i am more optimistic than most people are because i think that there are some logical sound economic responses to the fiscal crisis. . . 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 i think the risks are backtracking into a recession somewhere between 1/4 and 1/3, uncomfortably high. if the unemployment rate were sitting as 7%, which is the peak rate coming out the last recession in 2003, fine. we will taper chances. we will go down the path for the however, we are sitting down

at tender. it is only -- will go down the path. however, we are sitting at 10%. it is to uncomfortably high. >> let me ask your question looking in the rearview mirror. others have argued over and over again that the initial stimulus effort was too small. at that time, it did you think it was too small? did you think it was it not too small or too large, what it allocated the right way? with a lot of things in the package that we will spend out over a long amount of time for them it is not strike many economists as 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. -- it is hard to find a small group that can be helped. i think we are done doing the right thing so many of the mortgages are coming out fannie mae and freddie mac. it is right to be known that. it is about our own age wish i now. we did our only choice now. i did mine in pushing a loss right now. the housing credit i think was a useful as well, although recent evidence suggests that it was mainly affected in pushing sales forward. now we have extended it. we will have to see what happens in the next few months.

at least there are a lot of signs that the house pricing has hit the floor. i think the winter data is erratic and not very reliable. it will be a red -- a while whether we see the housing market has turned for good or not. >> do you have any secret plan? >> yes, i do. first, i think the stability and housing values in the second have the here is a function of three different policy efforts. housing tax credit, which is actually part of the stimulus and was much more effective reducing unstressed home sales in the summer and fall. to my surprise, it was very effective. 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 this is a crude way of trying to mitigate the too big to fill risk. the big way is a tax on size would to be the same rough thing they give you revenue. >> [inaudible] >> yes. >> to change the subject of it

back to foreclosures. one of the things i understand in the foreclosure crisis in your description of how you would approach it, is the secondary market. -- mortgages. there has been an increasing unwillingness to work out of those loans and that produces the difficulty with the first mortgages. >> excellent one. the point is when you engage in there, yet the modifications. the need 3 subordination on the same room. many organizations in trouble have another jingling 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 [captioning performed by national captioning institute]

[captions copyright national cable satellite corp. 2010] here a delayed the speakers some

federal stimulus spending from the west side -- website recovery.gov. $170 billion has already been paid out. you can hear more of the federal stimulus program by visiting c- span.org/stimulus we will find congressional debate. coming up on c-span, and discussion by u.s. relations with north and south korea at the woodrow wilson institute. the headed the national congress of american indians discovers -- gives his state of the union address th. "washington journal" will be live.

>> on tomorrows "washington journal" we will begin with a discussion of the top of the republican caucus. an advocate the high-speed rail plan with the american public transportation association. kevin carey will talk about the president's state of the union speech. nyu professor on mexico's war against drug traffickers. "washington journal" is live at 7:00 a.m. eastern here on c- span. saturday, the history of executive power from george washington to george of the bush. john hughes talks about his book "crisis and command." it is part of our book tv

weekend. >> american test is spreading good will overseas. >> i think so. >it is like a religion. >> he was without question the single most important figure in it jess in the 20th century. -- in jazz in the 20th century. >> now i indicate u.s. relations with north and south korea. you hear from james steinberg. the woodrow wilson center hosted this 50 minute event.

they will be partnering with the institute for the eastern studies. we are honored to welcome a very distinguished group of scholars and the united states and correa. many of you have a high ranking positions in your respective governments. the combined expertise in this room is really quite remarkable. i want to recognize the ambassador to the united states.

it is a very special privilege to welcome him. he comes back to the center after having visited here before. he is one of the world's leading experts on injured korean affairs. dr. park is a renowned scholar is the finest tradition of woodrow wilson. he is the current president of the university of north korean studies. and is the chairman of the national security council for the republic of korea. he is the current presidential advisor on korean beautification affairs.

in november of last year, he received the jacques chirac prize for conflict prevention with this 40 year devotion to maintaining peace on the korean peninsula. he has been a great friend of the wilson center. i am very grateful to him i am pleased to welcome him now. [applause] >> good morning. it is a great honor for me to be here with the. we are making some opening

remarks. today's event marks the beginning of the high form. this forum cannot describe the value of [inaudible] i would like to thank you. -- thank you, president of the woodrow wilson center, for his leadership. i would also like to thinank the center led by -- for inventing

the process. today's forum brings together experts to discuss the peninsula. the korean peninsula has long been thought of instability in the northeast asia and beyond -- it will require the effort and cooperation of all of the stake holders in the nation of the world. 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 is currently on leave. he was vice president and director for for policy studies at the brookings institution. during president clinton's administration, he served in numerous important and vital positions, among them deputy national security adviser, chief of staff to the u.s. state department, director of policy planning, and deputy and assistant secretary for analysis in the bureau of intelligence and research. . .

>> he will moderate a q&a section. ladies and gentlemen, secretary of state james steinberg. [applause] >> thank you for that kind introduction. i want to pay tribute to you for your many decades of public service. you have been a model and

inspiration to many. i am grateful for your good counsel and guidance in many capacities. it is a great pleasure to be here this morning. thank you to the wilson center and the university of north korean studies for hosting this event. as it only been one year? it seems a lot longer than that. it is a good way to mark this anniversary because it has been clear from the beginning of this administration, the importance of the administration in this region. it was almost exactly a year ago that the secretary -- you will recall her first trip to east asia. it reflected the importance that we attach to this region. as we continue our work in the coming years, we will look to the wilson center and our colleagues here today and most of you in the audience who are

working on these issues for wisdom and insight going forward. it is a very timely moment for a conference on asian security in the korean peninsula. at this audience knows, 20 tent is an important year of anniversaries. -- 2010 is an important year anniversaries. peace has been a central consideration for the united states. even though our focus on the region has been in during, this is an inappropriate time for us to reflect on what has changed, as well as -- this is an appropriate time for us to reflect on what has changed. at the same time, it is a cautionary tale. the divergent paths persued by north and south korea. nations that are fully engaged

in that respect the fundamental rights of their citizens prosper and progress. those that choose isolation and oppression do not. i do not need to remind this distinguished group of the remarkable story of south korea's achievement over the last 60 years. from the ravages of war, poverty, and early years of authoritarian government, south korea emerged as a vibrant, democratic, increasingly proper suit -- prosperous country. from its membership to its upcoming role as the host of g- 20, it has taken its place as one of the core players in the global economy. from its and the piracy -- anti- piracy, it has moved to consumer security to provider of security. turning its back on the

globalize world and the basic freedoms allowed its citizens, despite the open hand offered by south korea and that international community, and despite its start compared with the south, to date its citizens regularly face the ravages of hunger, fear, and disease. they put the military first. its pursuit of nuclear weapons and ballistic missiles deepens its self-imposed isolation. i will discuss it in more detail in a few minutes. we hope the leaders will seize the chance to pursue a more peaceful relationship with the rest of the world, in the coming months. last week, we were marked the 50th anniversary of our security ties with japan. our bilateral alliances with south korea and japan, along with australia, thailand, and the philippines, could play a crucial role on maintaining

stability throughout east asia. they provide an environment in which korea and other countries have had the chance to prosper. secretary clinton made clear in her speech to the weeks ago that these bilateral alliance is continue to provide the foundation for our engagement in the region. our security commitment has helped the region overcome what we academics called the security dilemma. it has largely avoided the destabilizing, allowing countries to grow, prosper, and integrate, in the context of reassurance rather than exile the and fear. it will be more important than ever as we work to overcome the challenges and seize opportunities on the korean peninsula today. our alliances must evolve to adapt to the changing environment, as the cold war paradigm has dominated our thinking for decades and is replaced by a more complex and potentially more optimistic set

of relationships among the countries of northeast asia. we have been working hard with south korea and japan to update an enhanced our alliances in a spirit of partnership and a quality. it befits their own achievement over the past half century. this was very much on display during a very successful visit. they strengthened an already strong relationship. president obama reiterated his support for the korea-u.s. free trade agreement. he wants to build on and $83 billion trade relationship, our seventh largest trading partner. strengthen our bilateral bonds, bring new jobs to our workers. later this year, south korea will host the 2 +2 meeting. there will commemorate the 60th anniversary of the korean war

and the progress and our alliance. one important part of this effort is the relocation of our troops. the headquarters of u.s. forces will move from downtown seoul to a new headquarters. over 100 u.s. military bases spread across a real will be consolidated around to group strategic cubs. this will transform our military footprint into a better position, without sacrificing our commitment to the alliance. we will continue to work together on updating our relationships to reflect our evolve alliance. this is an alliance which is increasingly global. we are appreciative of south korea's increasing willingness to expand its global role, commensurate with its achievement. on the whole range of issues, that will define the coming decades, for northeast asia and beyond. president obama and president

li issued a joint statement. they looked for bilateral work. secretary general ban ki-moon embodies the strong values and ideals that bind the united states and the republic of korea on the global stage. as an active contributor to u.n. peacekeeping missions. most recently, it decided to offer 200 peacekeepers $10 million in emergency assistance to haiti. it is a key member of the anti- piracy task force. it has underscored its commitment to non-proliferation last year. we are appreciative of its role in iraq and now for announcing it will send a provincial reconstruction team to afghanistan. we welcome the announcement that

the south korean government plans to trip&e@@@@@@@@ @ @ @ @ our partners in japan to sustain our crucial alliance. a few days ago, i had a chance

to reflect on those challenges and opportunities. today, i want to reiterate that we welcome the dialogue as exemplified by secretary clinton's recent meeting with the foreign minister in hawaii. as president obama said in his tokyo speech, the u.s.-japan alliance is not the historic berlin -- relic, but and abiding commitment to each other that is fundamental. it is essential that we work together to maintain the alliance and understanding of the japanese and american people, and that we implement a sound plan for sustaining our military problem -- military operation. the end of the cold war has brought with it the opportunity to supplement our security alliances with increasingly strong bilateral ties to the two other key nations of northeast asia, russia in china. with both of them, the obama

administration has set out in new waters for more action- oriented partnerships that are necessary, if we are to overcome the challenges in northeast asia and around the globe. with russia, we hit the famed reset button. while this does not mean we are necessarily going to agree on every issue or resolve every source of tension in our relationship, we're making important progress. we are now close to concluding negotiations on a new treaty that will be an important step to the u.s.-russia relations. with china, we took important steps in institutionalizing our broader and more effective picture with the first strategic and economic dialogue held here in washington, d.c. last july. it is an arrangement that built on strong working ties between president obama and secretary clinton, and our chinese counterparts. those discussions reflected mutual understanding that we

have in reflection of our most pressing challenges. nonproliferation, terrorism, pandemic disease -- there is little hope for progress, if we do not work together. as we look forward to the second meeting of the strategic economic dialogue in china next summer, we're having discussions at an -- on an unprecedented range of topics that we hope will ultimately yield action. more broadly, we are beginning our ties with other key parts of east asia, from are increasingly productive relationship with india to our corporation with asean. our bilateral relationships alone cannot achieve the kind of regional and global cooperation we need to meet the challenges of the 21st century. that is what secretary clinton

has set forth her vision of how to deepen our bilateral engagement in east asia, to address transnational matters. as secretary gates observed several years back, the u.s. is a resident power in asia- pacific. the obama administration is determined to play an increasingly active role in working with the countries of the region. from our allies to emerging powers like india, indonesia, and china. we want to shape a peaceful, prosperous future for the billions who live in this increasingly central part of the world. this framework of security alliances, bilateral ties, and multilateral engagement provides the framework for which we approach the most urgent and dangerous challenge facing the region. it is the danger posed by north korea's nuclear missile program. there is a longer-term challenge a peaceful reintegration. let me conclude by saying a few words about our approach.

we want to restart the six party talks and move toward the goals shared by our partners in those talks. from the beginning of the obama administration, we have made clear that the united states is prepared to engage diplomatically with north korea and at remain committed to the implementation of all elements of the 2005 joint statement of the six-party talks. these include verifiable denuclearization, a peace regime, normalization of relations, economic and energy cooperation. as president obama said, our message is clear, if north korea is prepared to take concrete and irreversible steps to fulfil its obligations and eliminate its nuclear weapons program, the united states will support economic assistance and help promote its full integration between the community of nations. that opportunity, in respect,

will not come with threats and less -- those of the president's words. p'yongyang has expressed a desire to engage, but has not yet shown that it will take the concrete steps necessary to live up to those obligations. since agreeing to the 2005 joint statement, it has tested two nuclear devices, modernized, proliferated nuclear technologies and weapons, and engaged in provocative and destabilizing behavior. the international community and particularly our partners in the six-party talks have responded to these provocations firmly and clearly. the security council resolutions are important reflections of this determination. we have taken together unprecedented steps to implement them. the new measures include a ban on arms and related material exports in north korea and a major expansion of the ban on

arms support, strict financial restriction, and enhance provisions for the inspection of cargo. last month, following close consultations, ambassador stephen bosworth led a delegation to p'yongyang. north korean officials expressed a willingness to resume the six- party talks. reaffirmed their commitment to the 2005 statement. did not reach an agreement on the specifics of when and how to proceed. the ambassador made it clear to the north koreans that concrete actions, through verifiable demilitarization is the sole way to improve relations. we believe it is important that the six-party talks resume expeditiously, and that north

korea began to take those steps to eliminate its nuclear weapons program. in the meantime, either the united states -- neither the united states or our allies will provide material benefits to north korea simply to return to negotiations. the terms of the un security council resolution will continue to be enforced. our determination to see that enforcement was made clear in the recent seizure of arms and related materials from the north korea charter flight in thailand. that incident clearly demonstrated the result of the international community in countering proliferation of destabilizing technologies, in north korea especially. meanwhile, we continue to speak out clearly for the basic human freedoms and dignity to which all north koreans are entitled. secretary clinton's designation as a special envoy and recent travel to japan demonstrate the importance of this issue.

secretary clinton has described the approach that our administration is taking and the ordination with our six-party partners. it does not mean we're doing nothing, on the contrary, we are working closely with our allies and partners in the region to offer north korea a different future. strategic patients means that north korea must live up to its commitments and obligations. there is a clear path open through the six-party talks and denuclearization to achieve the security that north korea says it seeks. but if returns to talks and begins to make progress, we will all be prepared to discuss, in bilateral talks, all the elements of negotiation, including, with our south korean partners, a peace regime for the korean peninsula. we will not be for the core

nuclear issue. as secretary clinton has said, current sanctions will not be relaxed until they make irreversible steps towards complete denuclearization. they may -- they will not have -- the unity that we have seen in the past year with the unprecedented action by the u.n. security council and the cooperative implementation of sanctions has been an important achievement for the future of this process and for future cooperation in northeast asia, beyond this challenge. that is something i want to emphasize, that even as we work together on overcoming the very difficult challenge posed by north korea, we can take advantage of our joint action to build a new capacity for cooperation and collective action in a part of the world that will become more important in the years to come.

our cooperation today is focused on denuclearization, but we are also paving the way for cooperation on a broader challenge of the opportunities in northeast asia and the entire pacific region in the years to come. thank you for your time. i look forward to your questions. [applause] >> thank you. the secretary has agreed to take your questions. the floor is open, but please wait for the microphone and please state your name. microphone. >> recently north korea demanded a peace treaty with the united states. before the six-party talks, what

is the u.s. position on that? north korea -- i'm sorry. >> let me try to answer your question. i do not want to characterize the north koreans position, i will let them characterized their own position. as i said in my remarks, we believe that there is an appropriate time and place to discuss the issue of how we replace the arms going forward. the first step is to return to the six-party talks. within that framework, we have a clear path forward to discuss the full range of issues, including the potential for peace. as we do so, we will do this in close consultation with our south korean allies who are the principal parties in interest for any agreement of that sort. we accept the fact that there is inappropriate time and place for those discussions to take place -- there is an appropriate time

and place for those discussions to take place. we want to implement their prior commitment from 2005. >> i would like to take some other questions. over there. >> what is your assessment of the chinese interest in engaging in the human rights part of the portfolio that you described? if you do assess it in a positive direction, how do you envision them taking some independent action along those lines? >> the chinese have made quite clear that they are concerned about stability in north korea. instability in north korea could affect their interests. we've been trying to encourage them to see that, the lack of human rights, it is appalling

conditions in north korea contributing to those conditions. china is serious about wanting a diplomatic process to move forward. it should use in its own way, its influence to try and improve the situation of the people they're economically and politically. it is hard to judge whether the chinese are prepared to take on that role. sometimes the chinese do things without sharing their intentions with us. we will continue to make clear to them that, in their own interests, china ought to work with the north koreans to agree much better conditions of living for their people and to recognize the human situation that prevails in north korea is contrary to the interest of all of us and north korea's neighbors. >> the gentleman in the red. >> i am with the associated press. i do take into a back up -- how

do you take into consideration the fact that they continue to make nuclear weapons? >> we take it as water under the bridge. north korea had made some progress in developing its nuclear program. we need to make sure that as we deal with this, we do not repeat what we saw in the past -- that is, rewards for actions which can be easily reversed. in violation and will continue to suffer the consequences.

that is what i mean by the fact that strategic does not mean absent. we are prepared to enforce vigorously the sanctions, until and unless north korea take meaningful steps to meet its obligations. >> thank you. >> bill jones. i would like to ask a question about relations with south korea. the south koreans have a very ambitious nuclear energy program and are considering the possibility of reprocessing nuclear fuel. there have been restrictions on that, dating back from 1976 legislation. just over the last couple of days, kurt campbell has indicated there would be a possibility of assisting this issue so there would be able to do that. what is the u.s. position on that issue? they have agreed to all of the non-proliferation restrictions, they're cooperating in every way. would it not be a possibility to

allow them to do this reprocessing? >> as most of you know, the vice minister was here and i had the opportunity to have extensive discussions with him and his colleagues on this issue. we agreed that we have a very strong mutual interest in strengthening the goal of nonproliferation. there are concerns, as more countries news to develop nuclear power, about the risks of proliferation episode- associated with this. but we strongly for work -- and you heard the president very vigorously support our own interests in civilian nuclear power, we have to make sure it is done in a way that does not foster dangerous behavior. we are all very cognizant of the very real challenge not only from north korea, but from iran. as we move forward, we have to be cognizant of the impact of activities involved on the

dangers of proliferation. we have agreed to work together on basic principle. however we strengthen our own national civilian nuclear power programs, we need to do it in a way that does not encourage a dangerous proliferation related behavior. we have an agreement with south korea, we are having discussions with them about how modern technology can be applied under that agreement. that court and shared understanding -- that core and shared understanding was a clear determination that whatever we do to enhance civilian nuclear power, we must be cognizant of the consequences. our discussions will take place on that shared understanding and we look forward to ways to see how we can adapt to their circumstance. >> thank you. let me take a question from one of our participants in the overflow room. the president said he wanted to meet with the north korean president kim jong-il this year.

any comment on this? >> we strongly support president li and the very clear path he has set forward about what is necessary to achieve peace and stability on the korean peninsula. i am confident that, whatever form of engagement the south korean government chooses, we will do this in close cooperation and in the framework we have all agreed on. if south -- if north korea wants to make meaningful progress, it is going to need to return to the six-party talks. there is a strong sense of shared approach that characterized our relationships from the first phase of our administration. we are very supportive of the measures that he takes. we know we are pursuing a shared goal. >> thank you. the gentleman all the way in the back. >> i want to ask you about

china's will -- role. how satisfied you on their current effort to persuade north korea? >> from the outside of the administration, we recognize that china is an important factor in the effort to achieve denuclearization of the peninsula. we have had intensive discussions. i'm quite convinced that the chinese share are strong conventions -- convictions that a nuclear north korea would be an enormous danger to all and very destabilizing to the region. we have a vigorous dialogue with china. there are many positive steps that china has taken to implement those things. there are issues we continue to work out together, as we try to resolve some of these ambiguities around particular

transactions or activity. we have seen a clear indication on china's behalf that they take this seriously and understand the importance of standing -- sending a vigorous signal to north korea about nuclear recession. we continue the dialogue. >> the gentleman to rose down. >> thank you very much. what is the u.s. reaction to the military incident between the north and south? you mentioned the recent agreement with russia. many in moscow feel that it will no longer be part of the u.s.- russia agenda, is that true? >> we continue with the universal preoccupation of the united states to address those issues, within the framework of the dialogue that we have established with russia. it is one issue we continue to discuss and we think it is quite

important for russia's own future to continue to offer its own people the benefits of an open society with open media and freedom to discuss and debate. that will be an important part of our relationship with the nature of the reset allows us to have these conversations without jeopardize in the overall relationship. we recognize that we will have areas of disagreement. we're not using this to say that we have no differences. we recognize that constructive partners can have differences, in the biggest differences on some issues, but still work together on common challenges like north korea and iran. i think that has been one of the positive results of the way we have approached the spirit we can have the differences and still work together. -- results of the way we have approached this. we can have the differences and to work together. we have been concerned about this and we think there are provocative.

north koreans need to exercise restraint. -- the military activity has not crossed the boundary, but there are risks associated with the behavior. we urge the north koreans to restraint and refrain from that. >> thank you. the gentleman to the right here. >> in the past, our japanese friends have had various attitudes toward north korea, from promising substantial reparations, which were very big buy their formula -- and other times not wanting to engage with them until they had returned people who they had kidnapped. they have a new administration, which is good for our friends in the pentagon, who do not like democratic changes. my question is very simply, reducing the japanese stand on the various -- where do you

think the japanese stand on the various positions to north korea? is it too early to tell how the very new japanese administration will approach these things? >> i will not agree with your characterization of the pentagon's view of our relationship with japan. we have had quite a good opportunity to discuss with the new government, its approach to north korea. it has been quite reassuring how much in sync we are on this question. there is no question that the humanitarian convention -- the about the japanese citizens is a concern, and why would it not be. we would be concerned about american citizens who are held in north korea. we do not see that as inconsistent. as many of you know, during our visit to tokyo, secretary clinton met with some of the families. we share their concern. we are also on the same wave length about the importance of moving forward on the six-party

talks, the potential role of achieving denuclearization, and our common determination to take measures to strengthen our security alliance, including concrete security measures, so long as north korea continues in that direction if they're going to continue to test missiles and nuclear devices, we're want to continue to work with south korea and japan to provide defenses and deterrents against the dangers that north korea represents. there has been no confusion between us and the government in tokyo about that issue. >> i think we will wrap it up. we will go to one final question. [inaudible]

[inaudible] >> i look back on the past year as a very positive year in u.s.- china relations. we have had an opportunity from the first weeks of this administration to signal the importance that we attach to u.s.-china relations to our strong commitment to a constructive and cooperative relationship, and to build on the positive development that had taken place in previous years to broaden and strengthen the relationship. it has been manifest from the first weeks since president obama's phone call.

since april of last year, president obama visited china. we have differences on some issues and they have issues of difference with us. that is to be expected. we do not believe that overnight, would not believe these are going to wait -- go away. we have a responsibility to manage those issues and realize that these are critical issues. neither of us are born to be able to achieve our fundamental objectives without cooperation. their interest in sustaining there are economic growth depends on healthy global economics. it depends on corp. tween us and the other major economies of the world bridge and it is concerned -- it depends on cooperation between us and the other major economies of the world. we must deal with the common interest and problem of terrorism. with a common interest in global public health.

these are all issues that we have provided a strong basis for the relationship. we have some differences and will hear more about those in coming days we can speak clearly and candidly about what our positions are in yet understand that our long-term interests are going to be achieved if we can work our way through these differences and find a way to go forward. i do not dispute that we will have some ups and downs, but that is the nature of these relationships in these circumstances. we're committed to working through them. we look forward to finding ways to build on the relationship in the upcoming second round of dialogue and it will be a good opportunity for us to do that. it is a very important perspective to keep in mind as we handle the issues going forward. thank you very much for your time. it has been a pleasure. thank you very much. [applause] >> we will now have a break.

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>> next on c-span, president obama takes questions from house republicans at their annual conference in baltimore. then we will discuss that meeting on "washington journal" live with your phone calls. >> later the c.e.o. of freddie mac gives a talk from detroit. >> at the nation's capital and across the country listen to c-span radio on xm satellite radio. it is also a free ap for your iphone. covering washington like no other. >> president obama spoke yesterday at the republican caucus in baltimore. following his remarks, the

president takes questions. this is 1:45 minutes. >> ladies and gentlemen, the president of the united states. [applause] [applause]

>> let us pray. >> let us pray. lord god of heaven and earth, father of us all, as we ask your spirit to be at this gathering, and all the great benefits you lay upon america's table, we cannot help but pray for our brothers and sisters in haiti, afghanistan, and iraq. you are ever atentive to every human need, and the greatest hungers of the human heart, for you alone are the lord, god. for those who hunger for economic and homeland security, lord, grant interior freedom and trustworthy protection. for those families that hunger

for work and bright promise for their children, bring forth bright management of time and talent and perseverence in continued education for the future. lord, renew the nation in faith. remove the veil of cynicism and fear that inhibits your people's ability to be creative and struss -- industrious in common endeavor. bless our president, all the members in congress, and all involved in the judiciary system. may the three branches of the people's government live in true balance being accountable to each other, to the people they serve, and most of all, to you, almighty god. may your discertaining spirit live and move in all our rippeds

that we may recognize -- relationships that we may recognize your presence in our midst, and feed a hungry world searching for lasting meaning. lord, by seeing in the united states of america your free children working together, may they and all the world give thanks for the united states of glory now and forever. amen. frankly, for many americans, it

is a time of anger. >> this is a time of action restore bonds of trust, and we share the responsibility of listening to the american people. power. in addition to listening to the people, we also need to listen to each other. it is in that spirit, mr. president, that we invite you here today, and we're very grateful that you have accepted. in january, 2009, i promised that the republicans would stand with you when we believe your policies were in the best interest of our country. when it came to afghanistan, iraq, charter schools, teacher quality -- we did just that. when we disagreed, as we have on some major issues, i said that republicans would not just be the party of opposition, but we

would also be the party a better solutions. we formed solutions groups to many of those major areas. they produced detailed alternatives that we have presented throughout the last year to you, your ministration, into the democratic majority in congress. with compiled the summaries of these alternatives into a document we call "better solutions." it covers our proposals on everything from jobs and health care to government spending and transparency. mr. president, i am pleased today to present you with a copy of our better solutions. [applause] for those that will not have the president's copy, you can go to solutions.gop.gov and read

them. we spend a lot of time listening to people. it is reflected in the work we have done. mr. president, we do not expect you to agree with us on every one of our solutions. we do hope that you and your administration will consider them. the battle of ideas is one of the hallmarks of a thriving democracy. we look forward to the dialogue that will take place today. we are really grateful that you have come. ladies and gentlemen, the president of the united states. [applause] >> thank you. thank you very much. thank you. thank you very much. thank you.

thank you. thank you, john, for the gracious introduction. thank you for hosting me. thank you to all of you for receiving me. it is wonderful to be here. i want to acknowledge the president of the congressional institute and all the family members who are here and have to put up with us who are in elected office every day. i know that is tough. [applause] i very much am appreciative of the tone of your introduction and at the invitation that you extended to me. you know what they say, keep your friend's clothes, but visit the republican caucus every few months. [laughter] part of the reason i accepted your invitation was because i wanted to speak with all of you.

not just to all of you. i am looking forward to taking your questions and having a real conversation in a few moments. i hope that the conversation we begin here does not in here. i hope we can continue our dialogue in the days ahead. it is important that we do so. it is important to you, i think, that we do so. it is important to the american people that we do so. i have said this before, but i'm a big believer, not just in the value of all the loyal opposition, but in its necessity. having differences of opinion and the real debate about matters of domestic policies, national security -- that is not something that is only good for our country, it is essential. it is only through the process of disagreement and debate that bad ideas get tossed out and good ideas get refined and made better. that kind of vigorous and back- and-forth, the imperfect but

well-founded process that it often is, is at the heart of our democracy and makes us the greatest nation in the world. i want you to challenge my ideas and i guarantee you that, after reading this, and may challenge the view of yours. -- i may challenge a few of yours. i want you to stand up for belief, and knowing this caucus, i believe you will. the only thing i do not want -- and here i am, listening to the american people -- i think they do not want it either for washington to continue to be so washington. i know folks, when we are in town, they spend a lot of time reading the polls and looking at focus groups and interpreting which party has the upper hand in november in 2012, and so on and so on and so on. that is their obsession. i am not a pundit.

i'm just the president. take it for what it is worth. i do not believe the american people want us to focus on our job security. they want us to focus on their job security. [applause] i do not think they want more partisanship or more obstruction. they did not send us to washington to fight each other in some sort of political cage match to see who comes out alive. that is not what they want. they sent us to washington to work together and get things done, to solve the problems they are grappling with every single day. i think your constituents would want to know that, despite the fact that it does not get a lot of attention, you and i have actually worked together on a number of occasions.

there have been times when we have acted in a bipartisan fashion. i want to thank you you and your -- thank you you and your democratic -- thank you and your democratic reports for your effort. we have worked to break the taliban's momentum. there has been broad support for disrupting, dismantling, in defeating al qaeda. we're united in their admiration of our troops. -- we are united in our admiration of our troops. [applause] in may be difficult to understand that whatever divisions and differences may exist in washington, united states of america stands as one to defend our country. [applause]

@@@@@@@ @ @ @ @ @ @ @ @ @ @ @ @p we stood together on behalf of our nation's veterans. together we passed the largest increase in the v.a.'s budget and provided better access and medical care to those who serve in uniform. some of you also joined democrats in supporting a credit card bill of rights and in extending ememployment operations out of work. some of you helped us with stopping tobacco companies stop targeting kids and helping responsible home owners stay in their home.

we have a track record working together. it is possible. but, as john, you mentioned, on some very big things, we have seen party-line votes that i'm just going to be honest were disappointing. s our efforts to jump-start the economy last winter, when we were losing 700,000 jobs a month. our financial system teetered on the brink of collapse. the threat of the sec it -- of the second great depression looming large. i did not understand then and i still do not, why we got opposition in this caucus. there were badly needed tax cuts and cobra coverage for those who had lost jobs, they needed to keep the health insurance they desperately needed. there was opposition to putting americans to work on new construction progress. there was an interesting

headline in cnn. americans disapprove of stimulus, but like every policy in it. there was a poll that showed that, if you broke down into its component parts, 80% approved of the tax cuts, the infrastructure, the insistence to the unemployed -- assistance to the unemployed. that is what the recovery act was. let's face it, some of you have been opposed to these important projects in your communities. i understand you have a philosophical differences on just the concept of government spending. as i recall, the opposition was declared before we had a chance to actually meet and exchange ideas. i saw that as a missed opportunity. i am happy to report this morning that we saw another sign that our economy is moving in the right direction.

the latest gdp numbers show that our economy is growing by almost 6% -- the most since 2003. to put that in perspective, at this time last year, we were not seen positive job growth, we were seeing the economy shrank by about 6%. you have seen a 12% reversal during the course of this year. this turnaround is the biggest in nearly three decades. it did not happen by accident. it happened because of some of the steps we took. by the way, you mentioned the west side out here, you can look at the website that was eric cantor's idea. here's the point, these are serious times. what is required by all of us, democrats and republicans, is to do what is right for our country. even if it is not always what is

best for our politics. i know it may be perce -- may be heresy to say this, but there are things that are more important than point number three people cannot accuse me of not living by my principles. we need an economy that less everybody up -- that lifts everybody up. it is more important than winning an election. our politics should be shaped by what is best for our future. no matter what is happening in the past, it is important for all of us to move forward together. we have issues right in front of us, on which i believe we should agree, because, as successful as we have been in spurring new economic growth, everybody understands that job growth has been lagging. every economist will say that jobs are a lagging indicator.

that is no consolation for the folks who are out there suffering right now. there are 7 million americans who have lost their jobs in this recession and we have to do everything we can to accelerate it. today, in line with what i said at the state of the union, i propose a new jobs tax credit for small business. here's how would work, employers would get a tax credit of up to $5,000 for every employee they add in 2010. they get a tax break for increases in wages as well. we would refund part of your payroll tax. it is a simple concept and easy to understand join me and let's get this done.

let's take some of bailout money that the wall street banks return and use it to help community banks start lending to small businesses again. i am confident we can do this for the american people. there is nothing in the proposal that is contrary to the ideological dispositions of this caucus. the question is what is going to keep us from getting them done. i propose a modest fee on the nation's largest banks and financial institutions to fully recover the taxpayer cost money -- the taxpayer money they provided to the financial sector. it is designed to discourage them from taking reckless risks in the future if you listen to the american people, they will tell you they want their money back. let's do this together. republicans and democrats. i propose we close tax loopholes that are were companies for

shipping american jobs overseas. . we can't blink when it is time to actually do the job. at this point we know that the budget surpluses of the 1990's occurred in part because of the pay-as-you-go law which said, well, you should pay as you go and live within our means, just like families do every day. 24 of you voted for that, and i appreciate it and were able to pass it in the senate yesterday.

but the idea of a bipartisan fiscal commission to confront the deficits in the long-term died in the senate the other day. so i'm going to establish such a commission by executive order. and i hope that you participate fully and genuinely in that effort. because if we're going to actually deal with our deficit and debt, everybody here knows that we're going to have to do it together, republican and democrat. no single party is going to make the tough choices involved on its own. it is going to require all of us doing what's right for the american people. and, as i said in the state of the union speech, there is not just a deficit of dollars in washington, there is a deficit of trust. i hope you will support my effort to make all congressional earmarks public before they come to a vote. let's require lobbyists who exercise such input to publicly

disclose all contacts, whether they are contacts with my administration or contacts with congress. let's do the people's business in the bright light of day together, republicans and democrats. i know how bitter and contentious the issue of health care reform has become, and i will eagerly look at the ideas and better solutions on the health care front. if anyone here truly believes our health insurance system is working well for people, i respect your right to say so, but i just don't agree. and neither would millions of americans with preexisting conditions that can't get coverage today or find out that they lose their insurance just as they are getting seriously ill. that's exactly when you need insurance. for too many people, they are not getting it. i don't think a system is working when small businesses are gouged and 15,000 americans

are losing coverage every single day. when premiums have doubled and out-of-pocket costs have exploded and they are spoys -- poised to do so again. to be fair, the status quo is working for the insurance industry, but it is not working for the american people and it is not working for our federal budget. it needs to change. this is a big problem, and all of us are called on to solve it. that's why, from the start, i sought out and supported ideas from republicans. i even talked about an issue that has been a holy grail for a lot of you, which has been tort reform, and said that i would be willing to work together as part of a comprehensive package to deal with it. i just didn't get a lot of nibbles. creating a high-risk pool for uninsured folks with preexisting ideas. that wasn't my idea, it was senator mccain's, and it got incorporated into our aproach.

allowing insurance companies to sell coverage across stathe lines and bring down costs for businesses and consumers. that's an idea that some of you, i suspect, included in this better solution. that's an idea that was incorporated into our package. i support it, provided that we do it hand in hand with broader reforms that proytect benefits, protects patients, and protect the american people.

all of us have to choose if we are going to be politicians first or have politics for progress.  i was not elected by democrats or republicans, but by the american people. that is especially true because the fastest-growing group of americans are independence. that should tell us both something. i am ready to eager -- ready

and eager to work with anyone who was willing to proceed in the spirit of goodwill. but understand, if we cannot break from partisan gridlock, if we cannot move past the politics of know, if resistance supplants constructive debate, i still have to meet my responsibilities as president. i have got to act for the greater good because that is a commitment that i have made. that too is with the american people sent me to washington to do. i am optimistic. i know many of you individually. the irony, i think of our political climate right now is that, compared to other countries, the differences between the two major parties on most issues is not as big as it is represented. but we have gotten caught up in the political game in a way that is not healthy. it is dividing our country in

ways that are preventing us from meeting the challenges of the 21st century. i am hopeful the conversation we have today can reverse that. so thank you very much. thank you, john. [applause] i would like to open it up for questions. >> the president has agreed to take questions and members would be encouraged to raise your hand while you remain in your seat. [laughter] the chair will take the brunt of [inaudible] >> i appreciate that.

@@@@@@@ @ @ @ @ @ @ @ @ @ @ @ @ >> mr. president, there were several us in this conference yesterday that stopped by the salvation army homeless facility here in baltimore. i met a boy named carter. when he heard i was coming here today, his eyes lit up. he wrote you a letter. i had a conversation with little david junior and david senior. his family is struggling in this economy. his dad said words to merks mr. president, that i'll never forget, about my age.

he said, congressman, it is not like it was when we were coming up. he said, there is just no jobs. now, last year, about the time you met with us, unemployment was 7.5% in this country. your administration and your party in congress told us that we would have to borrow more than $700 billion to pay for a so-called stimulus bill that was a piecemeal list of projects and boutique tax cuts, all of which we were told would have to be passed or unemployment would go to 8%. 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%. i would simply submit that we could do more to start now. you have also said you want to take 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@@@@@@@ @ @ @ @ @ @ @ @ @ we prepared a budget for 2010 that's 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, if you either increase taxes osh significantly lowered spending when the economy remains somewhat fragile, that that would have a destimulative effect, and potentially you would see a lot of folks losing business. more folks potentially losing jobs. that would be a mistake when the economy has not fully taken off. that's why i propose to do it

for the next fiscal year. that's point number two. 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.