both had a way of aig their long-simmering the use of these things. it would not entirely surprised me to see them find a way to do >> thank you for joining us.

>> [inaudible] >> i appreciate that.

>> they stopped by the homeless facility here. when he heard that i would be seeing you today, i told him [inaudible] >> he has said words he said you'd never forget. he said, it is not like it was when we were coming off. he said there is no jobs.

it was a peaceful list of projects. we were told it had to be passed. or unemployment would go to 8%. unemployment is tenser now. here in baltimore it is higher. republicans offered the bill at the same time. a cost half as much. using your economic analysts models, it with treated twice the jobs. the it would have created twice the jobs. it was across the board tax relief. we know you have come to baltimore today. you have raised this tax credit,

which was less promoted by president jimmy carter. the first question i would pose -- would you be willing to consider embracing in the name of little david carter jr., in the name of every shuttling family in this country, the kind of across the board tax relief that republicans. it has always been the means. >> our e promise i'll be riding back to that young man.

let's talk about the job environment in general. you are absolutely right. the hope was unemployment would remain around eight at that point, not all the data had trickled them. we have lost six and a 50 jobs in december. i'm assuming you are not fall to my policies for that. we have lost 700,000 jobs in january. we lost another 650,000 jobs such equipment.

i am assuming that was not a consequence of the policy. i'm assuming that was not as a consequence of our policies, that does not worth that -- that does not reflect the failure of the recovery act. the point being that what ended up happening was that the job losses from this recession prove to be much more severe, in the first quarter of last year going into the second quarter of last year than anybody anticipated. so i mean, i think we can score political points on the basis of the fact that we underestimated how severe the job losses were going to be. but those job losses to place before any stimulus, whether it was the ones that you guys have proposed or the ones that we proposed, could have ever taken into affect. now, that is justified -- just the fact, mike, i did not think

anyone would dispute that. you could not find an economist who would dispute that. at the same time, as i mentioned, most economists, republican and democratic, liberal and conservative, would say that had it not been for the stimulus package that we passed, things would be much worse. now, they did not fill a 7 million hole in the number of people who were unemployed. they probably account for 2 million which means we have 5 million folks in there that we have still got to deal with. that is a lot of people. the package that we put together at the beginning of the year, the truth is, should have reflected -- and i believe reflected what most of you would say our common sense

things. this notion that this was a radical package is just not true. one-third of them more tax cuts and they were not -- when you say they were boutique tax cuts, mike, 95% of working americans got tax cuts, small businesses got tax cuts, large businesses got help in terms of their depreciation schedules. i mean, it was a pretty conventional list of tax cuts. a third of it was stabilizing state budgets. there is not a single person in here who, had it not been for what was in the stimulus package, would not be going home to more teachers laid off, more firefighters laid off, more cops laid off. a big chunk of it was unemployment insurance and cobra, just making sure that people had some floor beneath them, and, by the way, making sure that there was enough money in their pockets that businesses had some customers.

you take those two things out, that accounts for the majority of the stimulus package. are the people in this room who think that was a bad idea? a portion of it was dealing with the empty -- amt, the alternative minimum tax, not a proposal of mine, that is not a consequence of my policies that we have a tax system where we could -- keep on putting off a potential tax hike that is embedded in the budget that we have to fix each year. that cost about $70 billion. and then the last portion of it was infrastructure which, as i said, a lot of you have gone to appear at ribbon cuttings for the same projects that you voted against.

i say all this not to really get the past, but it is simply to say that the component parts of the recovery act are consistent with what many of you say are important things to do. rebuilding our infrastructure, a tax cuts for families and businesses, and making sure that we were providing states and individual some support when the roof was caving in. and the notion that i would somehow resist doing something that costs half as much but would produce twice as many jobs, why would i resist that? i would not. i mean, that is my point. i am not an ideologue. i am not.

it does not make sense if somebody could tell me you could do this cheaper and it increased results i would not say great. the problem is, i could not find credible economists who would back up the claims that you just made. now, we can -- here is what i know going forward, though. we are talking -- we were talking about the past. we can talk about this going forward. i have looked at every idea out there in terms of the accelerating job growth to match the economic growth that has already taken place. the jobs credit that i am discussing right now is one that a lot of people think would be the most cost-effective way for encouraging people to pick up their hiring. there may be other things that you guys have. i am happy to look at them, and i'm happy to embrace them.

i suspect i will embrace some of them. some of them i have already embraced. the question will have to ask ourselves as we move forward, are we going to be examining each of these issues based on what is good for the country, what the evidence tells us, or are we going to be trying to position ourselves so that come november, we're able to say, the other party, it is their fault. if we take the latter approach, then we are probably not going to get much agreement. if we take the former, i suspect there is going to be a lot of overlap. all right? >> will you consider supporting the across-the-board tax relief, as president kennedy did? >> here is what i am hoping to do. -- here is what i am going to do, mike. what i am going to do is i'm going to take a look at what you guys are proposing a. the reason i say this, before you say ok, i think it is important to know. what you may consider across the board tax cuts could be, for

example, greater tax cuts for people who are making a billion dollars. i may not agree to a tax cut for warren buffett. you may be calling for an across the board tax cut for the banking industry right now. i may not agree to that. so i think that we have got to look at what specific proposals you are putting forward and, this is the last point i will make. if you are calling for across- the-board tax cuts, and on the other hand saying we are somehow going to balance our budget, i'm going to want to take a look at your math and see how that works, because the issue of deficit and debt is another idea where there has been a tendency for some inconsistent statements. how was that? all right?

>> thank you, mr. president. >> thanks for agreeing to except our invitation. it is a real pleasure and honor to have you with us here today. >> is this your crew right here, by the way? >> it is. this is my daughter liza and my son sam and charlie and this is my wife janna. >> hey, guys. >> say hi. [laughter] i serve as a ranking member of the budget committee so i'm going to talk a little budget if you do not mine. the spending bills they have signed into law, the domestic discretionary spending has been increased by 84%. you want to freeze spending at this elevated beginning next

year. that means that total spending in your budget would grow at 31 hundreds of 1% less than otherwise. i would submit that we can do more and start now. you have also said that you want to take a scalpel to the budget and go through it line by line. i want to give you that scalpel. i have a proposal with my home state senator, russ feingold, a bipartisan proposal to create a constitutional version of the line item veto. problem is, we can i get a vote on the proposal. why not start freezing spending now and would you support a line-item veto in helping us get a vote on it in the house? >> a me respond to the specific questions but i want to push back a little bit on the underlying premise about as increasing spending by 84%. i talked to peter or sec before it came here because i suspect i would be hearing this argument. the fact of the matter is, most of the increases in this year's budget, this past year's budget, were not as a consequences of policies that we initiated, but

instead were built in as a consequence of the automatic stabilizers that kick in because of this enormous recession. so the increase in the budget for this past year was actually predicted before i was even sworn into office and had initiated any policies. whoever was in there, paul, i do not know that -- do not think it will dispute that, whoever was in there would have seen the same increases because of, on the one hand, a huge drops in revenue, but at the same time, people were hurting and needed help. and a lot of these things happen automatically. now, the reason i am not proposing the discretionary freeze taken to affect this year, we prepared a budget in

2010 -- for 2010, it is now going forward, is, again, i am just listening to the consensus among people who know the economy best. and what they will say is that if you either increase taxes or significantly lower spending when the economy remains somewhat fragile, then that would have a distillate of -- destimulative effect and potentially would see folks losing business, more folks potentially losing jobs. that would be a mistake when the economy has not fully taken off. that is why i have proposed to do it for the next fiscal year. that is point no. 2. with respect to the line item veto, i actually -- i think there is not a president out there that would not love to have it. and i think that this is an area where we can have a serious conversation. i know it is a bipartisan proposal by you and russ

feingold. i do not like being held up with big bills that have stuff in them that are wasteful, but i've got to sign because it is a defense authorization bill and i have got to make sure that our troops are getting the funding that they need. i will tell you, i would love for congress itself to showed discipline on both sides of the aisle. i think one thing that you have to acknowledge is you have studied this and take it pretty seriously that the earmark problem is not unique to one party. you get a lot of push back when you start going after specific projects of any one of you in your district. wasteful spending is usually spent some outside of your district. having noticed that? the spending in your district seems to be seem -- tends to seem pretty sensible.

i would love to see more restraint within congress. i would love to work on the earmark reform that i mentioned in terms of putting earmarks online because sunshine is the best disinfectant. i am willing to have a serious conversation on the line-item veto issue. >> i would like to walk you through that, because we have a version we think is constitutional. >> let me take a look at it. >> i would say that automatic stabilizer spending is mandatory spending. the discretionary spending, the bills that congress signs that you sign into law, that has increased 84%. >> will have a longer debate on the budget numbers, all right? >> thank you for joining us. as you said in your state of the union address, jobs and the economy are number one. i agree with you on that. i represent their state of west virginia. we are resource-rich. we have a lot of coal and a lot of natural gas.

my miners and the folks that are working and those are -- who are unemployed are very concerned by your policies in these areas, cap and trade, an aggressive epa, and the looming prospect of higher taxes. in our minds, these are job killing policies. i'm asking you if you would be willing to add some of these policies with the highest unemployment and the ensure economy that we have now, to assure west virginians that you are listening. >> i listen all the time including to your governor who is somebody who i enjoyed working with a lot before the campaign and now that i am president. i know that the west virgin -- that west virginia struggles with unemployment and i know how important coal is to estrogen and a lot of our natural resources there. that is part of the reason i have said we need a comprehensive energy policy

that sets up for long-term picture. for example, nobody has been a bigger promoter of clean coal technology that i am. testament to that, and it -- i ended up being in a whole bunch of advertisements that you guys all all the time about investing in ways for us to burn coal more cleanly. i have said i am a promoter of nuclear energy. something that i think that over the last three decades has been subject to a lot of partisan wrangling and ideological wrangling. i do not think it makes sense. i think that that has to be part of our energy mix. i have said i am supportive and i said this two nights ago at the state of the union, that i am in favor of increased production. if you look at the ideas that this caucus has, again, with respect to energy, i am for a lot of what you said you are for.

the one thing that i have also said, though, and here we have a serious disagreement and my hope is that we can work through these disagreements, there is going to be an effort on the senate side to do so on a bipartisan basis, is that we have to plan for the future. and the future is that clean energy, cleaner forms of energy are going to be increasingly important, because even if books are still skeptical in cases about climate change in our politics and in congress, the world is not skeptical about it. if we're going to be going after some of these big markets, they will be looking to see, if the u.s. is the one that is developing clean coal technology?

does the u.s. developing our natural gas resources in the most effective way? is the united states the one that is going to lead in electric cars? if we're not leading, those other countries are going to be leading. so what i want to do is work with west virginia to figure how we can seize that future. but to do that, that means there is going to be some transition. we cannot operate the coal industry in the united states as if we are in the 1920's or the 1930's or the 1950's. we have to be thinking about what that -- what does that industry look like in the next 100 years. it is going to be different. and that means there is going to be some transition. that is where i think a well thought out policy of incentivizing the the new while recognizing there is going to be a transition process, and we're not just suddenly putting the old out of business right away, that has to be something that

both republicans and democrats should be able to embrace. >> jason chaffetz, utah. >> thank you, mr. president, it is truly an honor. >> great to be here. >> i am one of 22 house freshmen. we did not create this mess but we're here to help clean it up. you talk to a lot about this deficit of trust. there is some things have happened that i would appreciate your perspective on, because i can look you in the eye and tell you we have not been obstructionists. democrats have the house and senate and the presidency. when you stood before the american people multiple times and said it would broadcast the health care debates on c-span, you did not. i was disappointed, and i think a lot of americans were disappointed.

you said you were not going to allow lobbyists in the senior most positions within your administration, you did. i applaud you when you said it and disappointed when you did not. you said you'd go line by line through the health-care debate or through the health-care bill. there were six of us, including dr. phil roe who said we would like to take you up on that offer. we never got a letter or call. we were never involved in those discussions. when you said in the house of representatives that you're going to tackle earmarks, i jumped up out of my seat and applauded you. it did not happen. more portly, i want to talk about moving forward. if we could address -- >> how about -- that was a long list. let me respond. look, the truth of the matter is if you look at the health care process, just over the course of the year, overwhelmingly the majority of it was actually on c-span, because it was taking

place in congressional hearings in which you guys were participating. how many committees were there that helped to shape this bill? callus hearings took place. now, i kicked it off, by the way, with a meeting with many of you, including yorkie leadership. what is true, there is no doubt about it, is that once it got through the committee process and there were now a series of meetings taking place all over the capitol try to figure out how to get the thing together, that was a messy process. i take responsibility for not having structured it in a way where it was all taken place in one place that could be filled. how to do that logistically would not have been as easy as it sounds, you're shelling back

and forth between the house, the senate, different offices and so one, different legislators. i think it is a legitimate criticism. on that one, i take responsibility. with respect to earmarks, we did not have your marks -- earmarks in the recovery act. we did not get a lot of credit for it but there were no earmarks in that. i was confronted at the beginning of my term with an omnibus package that did have a lot of earmarks for republicans and democrats and a lot of people in this chamber. the question was whether i was going to have a big budget fight when i was still try to figure out whether or not the financial system was melting down and we had to make a whole bunch of emergency decisions about the economy. what i said was let's keep them to a minimum but i could not exercise the mall. -- them all.

now, the challenge i guess i would have for you as a freshman is what are you doing insider bukosky's -- your caucus to make sure that i am not the only guy who was responsible for this stuff, so that we're working together, because this is going to be a process? when we talk about earmarks, all of us are willing to acknowledge they are defensible, good projects. they have not gone through the regular appropriations process in the full light of day. one place to start is to make sure that they are at least transparent, everybody knows what is there before we move forward. in terms of lobbyists, i can stand here unequivocally and say that there has not been in an administration -- been an

administration who was tougher on making sure the lobbyists were not participating in the administration than any administration that has come before us. what we did was, if there were lobbyists who were on boards and commissions that were carryovers and their terms had not been completed, we did not kick them off. we simply say that moving forward any time a new slot opens, they're being replaced. we have been very consistent in making sure that we are eliminating the impact of lobbyists, day in, day out, on how this administration operates. there have been a handful of waivers where someone is highly skilled, for example a doctor who ran tobacco free kids technically is a registered lobbyist. on the other hand who has more experience than anybody in figuring out how kids do not get hooked on cigarettes.

there have been a couple of instances like that, but generally we have been very consistent on that front. >> marsha blackburn, tennessee. >> thank you, mr. president, and thank you for alleging that we have ideas on health care, because, indeed, we do have ideas, we have plans, we have over 50 bills, we have lots of amendments that would bring health care ideas to the forefront. we have got plans to lower cost, to change purchasing models, address the medical liability, insurance accountability, chronic and pre-existing

conditions, and access to affordable care for those with those conditions, insurance portability, expanded access but not doing it with creating more government, more bureaucracy, and more cost for the american taxpayer. and we look forward to sharing those ideas with you. we want to work with you on health reform and making sure that we do it in an affordable, cost-effective way that is going to reduce bureaucracy, reduce government interference, and reduce costs to individuals and to taxpayers. and if those good ideas are not make it to you, maybe it is the house democratic leadership that is an impediment instead of a conduit. we are concerned also that there are some lessons learned from public option health care plans that may be are not being heated. in the state of tennessee, where the test case for public option health care in 1994, and our democratic government has even cautioned that maybe our experiences there would provide some lessons learned that should be heeded, and would provide experiences for us -- guidance

for us to go forward. and as you said, what we should be doing is tossing old ideas out, bad ideas out, and moving forward in refining good ideas. and certainly we would welcome that opportunity. my question to you is, when will we look forward to starting a new and sitting down with you to put all those ideas on the table, to look at those lessons learned, to benefit from that experience, and to produce a product that is going to reduce government interference, reduce costs, and be fair to the american taxpayer? [applause] >> actually, i have gotten many of your ideas. i have taken a look at them before i was handed this.

some of the ideas we have embraced in our package. some of them are embraced with a caveat. let me give you an example. i think one of the proposals that have been focused on by the republicans as a way to reduce costs is allowing insurance companies to sell across state lines. we actually include that as part of our approach. the caveat is, we have got to do so with the minimum standards, because otherwise what happens is that you could have insurance companies circumvent a whole bunch of state regulations about basic benefits or what have you, making sure that a woman is able to get mammograms as part of preventive care, for example. part of what could happen is

insurance companies could go into states and cherry pick and just get those who are healthiest and leave those behind or least healthy, which would raise everybody's premiums to were not healthy, right? -- who were not healthy, right? so it is not that many of these ideas are not workable, but we have to refine them to make sure that they do not and a worsening the situation for folks rather than making it better. what i said at the state of the union is what i still believe. it can show me, and if i get confirmation from health care experts, people who know the system and how it works, including doctors and nurses, ways of reducing people's premiums, covering those who do not have insurance, making it more affordable for small businesses, having insurance

reforms that insure people have insurance even when they have got pre-existing conditions, that their coverage is not dropped because they're sick, that young people out of college or as they're entering the workforce can still get health insurance, if those component parts are things that you care about and what to do, i am game. i have got a lot of these ideas. the last thing i will say though, let me say this about health care and health care debate. i think it also bears on a whole lot of other issues. if you look at the package that we have presented, and there are some stray cats and dogs a got in there that we were eliminating, we were in the process of eliminating. for example, we said from the

start that it was going to be important for us to be consistent in saying to people if you can have -- if you want to keep the health insurance you got, you can keep it. you're not going to have anybody getting in between you and your doctor in your decision making. i think that some of the provisions the got snuck -- that got snuck in might have violated that pledge. we were in the process of scrubbing this and making sure that it is tight. at its core, if you look at the basic proposal we have put forward, and has an exchange so that businesses and the self- employed can buy into a pool and get bargaining power the same way that big companies do, the insurance reforms i have discussed, making sure that there is choice and competition for those who do not have

insurance. the component parts of this thing are pretty similar to what howard baker, bob dole, and tom daschle proposed at the beginning of this debate last year. now, you may not agree with bob dole and howard baker, and certainly you do not agree with tom daschle on much but that is not a radical bunch. if you were to listen to the debate and frankly, how some of you went after this bill, you would think that this thing was some bolshevik plot. no, i mean, that's how you guys presented it. and i am thinking to myself, how is it that a plan that is pretty centrist -- no, look, i

mean, i am just say, i know you guys disagree, but if you look at the facts of this bill, most independent observers would say that this is actually what many republicans -- is similar to what many republicans propose to bill clinton when he was doing his debate on health care. so all i am saying is, we have got to close the gap little bit between the rhetoric and reality. i am not suggesting that we are going to agree on everything. whether it is health care or energy or what have you. but if the way these issues are being presented by the republicans is that this is some wild eyed plot to impose huge government in every aspect of our lives, what happens is you guys that do not have a lot of room to negotiate with me. i mean, the fact of the matter is, is that many of you, if you voted with the administration on something, are politically vulnerable in your own base, in

your own party. you have given yourselves very little room to work in a bipartisan fashion because what you have been telling your constituents is, this guy is doing all kinds of crazy stuff that is going to destroy america. çóóand i would just say that we have to thifkip!out tone. ñiñrñrñiit is not just on your y the way. it is on our side as well. this is part of what has happened in our politics, where we demonize the aside so much that when it comes to getting things done, it becomes tough to do. mike. >> dr. tom price from georgia and then we will have one more after that if your time permits, mr. president.

>> you know, i am having fun. [laughter] [applause] >> ok. >> i want to stick on the general topic of health care but ask a specific question. you have repeatedly said most recently at the state of the union that republicans have offered no ideas and no solutions. in spite of the fact -- >> i do not think i said that. what i said was, within the context of health care -- i remember that speech pretty well, it was only two days ago. i said i welcome ideas that you might provide. i did not say that you have not provided ideas. i said i welcome those ideas that you will provide. >> multiple times, from europe ministration, there have come statements the republicans have no ideas and solutions. in spite of the fact that we have offered as demonstrated today, a positive solutions to all the challenges we face, including energy and the economy and health care, specifically in the area of health care, this bill, h.r. 3400 that has more co-sponsors that any health-

care bill in the house, it is a bill that would provide health coverage for all americans, would correct the significant insurance challenges of affordability and pre-existing, would solve the lawsuit abuse issue, which is not addressed significantly in the other proposals that went through the house and senate, would write into law that medical decisions are made between patients and families and doctors, and does all that without raising taxes by a penny. my specific question is, what should we tell our constituents to know the republicans have offered positive solutions to the challenges of americans -- that americans face and yet continue to hear at of the administration that we have offered nothing? >> tom, look, i have to say, let's take the health care debate.

it is not constructive for us to try to debate a particular bill. this is not a venue to do that. but if you say, we can offer coverage for all americans and will not cost a penny, that is just not true. you cannot structure bill where suddenly 30 million people have coverage and it costs nothing. if -- >> mr. president, can i -- and i understand that we're not interested in debating the bill. but what should we tell our constituents who know that we have offered the solutions and yet here from the administration that we offered nothing. >> let me -- i am using this as a specific example, so let me answer your question. you asked a question to my want to answer it. it is not enough if you say, for example, that we have offered

health care plan and i look up -- this is under the section you have provided me, or the book that you just provided me -- summary of gop health care reform bill. ñithe gop plan will lower health care premiums for american families and small businesses, addressing america's number one priority for health reform. i mean, that is an idea that will embrace. but specifically it has got to work. i mean, there has got to be a mechanism in these plans that i can go to an independent health- care expert and say, is this

something that will actually work, or is it boilerplate? if i am told, for example, that the solution to dealing with health care costs is to reform, something that i have said i am willing to work with you want, but the cbo or other experts say to me, at best, this could reduce health-care costs relative to where they are growing by a couple of percentage points, or save $5 billion a year, that is what wer bend the cost curve long term or reduce premiums significantly, then you cannot make the claim that that is the only thing that we have to do. if we are going to do multistate insurance so that people can goñi across state lines, i have got to be able to go to an independent health-care experts, republican or democrat, who can tell me that this will not result in cherry picking of the healthiest going to some and the least healthy being worse off. so i am absolutely committed toó

working with you on these issues, but it cannot just be political assertions that are not substantiated when it comes to the actual details of policy. ñixdñiñrñibecause otherwise, weg to be selling the american people a bill of goods. i mean, the easiest thing for me to do on the health care debate would have been to tell people that what you are going to get is guaranteed health insurance,r lower your costs, all the insurance reforms, we're going to lower the costs of medicare and medicaid and it will not cost anybody anything. that is great politics, it is just not true. so there has got to be some test of realism in any of thesexd proposals, mine included. i have to hold myself accountable and guarantee the american people will hold me accountable if what i am

selling does not actually deliver. >> mr. president, a point of clarification. what is in the better solutions book are all the legislative proposals that were offered. >> i understand that. i have actually read your bills. >> through 2009. >> i a understand. -- i understand. >> the summary document you receive this backed up by precisely the kind of detailed legislation that speaker pelosi android restoration have been busy ignoring for 12 months. >> i have read your legislation. i take a look at this stuff and the good ideas we take. here is the thing that all this have to be mindful of. it cannot be all nothing, one way or the other.

would the mean by that is thisñi if we put together a stimulus package in which a third of it are tax cuts that normally you'd support and support for states and the unemployed that your governor would support maybe there is some things they do not like in time -- in terms of infrastructure. there is this provision are the provision they do not like. if there is uniform opposition, because the republican caucus as the get 100%, or 80%, thenit is going to be hard to get a deal.

that is because that is not how democracy works. ñiñimy hope would be that we can look at some of these components and maybe break some of them up on different policy issues. it a good congressman from utah has a particular issue on lobbying reform that he wants to work with us on, we may not beñ able to agree on a comprehensive package on everything. there may be some componentw3 parts that we can work on. you may not support our overall job package, but if you look at the tax credit that we are proposing for small businesses right now, it is ;om%hent with a lot of what you guys have said in the past. the fact that it is my administration that is proposing a genet you prevented -- should not prevent you from supporting it. that is my point. peter is an old friend of mine.

we've had many debates. ñr>> this will not be one. i heard echoes today about an attribute that you had that i think serve you well there. you did got some very controversial it is predicted on some very controversial subjects, death penalty reform. use a gun ethics reform. he took on big things. one of the keys was the year- old your sleeves up. you are able to make the deal. here is an observation. over the past year, that attitude has not been in full bloom. you have got in the subtext of house republicans that sincerely want to come and be a part of

this national comers asian. -- of this national thing. they are strong armed by pelosi. there is a dynamic of being shut out. when john boehner and eric kanter presented some substantive job creation, and the attack machine began to marginalize it. it was not productive or within this framework that you are articulating today. moving forward, i think all of us want to hit the reset button in 2009. how do we move forward? on the job creation peace in particular, you mentioned columbia. you mentioned panama and south korea. are you willing to work with us to make sure those get called

and ultimately that has to put more errors in your quiver. the obstacle is the politics of the democratic caucus. >> first of all, peter and i did work together effectively on a whole host of issues. one of our former colleagues is now running for governor on the republican side in illinois. in the republican primary, the ads did not say nice things about me. poor guy. is a point we made earlier. we have to be careful of this say about each other's and times. in boxes us in and make it difficult to work together. ñiour constituents are believing these could of -- these did they do not know it is just politics. just a tone of civility

incident slash and burn would be helpful. we have a media that responds only to that file is a type of politics. -- to that type of politics. in case is going to get a republican ballot, i did not meet it. i do not want to hurt you, man.

on the specifics, i think both sides can say some blame for a sour climate on capitol hill. what i can maybe do to help is to try to bring republican and democratic leadership together on a more regular basis with me. that is a failure on my part, to try to foster better communication even if there is disagreement. i will try to see if we can do more of that issue. that is on the general issue. on the specific issue, you are right. there are conflicts within the democratic party. i suspect there will probably some fissures within the republican party as well. if you went to some of your constituents, they would be pretty suspicious about new trade agreements for the suspicion is that they are all one way. we have been trying to make sure we have the enforcement side of

this height, make sure if we have a trade agreement with china or other countries, that they are abiding with it and stealing our electoral -- intellectual property. my hope is that we can move forward with some of these trade agreements. having built some confidence among the american people, the trade will be reciprocal. it will not be a one-way street. you are right when you say south korea is a great ally of ours. there is no country that is more committed to french up on the

whole range of fronts than self. . the european union is about to sign a trade agreement with south korea. at the moment when this opening of the market, the europeans might get in there before we do. we have got to make sure that we seize these opportunities. i'll be talking more about trade this year. it is going to have to the trade that combines opening their markets with an enforcement mechanism as well as his opening our markets. i think that is something that all of us would agree on. let's see if we can execute it. >> texas. and that will be it. >> jim is one to wrap things up? >> yes. >> all right. >> how're you? >> i am doing well. a year ago, i had an opportunity to speak to you about the national debt. something that you and i have in

common is that we both have small children. i left that conversation really feeling your sincere commitment to ensuring that our children, our nation's children, do not inherit an unconscionable debt. we know that under current law that governments -- because the government is due to grow from 20% of the economy to 40% of our economy. that is about the time our children are leaving college and getting that first job. mr. president, after the conversation a year ago, the republicans' proposed a budget that insures that government did not grow beyond the historical standards of 20% of gdp. it is a budget that actually

froze immediately non-defense discretionary spending. it spent $5 trillion less than ultimately what was enacted into law. unfortunately, i believe the budget was ignored. since that budget was ignored, what were the old annual deficits under republicans have now become the monthly deficit under democrats. the national debt has increased 30%. i know you believe, and writer stan this, -- and i understand this, that the spending is necessary. many believe it is part of the problem. i respect your view. this is what i do not understand. after that discussion, your administration proposed a budget that would triple the national debt over the next 10 years. surely you do not believe 10 years from now we will still be mired in this recession. and move the cost of government almost 24.5% of the economy. very soon, you are due to submit

a new budget. my question is -- >> i know there is a question in there somewhere. i disagree with half of that i have to sit here to listen to it. i know some point you let me answer. >> you were soon to submit a new budget. will that new budget tripled the national debt and continue to take us down the path? >> with all due respect, i have discussed to take this last question as an example of how it is hard to have the kind of bipartisan work that we are going to do, because the whole question was structured as a talking point before running a campaign. . . .

what issue is that we came in with $8 trillion worth of debt over the next decade. it has nothing to do with anything that we had done. it had to do with the fact that in 2000 when there is a budget surplus of $200 billion, you have a republican administration and republican congress and we had to tax cuts that were not paid for. we have a prescription drug plan, the biggest in several decades that was passed without being paid for. you had two wars. they were done through supplementals. the new head $3 trillion of this recession. we increase it by $1 trillion. i am happy to have any independent fact checker out there take a look at your presentation vs mine in terms of the accuracy of what i said.

going forward, here is the deal. i think the head of the budget committee has looked at the budget. he has made a serious proposal. i have read it. i can tell you what is in it. there are some ideas in there that i would agree with. there are some ideas that weçó should have a healthy debate about because i do not agree with. the major driver of our long- term viability is medicare and medicaid in their health care spending. nothing comes close. social security would approach the fix the same way tip o'neillñi and ronald reagan sat

down. that is manageable. çóthis is going to be with our children have to worry about. paul's approach -- and they have a lot of detail. we are going to provide vnwchers of some sort for current medicare recipients at the current level. >> [inaudible] >> i and a stamp. there is a grandfather in in. that is why i said i wanted to make sure. i want to make sure i'm not being unfair. i want to point out that i have read it. the basic idea is that at some point we hold medicare costs per recipient constant as a way of making sure that is not go way out of the way. i am sure there are some details. >> help inflation -- the point of our plan -- medicare isñr a huge liability. it has to be reborn for the

younger generations. it is going bankrupt. the premise of our idea is --xd why not give the will ofçó the same kind of health care plan the we have here in congress? that is the kind of reform we are proposing for medicare. [applause] >> as i said before, this is entirely a legitimate proposal. the problem is two-fold. one is that depending on how it is structured, if recipients are suddenly getting a plan that has the reimbursement rates going like this but health care costs are still going up like that, then over time, the way we are saving money is essentially by capping what they are getting relative to their costs. i just want to point out -- this brings me to my second problem. will made a very modest proposal as part of our package, our health care reform package,

to eliminate the subsidies for medicare advantage, we were attacked across the board by many in your andaisle for slashing medicaid. we will start cutting benefits for seniors, that was the senior. -- the story. it scared the dickens out of a lot of seniors. look. here is my point. if the main question is going to be what do we do about medicare costs, any proposal that paul makes will be made actually from the perspective of those they disagree with as cutting benefits over the long term.

i do not think you disagree with that, that there is a political vulnerability of doing anything that tinkers with medicare. that is probably the biggest savings that are obtained through his plans. i raise and not because we should not have a serious discussion about it. i raise it because we are not one to be able to do anything about any of these entitlements if what we do is characterize whatever proposals are part of that as that is the other party being irresponsible all. the parties tried to murder senior citizens. the party is doing x, y, or z. we cannot start off by figuring out who's to blame, how can makeñi the american people afrad çóçóñiçóthat is how our politics

right now. that is how a lot of our discussion works. that is how we start of every time someone speaks in congress. the first thing they do stand- up. this is how we operate. it is not solving problems. of what point when we have a serious conversation by medicare and long-term liability?

we will not agree all the time in getting it done. i am committed to doing it. i've already gone over time. i will be happy to take your question of line. you can give me a call. thank you everybody. a [applause] god bless the united states of america.

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>> after listening to the president, republican leaders spoke with reporters. >> the present accepted our

invitation and came to baltimore today. i thought the dialogue one very well. the fact that we want to continue to find common ground. we are not always going to agree. i think it should become clear in the conversation today that there are issues that we do agree upon. when they are lumped together in 2000 page bills, typically, what we find is a lot of things that we disagree with. the american people want to know where the jobs are. that should be our focus of this year. it should of been the focus of

the administration last year. they seem to be geared toward fed this year. let's find the common ground where we can put americans back to work. that is what they expect from us. >> the discussion that all of you just witnessed is a first. it was the kind of discussion, frankly, that we need to have more of. i am hopeful that leader hoyer in speaker pelosi will call the president's lead in begin to open their doors and and five republicans in to participate in a discussion like we just had. obviously, we heard differences. there are some things we agree upon. offshore drilling came up several times as low as the construction of clean nuclear plants. let's go ahead and do those things. let's do the things we can agree upon and set aside the things that the president

believes in that we philosophically do not. that there is common ground, we can go ahead forward with those. i look for reducing the house leadership on the other side of the aisle. we can begin to see some progress toward making things happen for the american people. >> house republican leaders are grateful for the presence of the united states. and his willingness to come in a freewheeling and open environment and have a frank and honest conversation about the future of this country. it was also very welcome to hear the president finally acknowledge that house republicans offered positive alternatives over the past year

of this that ministers and. -- of his administration. this summit that is now available links back to alternative the republicans offered on economic stimulus, on a budget, on energy independence, and on health care reform at a lower cost without raising or growing the size of government. we welcome the dialogue with the president. ñiwe especially welcome the acknowledgement that this business about the party of no idea is can hopefully be banished once and for all. >> do you feel like he will be more receptive and you'll be more of a participant in the process?

ñi>> i've been president has always been willing to work a little more closely with us, but it has never translated into real action on the hill. we will have more discussions with us. xd>> they felt it the president came here in said that you need to do it on a bipartisan fashion. then he turned around and started accusing you of doing just that. what do you think of that? >> that was a candid conversation. we have been very difficult year with a lot of major issues.

i am not want to exacerbate the problem that is already out there. today was a good first step in having more of a dialogue. i hope it continues. >> they are saying how republicans to stop talking so bad about the democratic party, but we think republicans did exactly the same thing. >> when i have issues with some of their proposals, -- listen, i tried to be honest about it. when i describe the health-care bills, i say it because i believe that is the essence of their bill. sometimes i do what i have to do. we are going to try to be honest in our assessment of those policies that we disagree

with. every time we do disagree with the policy, you will continue to see as put forward what we think is the better solution i think that is an honest way for the minorities to operate. ñi>> what incentive do they have for working with you? >> right now there is bipartisan opposition to the health care bill. it is republican and moderate democrats. the opposition to the cap and trade system is bipartisan. all they have a big majority, and they do not have to work with this. what we have seen over the last year is the fact that the speaker and majority leader has said we have a 40 vote majority. we will do it our way. when we are not allowed to depart to the process, when you go through an entire year without one open rule, you

really have the need to assessçó how they are running the house. this is not a wayñi they envisioned it happening. >> the president made the point that bipartisanship does not mean that the republicans from one to get 100% of what theyçó want or 80%. he went through a long row. could i your reaction to what you are saying and terms of how cooperative republicans have been? >> i have been involved in many bipartisan bills. it does not come along in the middle. it is not about taking one republican idea and throwing it in a 2000 building it is bipartisan.

we have very different philosophies. we started from the beginning. you saw me sit down with senator max baucus. ñito do pension reform. we did it from the beginning. if we are really serious but building a bipartisanñi project, and you have to do it from the beginning. i have been there. i have done it. we can do it again. >> the present has accepted responsibility for not putting the healthcare negotiations on c-span. what would you see as a concrete example of this but çópartisanshipñi that the presit talked about today? could you give as an example of

one thing you would like to see him do going forward that would be helpful? >> the kind of transparency that the president promised during his campaign cannot exist over this last year. it is also pretty clear that the american people are expecting much more transparency from this political process than they have seen. it is going to be incumbent. you are the people calling the shots? to the extent that there are any provisions of covering the war transparency to the process, i think is what the american people expect.

>> coming up next, the urban institute looks at the possibility of a new economic stimulus bill. a discussion about u.s. relations with north and south korea at the woodrow wilson institute, and later, president obama takes questions from republican house members at their annual retreat. >> on tomorrow's "washington journal," we will begin with the discussion of the president's talk at the house republican caucus. then a look at the president's high speed rail plan.

kevin carey will talk about the president's state of the union speech, an nyu president on the war against drug traffickers. >> saturday, the history of executive power, from george washington to george w. bush. our brooks tb weekend on c- span2. >> american jazz can be an instrument for spreading good will overseas. >> it is like a religion. >> he was without question the single most important figure in

jazz in the 20th century. "q&a" sunday, the new biography of jazz great louis armstrong. >> next, a discussion on last year's economic stimulus law and what the white house should do to improve the economy. they talked about the new jobs tax credit that the president talked about today. from the movie institute, this is one hour, 15 minutes. >> good morning. i want to welcome all of you who are here, as well as those who will be watching on c-span.

we sponsored forums where to experts with slightly different are greatly different perspectives have a civilized discussion or debate about an discussihe or debate about an national policymakers. today's issueñi is, does the economy need and can we afford another stimulus? the economy is experiencing a severe recession. 10% of the labor force is unemployed. the unemployment situation by many indices is the worst since

the great depression. the predictions seem to be playing out. last spring, policymakers enacted what seemed like a very large package of spending increases and tax cuts, the recovery act, which was estimated to cost somewhere in the neighborhood of $787 billion. the obama administration, as well as the fed, also implemented a number of other measures to shore up financial and housing sectors of the economy. a fairly lively debate, one that has turned quite partisan, has arisen over the effectiveness of the stimulus measures. the administration has attempted to track and measure the job creation impact of the stimulus package and has touted what it regards to be the successes of this effort. others have looked at the

situation and have concluded that the stimulus has been largely ineffectual. the question before policymakers now is, what more can and should be done to jumpstart the economy? some looked out and see green shoots of a self sustaining recovery in the data, and say that what lading is all that is needed. they admit that the unemployment situation is quite miserable, but they point out that employment is always a lagging indicator, and they stress such things as the federal open market committee's judgment that economic activity is continuing to strengthen, and they point out that after four quarters of decline, third quarter economic growth was 2.2%, and just this morning, the bureau of economic analysis released the fourth quarter results, which showed

that the economy expanded at a 5.7% in the fourth quarter. that is the advanced release, subject to revisions. others look and seeñi the size f çóthe current deficit, something over one trillion dollars, and the mountain of debt that we are accumulating and suggest that whether we need another jolt of stimulus, we cannot afford one. in the other camp are those who fear that there are other issues out there to drop. they argue that there is continued fragility in the financial-services sector, that home prices are continuing to decline, and household wealth is much smaller than it was a few years ago. they suggest we might experience a significant meltdown in the commercial real estate market, and know that

there are significant: facing state and local governments. the first stimulus effort is going to began to peter out over the course of the next six to 12 months. what they see is the prospect of a double that -- double-dip recession, and they argue that we need to buy an insurance policy against that possibility. we do not use the word stimulus anymore. rather, politicians now talk only about jobs bills. the house of representatives has passed a jobs bill that had a 170 four dollars billion price tag on it. the senate is working on its own version of that bill. the president's laid out a number of stimulus measures that

he would like to see, once up acting community banks, small businesses, energy projects, it infrastructure projects, and so on. it is likely we will see more detail on all of this when the president's's budget is released on monday. to shed some light on what the situation is now and what we can expect over the next year or so, what policies might make the most sense and what risks we might encounter if we do not act, we have to experience, well known participants in the policy debate. mark zandy is the founder of moodyseconomy.com, a division of moody's analytics. mark was an economic adviser to john mccain's presidential

campaign. lest you think of him as a partisan voice, he points out that his views are soft by the of project are sought by the obama administration and members of the house and senate from both parties. the last time i was with mark was at a session of the democratic caucus where he was holding forth on the state of the economy and policies that the democrats were considering. mark is the author of an expos a on the financial crisis and he has a book coming out soon called "paying the price," which provides the road map for meeting in the nation's daunting fiscal challenges. he will not reveal any of his secrets today. he will make you buy the book later.

rudy penner is an institute fellow. he was the director of the congressional budget office from 1983 to 1987, and among the many other posts he has held are assistant director for economic policy in the office of management and budget, senior staff economist at the council of economic advisers. he also is the co-ñichair of the committee on the fiscal future of the united states, which is a national academy of sciences and national academy of public administration project funded by the macarthur foundation, which released itsçó report two weeks ago on the long-term budget situation and how to deal with it.

the format of this session is going to be one in which mark and rudy get to present their prospectus for 10 to 12 minutes each. i will then give them a chance to comment or rebut what they have heard from each other. i will ask a question or two, and then we will open the floor to those of you in the audience to ask questions. when we get to that point, once you are recognized, please wait for the microphone to find you, identify yourself, and if it is appropriate, direct the question to one of the participants. >> they give for the introduction. i want to thank you for the opportunity to be here today. i will make just a handful of

points up front. first, the great recession is over. by the way, i will take credit for the name "the great recession." it was the title of one of the chapters and "financial shot," which i wrote a year and half ago. i think if i said enough, i will get credit for it. çóñiit isçó only over in a very technical sense,ñi perhaps one only an economist could growing. the value of all theñr goods and services we produce is expanding. we saw that this morning. xda big chunk of it was in an --

inventory gain. we are out of the recession, largely becauseñi of the policy response. the reserve its a good deal of credit is important that chairman bernanke was reconfirmed yesterday. he deserves a lot of credit for this. the system is stable, and it would not have been without the efforts of the federal reserve, treasury, and the fdic. i do not think it is an accident that the great recession ended at the same time that the stimulus was providing its maximum economic benefit. one key point, the link between stimulus and the economy is the rate of stimulus spend out. we went from no stimulus at the beginning of 2009 to $90 billion

a quarter. that is how we got the group -- how we got the growth and why the recession ended when it did. if you did the math, it suggested that the stimulus becomes a drag on the economy by the fourth quarter of this year, and particularly in 2011. without more support from policymakers, the stimulus that has been provided will become a drag. the recession is over in large part because of the policy response, the fiscal stimulus being a key part. we are not in an economic recovery, but it is fragile. i do not think the coast is clear. there is no guarantee that the recovery will evolve into a self sustaining economic expansion.

the odds are that it will, but the odds are uncomfortably high that it will not. the job market is improving in the sense that laos have abated, but hiring is not engaged -- layoffs have abated. without hiring, we cannot get net job creation. without that, we will not have the income to support consumer spendingxd. ñrwt hiring? ÷kkñrxd whyt hiring? xdsmall business cannot finance itself. itself. at the end of

at the end of december, it there were 325 million bank credit cards outstanding. if you go back to the peak of credit cards and outstanding in 2008, there were four under 50 million, so that is a decline of 125 million in credit cards outstanding. credit cards are very important to small business finance. many rely on this. i was a small business owner, and i had to go out and get along. i had to put up my home as collateral. because of weak housing values, it is difficult for banks to know what collateral is worth, credit is a big problem for small business.

if you suffer near-ñ)sñdeath tha4qoeñ least not quickly. you will be very cautious in taking any risks at expanding hiring. policy uncertainty is playing a role, particularly for big business. health care reform, financial regulatory reform, these are big questions with very significant implications for the cost of labor. policy uncertainty is also a problem. in addition to lack of hiring, the other impediment to recovery is the foreclosure crisis. i think the policy response has been responsible for the end of the recession, but the one aspect that has not worked well isn't foreclosure mitigation efforts. they are not working well.

there is a significant risk that we are going to see foreclosures continue to mount in 2010, drive down housing values, and nothing works in the economy if house prices are falling. creditors will not extend credit to anyone in a meaningful way until they think housing values have stabilized. the state and local governments situation is very serious. commercial real estate is the key reason why there are five printer 50 banks on the troubled list. -- 550 banks on the troubled list.

the banks need to be able to offload some of their own original in -- loan origination into the securities market. point number two is, we are in recovery. the most likely scenario is that it will slowly evolved to some sustained economic expansion, but the risks are too high that we will backtrack. if we do backtrack, it will be a mess. we have a 10% unemployment rate that is moving higher. there is no policy response to going back into recession. we have to guard against that possibility. point number three, it is entirely desirable for policymakers to provide more

additional support to the economy. temporary tax cuts, temporary spending increases. if i were king for the a day, i would say we need one or $2 billion more in 2010 for sustained economic suspension. state and local governments are an issue. they should get more help to forestall what will be very serious cuts in jobs and programs if they do not get the help in fiscal year 2011. a jobs tax credit, properly designed, could be a game changer in the labor market. it could be the one thing that lowers the cost of labor sufficiently to get businesses over their lack of confidence

and prompt them to hire. i would also empower the sba so that they can extend out more credit to small businesses. it is appropriate and desirable for policymakers to provide some additional support. policymakers need economic latitude to do this. if you look at the federal funds from the federal reserve board, in the third quarter 2009, net borrowing was negatived. the federal government is borrowing money, but everyone else's deleveraging.

there is no significant threat of crowding out higher interest rates in 2010 because of strong federal government borrowing. you cannot do it and not cause interest rates to rise. the bond yield shows no sign of rising. there's strong demand at every option. to reinforce the point, the federal reserve has no ability to go further in 2010. they are effectively the nation's mortgage lender. fannie and freddie or two-thirds of all -- are effectively the nation's mortgage lender.

i do believe that our most significant economic challenge after we get by this great recession and financial crisis is our fiscal situation. i think that is obvious. i think it is very important that we address that issue. we can talk about how to do it. i am more optimistic about this than most people, because i think there are some logical, sound, economic responses to the fiscal crisis. in my mind, is about getting the political will to do its. if history is any guide, we always figure out a way. i think we will get the will to address the fiscal situation. having said that, a necessary

condition for addressing the long-term fiscal situation is to get the nation's economy growing again in a clear and definitive way. the economy needs a little bit more help to do that. >> your last point was the most optimistic i have heard in a long time. with that, let's turn over your rudy. >> mae west once said that too much of a good thing can be wonderful. i don't think she was talking about stimulus at the time, or at least not fiscal stimulus. we start with a situation here, obviously the unemployment rate is too high, the national debt is too high, so what do we do?

because of the precarious nature of the debt situation and the inexorable arithmetic of the government's budget constraint, we know that any dollar of tax cut now are spending increase now will have to be paid for eventually with a dollar of tax increases or spending cuts plus interest. so is eat your broccoli now, or eat it later. that is our choice. those advocating stimulus bet that the broccoli will not be as repulse of at some later date. but there is a risk in that. the risk is that our politicians keep putting off eating a vegetable until after the next election, until after the next year, or the next election after that. i don't think the world will let us get away with that. if we try, i think there is an

ireland in our future. if you have not been watching what is going on there, there is blood all over the floor. they are in the midst of slashing civil service pay, devastating social programs, and so on. we see the greek bond market floundering. they have a debt to gdp ratio of about 120%. they have been trying to kick the can down the road. they have not done anything specific yet, but they will have to start very quickly and godown the same route as ireland. we really do want to avoid that sort of pain, because it will be very severe. some might say i am exaggerating the rest of all this, exaggerated the risk of a crisis. even if i am, after

investigating thousands of financial crises similar to the one we have just been through, there is a rule of thumb that a country allowing its debt to exceed 9% of the gdp sees its growth rate declined 1% for year. i have a little bit of a problem seeing a bright line like that, but nevertheless, even if thery are half right, te cost of that is enormous. it is sobering to realize that we will probably break their 90% threshold in 2013, even without any extra stimulus. in judging the trade-off between trying to do something to alleviate unemployment now versus suffering a great deal of pain later if stock-market

stumble, you obviously have to make the judgments as to the seriousness of the long-term risk associated with extra stimulus and versus the amount of good that you can do with extra stimulus now. i don't know if morganite judge the long run risk differently, but i am sure we differ quite a bit regarding how much bang for the but we get quickly from any stimulus policy. in the report last week, the cbo analyzes the impact of the past stimulus plan.plan . about $800 billion. they use a wide range of estimates for what the economists call multipliers or bang for the buck. the low end of the range for their whole stimulus package is

about one-third. if there is enormous uncertainty here. mark's estimates tend to be at the top and. the top and. i would be at the low end. i could see good reasons for being below the low end of the range of the impact. i think it is very curious that the general theory 70 years ago and in the past 50 or 60 years, we have had a whole series of challenges to the basic keynesian paradigm. much of the recent discussion seems to have forgotten about all of that except for a few op eds and the wall street journal. the major challenges to kansas

and through time -- and i think the analysis that is very important that suggests that fiscal policy is totally impotent in a world of flexible exchange rates. then there is the old-fashioned theory since we have been issuing this mountain of debt, households have been buying in and you should large in the amount of it, i wonder but they've been doing with their money if that that had not been available. he and his critics are 82 character. -- caricature. my bottom line is that i do not think you get huge benefits out of each additional dollar of debt issued.

i think the risk attached to east dollar are pretty high. one cannot deny the pain out there that is associated with this recession. i think it is concentrated at the lower end of the income distribution. one cannot deny the huge distortion of that. the constitutional restraints and implied that the recession has an exaggerated impact on what they do and we are being deprived of goods and services from that sector of the economy. i would look at this problem more as one of alleviating pain and correcting distortion and not one to much about agar met demand. -- aggregate demand.

that would imply using safety net programs or what we used to call food stamps or even ssi. i would continue the general eight to this day -- general aid to the state. state and local tax receipts rose and the third quarter according to the nia and i suspect that they are up again in the fourth quarter. my total spending would be about half of mark's, about $95 billion. food stamps $10 million and a tax credit but i would not call my program a stimulus because i pay for it.

my first choice of paying for it would be to claw back un obligated funds from the original stimulus. i always thought that was extremely dubious. some of the spending very slowly, i expect there are boondoggles and anything worth doing is worth paying for. i cannot get $95 billion from that source so of legislate specific tax increases to be able to finance my program. ideally, i would like to start on the task of deficit reduction at the same time. that is probably too much to ask. people are very shortsighted and not count the ways in which i care -- i would pay for these things and you get some increase

in aggregate demand as well but that would be an accidental byproduct of what i'm doing, not the main purpose of the huge flaw in my plan, the promise to pay later may not be credible. this is a testimony to the dysfunctional nature of our system right now that promises of this type may not be filled. frankly, i did not know what to do about that. >> on that happy note [applause] [laughter] >> i guess there will be and ireland but the good news is that there will not be in iceland. we have an array of bad prospects in front of the. would you like to make any comments? >> sure. i think we agree on many things. i did not think my perspective

on the long-term fiscal situation is that much different. i would concur that if we run deficits that lead debt to gdp ratios that rise measurably above where there will be if we cannot make changes in the future, then we have a problem. we were going to have some sort of fiscal crisis. it will be very to different and a mess. -- it would be a significant mass. i would not discount that risk at all. that is my second book, "paying the price." i do think that if we are focused on the debt and gdp ratio as our benchmark for progress, that is a good thing

to focus on as an objective. we have stabilized that ratio. it is important to realize that in that ratio, the numerator of the debt to gdp ratio and we have to make sure that is growing. if that does not grow, nothing else to do is going to matter. i think the debate boils down to what is the most appropriate way to ensure that that is growing, gdp is growing, as soon as possible and as consistently as possible. that requires that the job market kicks in. given that, it is very importantxdççsto try to jump-t that job market and to let it go on its own. we can do that and go down that path. it may work out which is fine. the economy may stick to strict -- said dick to script and be okay but i think -- çstick to e

script and be okay but i think we should provide some help to that and then start addressing the numerator and the debt to gdp ratio. >> that reminds me, i was going to ask you a question be a modeler and predictor, too high, too low. as a congressman, i want in number. >> i in good numbers. >> he said we are not into a self-sustaining recovery and the risk is too high that you could not sleep at night. what makes you not sleep? 25 percent son? 40%? >> i would put the brisk at 28.345%. -- risk at 28.345%.

>> all kidding aside, i think the risk of backtracking is between one-fourth and one-third but comfortably high. at least in my view. if the unemployment rate were sitting at 7% which was the peak unemployment rate coming out of the unemployment -- of the last recession, of the defined. we take our chances in court down the path. i agree. if we are sitting at 10%. we are still losing jobs. the unemployment rate is almost sure to rise further. w3that makes the 1/4 probability uncomfortably high. my>> let me ask both of you a question. looking into the rearview mirror, some have argued over and over again that the initial stimulus effort was too smallymç

and weaken the monday morning quarterbacks on this but at that time, did youç think it was too small? did you think it was too large? was it allocated the right way? we have a lot of things in that package that are spent out over a long period of time that cannot strike many economists as a stimulus. >> my own view is that it was very poorly designed and that is unfortunate. we created more debt than we have to do to get the same things in the bucket and demand flaws -- and the main flaws were on the infrastructure side of the highway spending has gone up faster than i anticipated to tell you the truth. if it looks like the spending on energy and infrastructure and

things like that was very slow indeed. cbo does not have it going until 2011. i would have had a program that was probably heavier on the housing side which might have cut taxes a bit more maybe even given state and local governments a little more generous aid. >> i think it was too small. i think the house bill was a better bill. it was a bigger package but it is now $862 billion, a chunk of that is they ma amt patch whichi did not consider stimulus. it is down to $700 million. that is too small. i would have increased the size with a temporary tax cuts. i think the multipliers are

lower than spending and it would getçó into the economy much more quickly. i would focus on payroll taxes which is what is being done now in respect to the job tax credit. for in my view, this discussion of his additional stimulus support is doing what we should have done best time last year. it should've been close to one trillion dollars and more heavily weighted towards tax cuts. i agree with the gritty pontiff if you rank order the different elements -- i agree with rudy that if you rank the order, infrastructure spending should be at the bottom. we have a 10% unemployment rate, you have to generate at least 10 million jobs. we have a big employment problem for an extended period. and the structure could be helpful in that regard as a

source of job creation over the next four to five years. i think it is difficult to get it out there but it does have some benefits. >> a minor point that i have not sorted out. mark in the council of economic advisers said the maximum impact of the stimulus is pretty much passed already. kñsóoñri]ç[ççi0/ñçç7=% they say the peak is in the next six months. i am not sure. i have not had time to really cut the lead the difference. it is somewhat important for what you're advocating now. we have not seen the full effect of the past and the less. there is then less need to talk about more stimulus at this point. >> i am not aware of that. i did not know that about the cbo. the only possible explanation is to have more of a lag in their

model relationships. @@@@@@@ @ @ @ @ @ @ @ @ @ @ @ @ it still provides benefit in the first half and by the end of 2010, it is negative. firmly negative. >> that may be a difference in definition. >> moving from the past to the future, there is a bill for the senate putting together one that is $200 billion. billion in the house passed one that is $174 billion. only half of the house bill is for the types ofç?7ñ3ç thingje broadly construed that could fit into the accessible category. a lot of it is infrastructure spending.

to be on the agenda now. it just takes too long. i am not too enthusiastic about employment tax credits for increasing employment. i think they are extremely difficult to design in a way that you cannot just provide a windfall for people that have been hired anyway. that is true even if you have threshold's like to% and so forth. we have all of these spaces in the r&d tax credit that to not work well ago and there's really -- they are similarly structured. to the extent that it is just a

windfall to businesses, i do not think many economists will say thatw3 stimulates aggregate demd very much. çfor some reason, the depreciation proposals you would think would work especially when they are about to expire. the data from the early part of the last decade shows hardly any indication that they increase at all. that troubles me, frankly. the numbers are just not there. >> mark, you endorsed the top tax credits. you can reveal how your tax credit would overcome the reluctance to endorse the policy? >> i think rudy's point that a

jobs tax credit may be inefficient in the sense that you are reporting firms that would have hired anyway is correct. the marginal job creation will be small. the numbers are big. in any given year, if there are 6 million hires, one out of 10 of those is marginal additional job creation. that is 600,000 jobs. if that comes in the spring and summer of this year, i am all for that. if that is a key time for the labor market and economy. if that is the thing that turns on the light switch and it's the economy going again. i did not think you need a large impact to make a significant and -- difference. the other issue with the jobs tax credit which is a very reasonable concern is the concern about gaming.

there is a potential for that. but there are ways to design it so you can mitigate the most serious forms of that. we will hear about those with the administration announces the tax credit today. there are a couple of other versions in the senate. once we take a good close look at that, i think it will become clear that it was designed in a way to address this issue. i think it is -- at the end of the day, i could be wrong. who really knows? it is worth a shot. moreover, cbo when asked what they would do to jump-start the job market, at the top of the list was this job tax credit. these are all things said they considered and that is at the top. i say let's give it a shot. one other quick point, broody mentioned the bonus

appreciation. there is some evidence that it worked in the fourth quarter. if you look at fixed investment , it jumped 13.5%. if you looked at yesterday's numbers on durable goods, there is a huge surge in december shipments which is strongly suggested of businesses trying to get that into place. they thought there were going to lose their tax credit so there is evidence that it worked in this go around. >> they looked at the 2001 and 2003, there was very little evidence. this data is suggested that it worked better. >> i would hope it would. it would confirm an economic theory and we seldom do that. [laughter] >> you pointed out that one of the significant problems we face is lack of credit available to small businesses. the president in his state of

the union said he is directing $30 billion of park money -- tarp monday which is not being used to small community banks with the intention of helping small businesses. is this an effective policy? >> i do not know. i did not have details on this plan. i think they threw it out. it was in the address and i think there is a lot of impetus for this. i have not seen the details. i have seen some discussion of essentially the tarp money used as a loan. it depends on how that mode is structured and what the interest rates he has jig interest rate is and how that is structured. i am not sure about that. if i had my druthers, i would

empower the small business administration to make more money available. there are leavers -- levers you can pull to make it more effective. the temporarily raised the proportion of student loans guaranteed from 75% to 90% and thatçñr was a very significant impetus for lending. i would advocate racing that to 95% temporarily. that this argued against by making bad loans and bad lending. that is true. i think it is worth taking more credit risk in the near term. the other thing i would do is there is an interest-rate cap of 275 basis points. çthe attack on another three,

that a 6%. that is just enough to cover ai] rigid cover a credit risk. i would raise that to more basis points. you get a 7% orw3 8% loan whichs that is a good interest rate for any small business and any time, including this one. you get more lending. if you have the infrastructure in place and that wouldç be muh more effective and quicker and getting that credit out as opposed to this other mechanism. i do not know. >> mark pointed out that there is a danger that the foreclosure problem will continue as bad or worse than it is now. he also pointed out that our efforts to mitigate them have

not been very successful. wei] are unlikely to have a self sustaining recovery if housing prices continued to fall. do you have any suggestions for what the government should be doing in that area? >> first of all, i think it is very hard to design a for closer mitigation program that has much impact. i think 10% or 50% of people that for clothes are just walking away and not leaving any forwarding address. -- 10% or 15%. it is very hard to find the small group that can be helped. i think we have been doing the right thing. mark bemoaned the fact that so many mortgages are coming out of fannie and freddie and i think it is right to bemoan that but that is our only choice right now.

i do not mind pushing them to run a big loss right now. the housing credit was useful, as well. it was mainly effected in pushing sales forward, so now we have extended it and see what happens in the next few months. at least there are a lot of signs that housing has had a floor. housing take it in the winter is very erratic and not very reliable. it will be a while before we see whether the housing market has really turned for good or not. >> do you have any secret plans? >> yes, i do. first, i think the stability and housing values in the second

half of the year is a function of three different policy efforts. it was much more effective in bringing up non distressed home sales in this summer and fall. to my surprise, it was very effective in doing that. of the second, the credit easing which drove down fixed mortgage rates, there were 5% when purchases were at their peak, and a mortgage modification plan. many of servicers and delayed a modification and stopped the foreclosure process as they tried to figure out who could qualify for a modification. these three things can together in the summer and fall and helped support housing bias. going forward, the housing tax credit expires in april.

we are going to get a little bit more jews the spring but not as much as previously because this brought forward a lot of sales. you then have the backside. the fed is ending the credit easing in march. there is a lot of debate about what that means for fixed mortgage rates. they're not going lower. it is a question of how much higher they go. we are finding out about who unqualified for the plan or another modification plan and as we see that, we see more foreclosure sales. my concern is that housing dollars are going to start falling again in the spring and summer when the double this -- double dip risk is that the maximum. given that we cannot extend the housing tax credit, that is done. there is no impetus to do that again and i did not think it would be appropriate. the fed is not going to raise rates unless something happens.

if we cannot do anything about the modification plan, we have a problem. we have to do something about the modification plan or at least prepare for the possibility that we may -- that we need to make a change to the plan. i can stop there or i can tell you what my plan is but the courts tell us what your plan is. >> do you want to know? " ok. this is my view. if it takes too long. >> that is iconoclastic. i am saying we prepare to go down this path. what i would do is i would say any homeowner who got in mortgage between 2005 and the end of 2008, at the time of origination was inherently unaffordable, and you can define that anywhere you want, say 35%

plus income ratio, that is inherently an unaffordable mortgage. if they got that mortgage, it was a regulatory failure. they should not have gotten the mortgage. we failed as taxpayers. the regulators are agents. therefore, we have a fiduciary responsibility. i am not talking about investors put owners. -- but owners. i go to that group of homeowners and i would have a plan that would involve principle right down to about 105% cltv. you just need to give them a little bit of a hook so that

they feel that money i am giving to the homeowner will flow through to the mortgage investors. obviously a big problem in the context of where we are today. i would have clawback. if that home owner defaulted any time in the next five or seven years, we get our money back. if they remain current on the mortgage through that time, it is your money. that gives the investor significant incentive to make sure they work with that homeowner. obvious criticism. out the banks. yes, i am. but, in my view, this only works if it is done quickly. you immediately convince these guys to do it and this is a slam-dunk for them. they will do it. we get this behind us and we are

off and running. i take the tarp money we are not using for housing because harp is the other program that is not working. the vote that money to principle right down and resolve this problem. convince you? [laughter] >> you heard it here first. >> since you goaded me. irst question would be, i was foreclosed on and left six months ago. now you are doing this for everybody who is line. what about me? >> you are toast. >> every policy step you take, there are winners and losers. we cannot help everybody nor should we. in a normalç time, i think this is something i would not even dream of. this is not what we should be

doing. when you drive your car of the dealer lot, you are already under water. i am not advocating this is a policy. i am saying we should consider this if things are not going well this summer. >> questions. >> i used to work on the hill and now i teach a course at georgetown. i wanted to ask rudy to respond to criticisms of their opposition to infrastructure spending. given that everybody is expecting a very slow recovery, aren't these low spend of rice a virtue rather than a flock? qç-- will spend out rates a vie rather than a flaw? if you look at an angle and section workers and -- you look

at a lot of unemployed construction workers. >> with regard to the first point, we are talking about really slow. i and exempting highways because that would out fast. i guess it is a question of when you think it is needed and where the economy will be a year and half from now. a lot of theçó spending in the energy area maybe even in the health research and some of the other research areas may not be obligated for quite a long time. if the recession drags on, some of this will be useful. the way it is planned now, some of it will be spent in 2012 and

2013. way out there. i cannot think we will need it at that point. in terms of real resources, there are different ways of absorbing them. construction workers are pretty well paid. the question is where to you want to target the employment increase. again, we are talking about increases in employment, some of which is not the wing to take place for many years. i am not sure what the economy is going to look like two or three years from now. >> can i just say one thing? >> i think infrastructure spending is in good stimulus. that does not mean it is not good economic policy. construction sector is a disaster and our infrastructure is inadequate. i think the mistake was trying to markets infrastructure

spending a stimulus. some aspects are ok. but the school renovations and highway building. but this plethora of things put into the stimulus bill probably was oversold. providing a big bang for a short period of time. >> unemployed but not too discouraged to look for work but to irascible to find it. >> i have to ideas and no wonder if they could be put together. your idea of paying for a new program through club? rather than new funding. and your emphasis on increasing gdp growth and the importance of that. my grand synthesis, why do we not try to claw back the

bailout? i say that understanding that some of the money may be long gone and we may not get it back. it would not only have the effect of undoing the moral hazard we have already done by indicating the would subsidize the downside risk, it is hard to undo that, except this might be a way. even more so, i am thinking about the opportunity costs of incompetent incumbent in the market holding on to capitol. that is a misallocation of capital. it would be better for gdp growth if that capital were reallocated to more efficient rivals. we would not only be saying that you are not too big to fail, the bigger you are, if you are incompetent, the more desirable it is for you to fill because we could liquidate your assets and let the market does to be -- and let the market distribute to

smaller rivals. did not cost direct money and stimulate growth. >> it would be very popular on main street. >> to some degree, the top tax is what that is about. -- the tarp tax is what that is about. it is proposed to pay for the job tax credits and this tarp pool. it is paid for. they are going to pay for it but to the top tax. -- tarp tax. at the risk of becoming overly iconoclastic, there is a reasonable argument to make the tarp tax permanent. we provide a subsidy to large

institutions because they are too big to fail. everybody knows it. their cost of capital is there for lower and they also get more business because of this unpleasant guarantee. i think it is reasonable for taxpayers to ask to get some of that subsidy back. eight tarp tax is so that it is a function of the size and complexity of the organization that raises revenue and reduces the two big to fill risk in the long run because you are raising the cost of capital and bubbling the playing field. the tax currently proposed is for institutions of over $50 billion of assets and got tarp money. that is the approach for what i am arguing for. i would have a permanent to big to fail tax that could be used as a source of revenue at least

in the near term to pay for what i am arguing. i am not arguing to not pay for it. i would not pay for it in 2010 because that is counter- productive. i would argue that if we start this thing in 2012 or 2013 when the economy is running. >> i think the question about something like that is really whether you can design it properly. as you described it as it evolves -- as you describe it, it involves a lot of social engineering involved. that is my concern. >> to big to fail, the wrong way of doing it in my view is they

-- is the volker rule. you do not raise any revenue. the best way is a tax on complexity and size which would kick you the same thing but will raise revenue. >> >> a change of subject a little bit. back to foreclosures. one of the things that i understand about foreclosure prices in your description of how you approach a is the secondary market, secondary mortgages and home-equity line that there has been an increasing unwillingness to work

out those loans and that produces the difficulty with first mortgages. >> excellent point. the point is that when you engage in modifications, in many cases, you need subordination of the second to win over on the home. many of these mortgages that are in trouble have another plane on the home. they appear to be very reluctant to risk subordinate. they are playing a game of chicken. in many cases, have you address that issue? there are two approaches. both are being taken. i think they need to be taken with more force. the first is that regulators need to go in and make sure that

they are appropriately marked, they have less reason to we subordinate. this is now only kidding going as an incentive -- only now getting going as an incentive. it seems as if public pressure, give them a program, well articulated and designed, and put public pressure on them to do it, that seems to be working as little better. if none of these things work, the next step might be to say something like we're going to let these things go into rbo and the government to step in and buy the mortgage. it is extreme and i would not advocate that unless we are

getting into summer and fall and things and not doing particularly well. >> last question. >> you talked about -- >> identify yourself to go where the jobs going to come from? you talked about the the residual jobs that came with the loan originators. you also mentioned in your paper about some of the problems we face in the economy have to do with productivity gains. i think we have it structural employment problem. how we address that? where the future jobs going to come from? >> to you want me to take a crack at it? >> i have been talking a lot. >> to try to be a little more optimistic about the situation, the one reason for believing

that once the recovery gets going that it might be a little more vigorous than the standard forecast is that things are so bad now that housing starts are so far below normal, and car sales are so far below normal, that even a small movement toward normality will imply a significant recovery. that is what i am hoping for. i would be the first to admit that i am disappointed by the lack of employment growth so far. i had hoped that we would start seeing some positive gains toward the end of last year. once that starts, and i still have hope that it will start pretty soon, and wages grow a bit faster than they have, i think it will make a big difference to the mood of the economy and consumer@@@@@@xn@ @

there are reasons to be optimistic. if we get by the next 12 months and get into 2011 and 2012, the economy has the potential for a very solid, strong growth. for the reasons that are articulated. we are selling 11 million cars and allies. demographics say we should be selling 15.5 million. is a big difference. we are putting up 600,000 homes per year. we should be putting up 1.7 5 million homes. we are going to go to those numbers. that is too weak to be a lot of economic activity. that is probably going to be to tell the 11 and 2012.

the real growth in my opinion is going to come from loans with the rest of the world. the strongest growth is in the emerging economies. these are very large economies. the u.s. accounts for 20 per -- 20% of global gdp. the rest of the developing world accounts for about the same. we have to figure out how to sell things to them. it is not just the stuff you think about. agriculture, satellites, defense, movies but it is going to be things like legal services. we have a lot of good lawyers. accounting services. management consulting services. marketing and advertising. economic consulting services. [laughter] i assure you, we will figure it

out. at the end of the day, what makes our economy great is that we have the best and the brightest on the entire planet wanting to come here. as long as we maintain that, we are going to be just fine. how is that for an optimistic and then? >> thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] [inaudible conversations] ñrñrñi

[inaudibleñiñi conversations] >> here are the latest figures on federal stimulus spending. out of the $787 billion stimulus (qq' committed. $172 billion has been paid out. you can learn more about the federal stimulus program by visiting c-span.org/stimulus where you'll find links to the debates and links to watchdog groups that are tracking spending.

tonight, a discussion about u.s.-korean relations with north and south korea. president obama takes questions from republican members at their annual retreat. then the possible of a new economic stimulus bill. -- possibility of a new economic stimulus bill. >> american jazz can be an instrument for spreading good will over seas. >> think so. it is like religion. >> he was without question the single most important figure of jazz in the 20th century. >> "q&a" sunday. a new biography of louis armstrong at 8:00 p.m. eastern and pacific on c-span.

in the nation's capitol and across the country, listen to c- span radio. in washington and 90.1 fm and xm satellite radio channel 132. it is a free app for your iphone. c-span abroad deal, covering washington like no other. -- radio, covering washington like no other. we will hear from james steinberg. the woodrow wilson center posted this 50 minute event. >> it is my pleasure to welcome you here today, to the first institute for far eastern studies, univ. of north korean studies forum at the center. it is a pleasure for the center 's north korean documentation project and asian program to be partnering the institute for far east studies at the university of north korean studies, both

affiliated with [unintelligible] university. we're honored to welcome of a distinguished group of scholars from the u.s. and korea. many of you in the indians have held high-ranking positions in your respective governments. -- many of you in the audience have held high-ranking positions in your respective governments. i want to recognize the republic of korea's ambassadors to the u.s. who is with us this morning. the former republic of korea ambassador to the u.s., and formethe former national securiy adviser to the south korean president. it is a special privilege to welcome dr. park, coming back to

the center after having visited here before. he is one of the world's leading experts on intra-korean affairs. dr. park is a renowned scholar and policy maker. he bridges between academia and government in the house -- in the finest tradition of woodrow wilson. a tradition the center seeks to uphold. he is the current president of the university of north korean studies, a former minister of unification and chairman of the national security council for the republic of korea. he has -- is the current president for unification affairs. in november of last year, president park received the jacques chirac prize for conflict intervention in recognition of his extraordinary 40-year devotion to maintaining peace on the

korean peninsula. president park has been a great friend of the wilson center and i am very grateful to him. i am pleased to welcome him to this podium. president park. [applause] >> good morning. ladies and gentlemen, it is a great honor for me to be here with you and make some opening remarks. today's event marks the beginning of the forum in washington. this demonstrates the growing

partnership between the woodrow wilson information center and the diversity -- university. i would like to thank the president of the woodrow wilson center for his leadership and vision. i would also like to thank the excellence dollars of the center -- scholars of the center for advancing our academic partnership. today's forum brings prominent scholars and experts to discuss peace and the security of the

korean peninsula. the korean peninsula has long been the source of instability in the northeast asia and beyond. the problem of north korea is regional. to solve it will require the cooperation of all the stakeholders nations of the world. our immediate task as stakeholders is to find ways to bring north korea back to the six party talks aimed at thenorh korea's denuclearization.

south korea's current policy is based on reciprocity toward north korea, conforms to the goals of maintaining peace, developing corpand cooperation. it puts precedents on denuclearization of the north up. and has yet to induce the north and in negotiation. cooperation and consensus among the main stakeholders among the united nations, the u.s., korea, china, russia, and japan is essential. all of us must be prepared to work not only to avert nuclear crisis, but also as president obama has said, to offer north korea a different choice.

in this endeavor, the u.s. alliance which had been a pillar of stability in that region will be a foundation in which to move forward. as well, peace and stability on the korean peninsula is a key interest to china. its role and active cooperation will continue to be important. if it[unintelligible] progress on the nuclear issue can come forward swiftly in safely. together, the university of north korean studies and woodrow wilson center have strived to bring great understanding of north korea and of the problems surrounding the korean peninsula.

the work we have done together so far to uncover north korea's history has been an ongoing success, throwing -- drawing significant attention. i am sure that the partnership will continue to contribute to the research and policy making communities of korea and the u.s. and others. let me thank you for coming to the forum. i hope all of you will find that today's proceedings are informative and stimulating. thank you for your attention. [applause] >> thank you very much, dr. park. my pleasure now to introduce the

morning's keynote speaker, the u.s. deputy secretary of state, james steinberg. one year ago today, secretary of state hillary clinton swore him in as her deputy. at which time he took up one of the largest, most important, and most challenging portfolios in our government. happy anniversary to you after one year. i'm not sure this is exactly the best way to celebrate. it is one way to celebrate. jim is an experienced, dedicated, and very able public servant. prior to his appointment by president obama, he served with distinction as the lyndon johnson school of public affairs in austin, texas from which he