referee, as i was climbing the fence, i was so mad, and asked him what does it take to get a rough kicking call? and he said, in this town, you better shut up and play the game. my son is a coach at a major school in texas, but i can assure you he has never forgotten that person who refused to enforce the rules and just lucky he didn't get injured. he was a little kid still and was in the seventh grade. i have never forgotten it. and most people don't forget when they break rules -- if kids are playing on saturday or sunday and see a blatant violation of the rules, most americans get infuriated. i take the position and i take the position as easily defended that the united states of america cannot run without the

laws that we create both in this body and our state legislatures around the country and those laws that the courts have interpreted correctly. those things keep us on that foundation of operational procedures that allows us to know that when we do something, we follow the rules and others are expected to follow the rules and if they don't follow the rules, we have recourse to make them follow the rules. . i've been talking about that, i said there were ethics and violations filed against them, that the ethics committee needed to resolve those because there were allegations they'd broken the rules. and some of those things have come to fruition and without any animosity toward anyone, i'm glad at least one of those issues has been absolutely resolved. but there are others. and it would seem to me as we talk about and we look at each

other in this body and all of us are members and all of us agree to a set of rules when we come here. what's interesting is that the history of the united states, there's some people that are highly respected by both political parties, by all americans. i think abraham lincoln falls in that category, i think george washington falls in that category. i believe thomas jefferson, benjamin franklin and many, many others of those who are either our founding fathers or people who have done such extraordinary things for freedom and for liberty in this country that we remember them. and we remember and we honor what they did. thomas jefferson wrote the rules for operations of this house and of the senate. i take that back, i don't know if he wrote the senate, i know he wrote it for the house. i think he wrote it for both parties. whatever that may be, when our founding fathers were sitting around on that -- on those hot

days in the summer trying to put together a constitution and trying to resolve the issues and deciding what kind of functioning government they wanted to have, they had a concept of creating a republic, not a parliamentary democracy but a republic where you had representative form of government, where you had two bodies, the house and the senate. the house would be the people's house and it would have the opportunity to change every two years. the senate at that time would be appointed by the legislatures of the various states. the senators would represent states and they would not change but after a six-year term with alternating terms so every two years a certain body, but never all that body would change. and when they looked to how they wanted these two houses to operate they set up that this house would be the rapid solution to the problem house.

this house goes and moves compared to the senate at light speed. and it was intended that way by our founders. they intended it because they wanted the people's business taken care of and addressed first and they wanted it addressed in an important manner by this house. but they also realized that some time in the heat of debate that can go on in this place, that level heads needed to calm things down for a bit and ponder it before it's passed so things aren't rushed to judgment and mistakes aren't made. we had the same kind of procedures in the croom today just for example in a capital murder case. we spent an inordinate amount of time and slowed things down so we could try the very best to make sure mistakes were not made because it's life and death that occurs in that croom. so our founding fathers want -- croom. so our founding fathers wanted

our -- courtroom. so our founding fathers wanted the ability to slow the process down and make the hard look at each of the elements and try to come up with a resolution in the senate that was more philosophical and more pondered than the house. it was intended that way. and for that reason they set up a means by which the members of the senate could do what's called filibuster the house. that means they could start talking and one person could hold up the whole operation until everybody agreed to calm down and get certain points resolved at a slower rate. this has evolved but the suspend the rules have been following that very trend -- but the rules have been following that very trend. today we have a process that takes place over in the senate which is sort of, if you will, imagined that there's someone

standing up and talking until you get 60 votes to shut him up. but there's not really somebody to stand up and talk. we have a rule called closure and that rule says that until you can vote to -- an up or down vote on any issue in the senate of the united states you have to have 60 members of that body to agree to bring that to the floor of the senate nor a vote. -- for a vote. and that's an issue that it should be if it's not in the minds of all the american people today, it should be in the minds of the american people because 1/6 of our economy teeters on the verge of change based upon whether or not the senate -- based upon whether or not the senate rule of cloture will be maintained which has been in existence since the founding of the body that is over on the other side of this building. now, whatever -- whenever

there's a rule there's someone who will try to come up with a way to get around the rule. that's human nature. sometimes people get around it by breaking the rule, sometimes people get around it by adjusting the rule. the rule is adjusted slightly back in, i think it was 1974, when they came up with a concept called reconciliation. what they were finding was that in the budgetary process, when you have to reconcile revenues with expenditures to make as we know balance your check book, balance your budget, whatever you do at home, don't use the kind of accounting we use around this place, but to make those two things reconciled they put up the process of reconciliation which is for reconciling those numbers. for reconciling those two numbers to make them work. you can use the reconciliation process if -- if you had put it

in the rule prior to the passing of the budget so that could you reconcile the numbers and it didn't take 60 votes to get that vote. and reconciliation has been used for budgetary and number balancing ever since, very limited manner, it comes up maybe once or twice a presidential term for a president, to make sure that when you this things are being done in the way of expenditures or taxation or whatever it is, to make things reconciled, sometimes that's reconciliation. but it never was designed to take a whole body and battering of laws and just change the rules to make it a 51-vote to make it a win in the senate. it was always intended that that was just for balancing your checkbook and not for creating your job and paying your bills.

so, in other words, if wasn't for the big ideas, it was for the little tweaks to make things work. i don't think everybody understands that but that's what it was for. that's what it's been used for. i have some examples on this page, this was written by a man named john dolt about the process. it's a good explanation. he points out that, and there may be others but he's got a list of the names of the bill that have been used, reconciliation, omnibus reconciliation act of 1980 under jimmy carter. omnibus budget reconciliation act of 1981 under ronald reagan. omnibus budget reconciliation act, 1982, under ronald reagan. tax equity and fiscal responsibility act, 1982, under reagan. omnibus budget reconciliation act, notice the names budget, fashion taxes, fiscal under reagan. deficit reduction act under reagan. those are all -- that took place in the 1980's. all of those, you hear the word

budget or you hear the word tax or expenditures. that's what it was for. today we have been debating now for over a year president obama's concept of health care for the united states. i hesitate to say president obama's bill because at least to my knowledge president obama has never himself nor the white house written a bill and presented it to this body for deliberation. so the bill that we're talking about right now, we had a house bill pass this body by one vote and we had a senate bill pass the senate on christmas eve. both of those were contentious and both of those were hard-fought and both of those barely squeaked by and yet -- and normally because the senate bill is drastically different from the house bill, those would go to a conference committee where they would work out the

differences and try to come up with solutions. that's the normal process for bills in this house. but the normal process doesn't seem to be wanting to go on in this house right now. so we're not going to a conference committee. and the only other alternative would be that either the senate take the house bill without any changes and pass it, which they've said no, or now that they've passed their bill, they send it over to the house and the house has to pass that bill without any changes. and if there are any changes, the got to go to the conference committee because you can't change. it you either accept it or you haven't accepted it. if you haven't accepted it then you have to reconcile between the house and the senate bill. the proposal on health care which is being strong armed in this house right now is to get this done by easter and they're going to do it by strong arming

elements in this house on the democratic side of the aisle because the republicans are not going to vote for this bill, to ask them to give up their conscience, both our liberal members and our conservative members, to give up what they stand for and pass the senate bill even if they don't agree with it. and then to trust the leadership of this house to put together a reconciliation package that will fix things like abortion which has nothing to do with anything to do with reconciliation and do a reconciliation bill to address the issues concerning abortion in this bill. or do a reconciliation bill to address government option which is the far left liberals' concept of what's missing in this bill. and the leadership here is asking this them to not mess

with the senate bill, pass it. even though they don't agree with it. and i don't think it should pass the way it is, pass it and trust it that it will be changed. and it will be changed to a -- through a process which is not for changing these types of life-changing issues but for tweaking your checkbook, if you will, and that means that we're going to change over 200 years of history in order to get a health care bill passed that by the best poll out there 57% of the american people don't want. and as many as 60% to 70% of the american people don't want this health care bill, they want to us start over and try again. they think we can could better than create hundreds or not

hundreds, that's an exaggeration, let's get it right, about 35 or 40 new agencies or bureaus in this country, that will have people overseeing everything to do with health care in this nation and that will put people who operate in w.a.c., between you and your doctor and -- you and washington, d.c., between you and your doctor in making health care decisions. people took to the streets in august and said, go back and do it right. you democrats and republicans get together. we want to see you work together on this bill and we want you to come up with the kind of solutions we're looking for that deal with costs, deal with accessibility, deal with pre-existing conditions, but they don't have to be something that nobody, unless they've got a couple of months, can read through and digest and understand. put it in a series of bills that we can understand as american people. if there's one thing we owe as

members of this body, we owe to the american people to give them bills that they can read. i mean, it is affecting 1/ of their life -- 1/6 of their life, 1/6 of their paycheck it going to be hit every time they think about health care and people are going to be ordered to take health care and mandated with penalties if they don't want to take health care and there are some people that don't. so it's life changing. . there are rules and laws that you run your operation by. and when you start violating them, especially the laws and rules that go to the basic tenet of the constitution of this united states that the senate is the deliberative body, then you are basically changing not only

a part of our economy, but changing the way the government of the united states has operated for over 200 years. that's not the way it ought to be. it shouldn't be that way. and so, i would argue that my issue about rule of law goes to reconciliation process. and yet the leadership of this house, the speaker of the house, nancy pelosi, harry reid, majority leader of the senate and the president of the united states are all talking about fixing the dispute that are in this house about the senate health care bill through reconciliation which would then be an abuse of the rules and violate what this country stood for for 200 years. now, what's wrong with that picture? well, first off, it changes everything that happens in the future, because now we can turn

over 1/6 of the economy of the government, a portion of the economy that will now be managed by the people who want a central government here in washington running everything. when they do that, then the next issue that comes before this house, there is no reason for anybody to honor the 60-vote rule in the senate. that is no reason for anyone to honor it. once you break it, it affects every human being that lives on this planet inside the united states, once you fix it and violate the rules to suit yourself against those people, what can we bring before this house that will require that rule ever again? i think an argument could be made that that will be the end of the cloture rule in the senate. and when you end the cloture rule in the senate, we'll go

back to a different senate than the way our founding fathers wanted it to operate. we need to realize that the concept that we should go by a set of rules and operate by that set of rules, to violate those rules, there are consequences. i'm not going to say we will put anyone in jail. i'm saying the consequencesr right now, you might have a win, but when you're in the minority, which this 60-vote rule is done to protect the minority, whoever it may be, democrat or republican, if you give up the power to protect the minority or at least give them a voice, then down the road, someone's going to wake up when someone has

their heart broken, there won't be a cloture rule to protect them. breaking rules has consenquenses. i don't know if what i'm saying here has any effect on those folks, but i can tell you that, for instance, the health bill care calls for $1 billion in budget savings over a five-year period of time totaling an estimated $8 trillion. this impact is 1/1000 of a percent which reaches the definition of the budget theory impact. senator byrd wrote a rule that said, you can't use this idea of reconciliation for just incidental effects. nothing more incidental than that, when we talk about $8

trillion versus $1 billion. that's pretty incidental. and yet it's 1/6 of the economy. the reason we have rules is for people to follow the rules. i encourage and i hope and i pray that every one of the american people will now understand -- and this is difficult to talk about and it's not easy for anybody to understand and if anyone tells you john carter is an expert, tell them you don't know what they're talking about. i'm not an expert but i understand what common sense means and what is right and wrong and when thomas jefferson writes the rules and everyone abides by them information over 200 years and all of a sudden, to get your way, you decide not to abide by the rules, that's wrong. i think the american people are going to know it's wrong.

and i know the american people will rise up and say it's wrong. if they can pass it with 60 votes in the senate, that's the way the deal operates, that's playing within the rules, that's following the rules, making the playing field, i consider it level because we all play by those rules. then that's fine. but if you can't, don't play tricks and don't change rules that you aren't supposed to change, because if you do, the consequences to the american people are going to be awful. and i believe the anger -- there is a lot of anger in this country right now and i believe that anger will be increased six-fold or more if they find out that the same bunch of americans who watch basketball or football or baseball or know the rules of the game and watch somebody break the files, they expect a foul to be called or penalty to be set or expect a

man to be called out or man to be called safe. they expect the rules to be played by. and they expect on the baseball field, football field or basketball court, why wouldn't they expect it when people are changing their lives, why wouldn't they expect that? health care reform has been on our plate now for quite a while. meanwhile, we are losing jobs. we've got issues that we really need to be dealing with with people out of work and trying to get them back to work, companies who are confused about the future and by that confusion, they aren't willing to make investments by expanding their businesses or hiring people. they are sitting on the sidelines. small businesses don't know whether they will be mandated to

do health care or continue what they are doing now or where they can go to make it better for their employees or not hire employees. we got millions of people that need a job. and we are happy -- i forgot what the number was, 30,000 or 40,000 lost a job this month. that is supposed to be happy? i think we should be happy when 30,000 or 40,000 got a job this month not when 30,000 or 40,000 or 20,000 are lost. that's not our goal. our goal is to be able to say, we have the announcement that 40,000 people got a job this month. but instead, we have been debating health care. we have been like people who say, take my football and go home, demanding the game be played by their rules and not by the rules of the game and

demanding that their way be taken even when the american people tell them they don't want that way. that's where i think this debate is about. i have a whole bunch of posters here that a lot of people went to a lot of work on. and i may go through some of them. robert byrd is still alive and working over in the senate. here's what he said about reconciliation. i aoppose using the budget reconciliation process to pass health care reform and climate change legislation. such a proposal would violate the intent and spirit of the budget process and do serious

injury to the constitutional role of the senate. as one of the authors of the reconciliation process, i can tell you that reconciliation was intended to adjust revenue and spending levels in order to reduce deficits. it was not designed to create a new climate and energy regime and certainly not to restructure the entire health care system. this was said by senator robert byrd, 4/2/09, one of the authors of the reconciliation process. that's what i have been telling you. what i have just been saying and i think one of the important things we have to be concerned about is what he said about the constitution, serious injury to the constitutional role of the senate. just what i have been talking about with you. and let me point out all these

chairs that you see in this room. we can see where we want to, and we all tend to sit somewhere. all of us stands up on the first day of this house and swear an oath, raise our right hand and swear an oath. and the nature of that oath is pretty darn simple. we don't swear to be loyal to our party, republican or democrat. we don't swear to be loyal to a man or a speaker or a majority leaderor a president. we swear one thing. we swear to provide for everybody and give -- we swear to preserve, protect and defend the constitution of the united states. that's what we swear to. that's our job here. our job is to make sure that piece of work that created this intricate system of rules that

we have all accepted and have called us all to prosper, our job is to defend that and the president oath. our job is npresident has the s. our job is not other things. it's preserve what's in the constitution. and the way the constitution is supposed to operate. senator byrd points out, we are looking at something that would be in violation of the constitution of the united states. so this is more serious than what some are thinking about. here's some stuff about reconciliation. here we go. gives congress the ability to change current law to bring spending and revenue in line. uses nuker call targets and not program-specific. the debate is limit todd 20

hours. nongermane amendments are not in order. a vote is guaranteed and requires 51 votes to pass rather than 60. the byrd rule. legislation cannot be added to a reconciliation bill if it has a budgetary impact, which is merely incidental to the policy components of the provision. as i told you, the bill we're talking about is $1 billion versus $8 trillion. that is pretty incidental. you may not think so until you realize what a billion is and realize what a $1 trillion is. it's so hard to understand that if we stacked, what was it, if you stacked $1,000 bills, four inches high, that's $1 billion.

-- no. that's $1 million. $1 trillion, 67 miles high. so you can see it's a lot of money we're talk binge. it's $1 billion to $8 trillion is pretty incidental. health care reform is not fiscal policy, that means it's not about money. the health care bill calls for $1 billion. i was just talking about that. so let's -- that's what we're talking about. when you change a rule to do something that you can't do, you shouldn't be doing in the first place and so you change the rule just to get your way and change the constitutional history of our country, it's something

people ought to think about, because some day, somebody might be rolling over you and something you care about by breaking the rules and i don't think you'll be very happy about that, because we are a group of people that play by the rules. . been picking on these two guys for the last few months about tax evasions with no penalties. the treasury secretary tim geithner and mr. rangel who's the former chairman of the ways and means committee. but the not fair to have spent the time thinking on these two guys when this whole house is fixing to breaks rules that are going to affect everyone sitting in this chamber and in fact everyone drawing a breath in this country. and they're going to break rules

and change rules and avoid rules , i'm almost embarrassed to have picked on these two individuales for rules they broke concerning taxes and other things. although it's the right thing to say, if they break the rules you ought to talk about it. the congress is about to break the rules and we ought to talk about it. finally, and i'm going to quit now, i would hope that everybody realizes that everybody in this congress wants to make health care work. and they want to make health care work for everybody and everybody equal opportunity under health care. and we -- there's many people on both sides of the aisle that think we can do better than these 2,000 and 3,000 and 4 you,000-page bills that -- 4,000-page bills that seem to hit the table every once in a while and health care is one of them.

so i am appealing to my colleagues in the house of representatives to encourage everybody when it comes to this important 1/6 of our economy to play by the rules. i yield back the balance of my time. the speaker pro tempore: any other individuals seeking one hours? seeking one-hour opportunities? the question is on the motion -- is there a motion to adjourn? mr. carter: i move to adjourn. the speaker pro tempore: the question is on the motion to adjourn. those in favor say aye. those opposed, no. the ayes have it. the motion is agreed to. accordingly the house stands accordingly the house stands adjourned until 10:00

>> tomorrow, the chamber will take up dennis kucinich's resolution about all were in afghanistan. there will also debate a resolution to impeach a louisiana judge for falsifying intimation in a bankruptcy case. live coverage of the house when members return here on c-span. >> ahead of presidents -- the head of the president's council of economic advisor christina romer's remarks are next on c- span. after that, ron kirk on efforts to open up foreign markets to

u.s. exports. later, testimony about afghanistan and the defense department budget. >> tomorrow morning, we will announce the 75 winners of our documentary competition. nearly 3000 students entered a short video on our country's greatest rings or challenge the country is facing. find out the winners tomorrow and view them at studentcam. org. >> christina romer talked about job programs including a tax credit and providing capital to small banks. this is part of a conference open -- hosted by the national association for business economics. it is about half an hour.

>> i like to welcome all of you to the breakfast. i am the vice-president of nabe , and i have two brief tasks this morning. the first is to one more time remind you about the professional development seminar we are holding in april. the brochures are available at the front desk. we have put together all wonderful pds. if you had been there before, it will be a new experience this time. it is designed for repeat attendees. we would love to have you come to that in april. my second very distinct pleasure is to introduce today speaker, christina romer, a class of 1957 was a professor of

economics at the university of california-berkeley and chairman of the council of economic advisers. she was promoted to full professor in 1993. prior to her work at berkeley, she was assistant professor at princeton from 1985-1988. she received her ph.d. from mit in 1985. after her nomination as chair, dr. romer was passed with co offering a plan for recovery from the 2008 recession. she is a highly accomplished academic. she has done extensive work on fiscal and monetary policy from the great depression to the present, using the notes from the federal open market committee and other written documents. her recent work with her husband has focused on the impact of tax

policy on general economic growth. with all the economic and other -- if all the academic another skill sets are not enough, she is president of the american economic association, a fellow of the academy of arts and sciences, and she has also received a memorial fellowship, the national science investigator award, and other recent fellowships. she is -- was co-director for the national bureau of economic research, but resigned that position when she took her current position. most of all, those of you here last year, you will recall she addressed us last march have one of the most turbulent times in u.s. economic history. she was new to the job and dealing with one of the worst

crises ever. she listened very carefully and thoughtfully to the comments from our audience. she is a great spokesman for the obama administration. someone with this educational background and experience, this level of academic research on this topic, and great communication skills -- there are very few people like this suited for this job. please welcome christina romer. [applause] >> thank you very much. it is lovely to be back with you again this march, as he just mentioned. i was here last march. we will give them a minute for technical --

let me go ahead and we will see if we get the powerpoint. when i spoke at this gathering a uriko, the country was in some of the very darkest days of the recession. -- at this gathering a year ago, the country was in some of the very darkest days of the recession. we have lost 1.5 million jobs in the previous two month. industrial production had fallen by more than 2% in january 2009, almost another 1% in february. there was rampant and stock prices were plummeting. my topic last year was the american recovery and reinvestment act, which had just been passed. i discussed its key features and my reason for thinking it would

be effective. one year later, the evidence has borne out my predictions. the recovery act has helped to change the direction of the economy dramatically. the decline and fear of a year ago has been replaced by growth and hope of continued progress. we are still in a very difficult situation, but the trajectory is vastly improved. in my talk this morning, i want to discuss where we have been over the last year, where the economy is now, and some additional policy actions that i think are needed to put us more firmly on the road to recovery. let me start by talking about the contribution of the recovery act. you know, the act was the largest countercyclical fiscal policy action in american history. of the $787 billion total budget impact, roughly 1/3 was tax cuts for individuals and businesses,

another 1/3 was payments to help those directly harmed by the recession and to state and local governments struggling to maintain employment and services, and the final 1/3 was direct government investment in everything from conventional infrastructure, to help information technology, to a smarter electrical grid. the most basic evidence that the recovery act and others measures have been affected is that the economy -- the trajectory of the economy has changed quite dramatically. here is the growth of real gdp over the last three years. we went from gdp falling at an annual rate of more than 6% in the first quarter of 2009 to rising at almost that same rate in the last quarter of the year. most analysts, including the administration and members of

the federal open markets committee, expect gdp to continue to grow steadily. this change in trajectory during the past three quarters is both must -- both much faster and much stronger than one would have predicted based on the behavior of the economy up to the passage of the recovery act. a number of analysts have investigated the impact of the recovery act on employment. these estimates suggest that the act raised employment as of the last quarter of 2009, relative to what it otherwise would have been, by between 1.5000002 million. this estimate is consistent with the reports filed by recipients of recovery act funds. -- by between 1.5 million and 2 million.

this estimate is consistent with the reports filed by recipients of the recovery act funds. the act built in an unprecedented commitment to transparency, and as part of that commitment, it requires recipients of grants, loans, and contracts to report quarterly on jobs created with the funds that they have received. this is not showing on the screen, however. i am going to say that i am fine without it. but thank you. all right. because of the recovery act, the american economy is growing

again. but as last friday's employment report made clear, the labor market remains severely distressed. most obviously the unemployment rate is 9.7%, a terrible number by absolutely any metric. consistent with this, total output is still far below the normal trend pattern. moreover we have yet to see gdp growth translate into employment growth. instead, productivity has risen at a 7% annual rate for each of the last three quarters -- the largest rise in productivity over three quarters in more than 50 years. the recent jobs report did contain signs that employment growth could commence in the next few months. as most analysts have noted, february snowstorms here in washington and along the atlantic seaborne likely artificially reduced the february payroll employment figures. workers who missed a paycheck

because of the snow do not show up in the statistics. based on the number of workers in the household survey who said they had a job but could not work because of bad weather, the cea and others have estimated that this impact may have been substantial. as a result, februaries headline number of malloch -- of relatively modest job loss is an encouraging sign of labor market healing. but it is essential that road trip -- job growth not just turn positive but that it be as robust as possible. as many of you know, it takes employment growth of roughly 100,000 per month just to keep up with normal labor force growth and hold the unemployment rate steady. to bring the unemployment rate down quickly, much faster job growth is needed. most forecast project relatively moderate gdp and and on employment growth over the next year -- and employment growth over the next year.

no one is predicting the kind of strong rebound that would fill the employment gap quickly. it is for this reason that jobs creation remains the president's top priority, and he has proposed a number of targeted measures designed to have the maximum impact on accelerating job creation at the minimum necessary cost. indeed, the fiscal year to 2011 budget submitted in early february set aside $100 billion for new job creation in evidence -- new job initiatives, and in the weeks since, the president has offered more details on the high impact proposals he wants to see enacted into law. the budget also included more than $150 billion for continued relief measures to maintain demand and provide essential support for those most directly hurt by the recession. he is also proposed important additional steps to increase lending to small businesses.

many of these measures are being debated in congress right now and i thought i would take some of my time this morning to highlight the case for three particular measures. let me start with a hiring tax credit. the administration proposed a $30 billion program that would give firms a fixed amount for each additional worker hired in 2010 and an extra credit for a fraction of the increase in their payrolls. both the house and the senate have passed a somewhat different jobs credit proposed by senators schumer and hatch. their proposal waives the employer side of the payroll tax for newly hired employees who had previously been unemployed, and it would provide employers with a $1,000 bonus for workers retained for more than a year. for a new worker earning $60,000 a year, the benefit for a firm that retained that worker for a full year would be about $4,000. now at its most basic level, a

hiring tax credit follows the core economic principle that if you want to increase the consumption of something, lower its price. we want to encourage firms to hire more workers, and to do this, the government is proposing to exist -- to absorb part of the cost of new workers in their first year. when one lowers the price of something to attract extra consumers, some people do what it purchased the good at the old price get the benefit. this is true of a hiring tax credit justices is within an embarrassment tax credit, the cash for clunkers program, and all other tax incentives. what matters are the relative costs and benefits. willie higher -- will a hiring tax credit generate enough extra hiring that it is a cost- effective way to jump-start job creation? your i believe the answer is unquestionably yes. based on estimates of labor demand elasticities in the professional literature, analysis by the council of

economic advisers suggest that the cost per new -- the cost per net new job of a hiring credit such as the one reposes lower than for other available job creation strategies. this is also what the cbo found, a payroll tax reduction for firms increasing payrolls is one of the most cost-effective job creation measures. such a hiring tax credit has been hired on a vote -- has been tried on a large scale in this country only once before -- with the new jobs tax credit of 1977 and 1978. the research on this programs impact is quite limited. the few available studies show that it did have beneficial benefits. and private nonfarm payroll employment did increase more than 11% from december 1976 to december 1978, the fastest 24- month growth in the six decades since the korean war. one factor that appears to have

limited the effectiveness of the tax credit was that they -- was that many firms did not even know about it and had no opportunity to respond. of modern credit would be accompanied by greater publicity effort, aided by new technology and the widespread existence of payroll services that can convey the incentives to individual employers. i would also suggest that the likely effect of hiring credits may be particularly large in the current situation. because the economy is growing again, most firms are surely planning to hire in the next year or two, as demand for their products increases. in this situation, firms may be particularly responsive to a hiring tax incentive. because of the reduced cost of employment, they may bring hiring forward to start gearing up for future production and to get the best workers. by hiring sooner than they otherwise would have, firms will

create jobs at a time when the economy needs them the most. because the economy is on the road to recovery, those jobs will remain long after the temporary credit expires. simply put, a hiring credit is a sensible, responsible policy uniquely well suited to the current situation. it has been endorsed by all long list of distinguished economists, including alan blinder, lawrence katz, laura tyson, and several nobel laureates. mark zandi, a prominent forecaster, has also advocated such a credit and estimated that the schumer-hatch proposal will generate about 250,000 jobs for the $13 billion price tag. the second recovery measure i want to highlight is additional fiscal relief to the states. the recession has had a devastating impact on state and local tax revenues.

state and local income tax revenues have fallen by almost 20% in real terms since the recession began. sales taxes revenues have fallen by almost 10%. because almost every state has a balanced budget requirement, states have no choice but to respond to their budget shortfalls. for this reason, fiscal support has had a strong effect on their decisions about spending and taxes, and thus on the economy. one key contribution of the recovery act is that it is filling about 1/3 of states budget gaps. several types of evidence confirm that the funds provided to states by the recovery act have been highly effective. despite the sharp decline in revenues, state government employment has fallen much less than private employment, and much less than one would have predicted given their budget shortfalls. the same is true of employment

by local governments. one major portion of the state fiscal relief, the state fiscal stabilization fund, is subject to the direct reporting requirements of the recovery act. the direct reporting data indicate that that $12.2 billion of relief provided by this fund through september supported 318,000 jobs. these figures suggest that the relief is a particularly powerful tool for job creation. finally, the other major component of the state fiscal relief, the temporary increase in the federal medical assistance personages transferred different amounts to states based on the specifics of their medicaid programs. an analysis by the cea has found that the employment performances have been better in states that received more funds through this channel. unfortunately the states continue to face continued budget shortfalls. as shown, the center of budget

and policy priorities estimates that even at the injection of recovery act funds, states face a combined fiscal shortfall of $125 billion in fiscal year 2010, $142 billion in fiscal year 2011, and $118 billion in fiscal year 2012. because of these continuing shortfalls, additional fiscal relief to the states is likely to be both particularly valuable and particularly effective. states are now at the point where the steps that would have to take to balance their budgets would involve cutting spending on vital services or raising taxes on families who are out -- who are already struggling. relief is particularly effective because it will alter states budgets decisions very quickly. there were able to meet very little of their shortfalls in fiscal year 20 -- 2009 by dipping into rainy day funds, and almost none at all so far in

fiscal year 2010. the vast majority of adjustment is coming from the changes in spending and taxes. because states are looking at multi-your shortfalls, commitments of additional federal support could lead to some change in budgets even vote for the relief is provided. by preventing tax increases and spending cuts, state fiscal relief raises incomes and employment relative to what it otherwise would have been. for all of these reasons, the administration has proposed additional fiscal support to the states over the coming year. the cea's stimulation model -- simulation model indicates that each $10 billion of additional state fiscal relief would support roughly an additional 100,000 jobs. the third recovery measure i want to highlight is providing capital to small banks. a key feature of this recession is the central role played by disruptions to credit markets and lending. we are all too aware of the

tremendous rises in credit spreads, the seizing up of key financial markets, and the many crucial interventions that were needed to keep lending going. despite these actions, lending remains severely restricted. non mortgage consumer credit outstanding is now 5% below peak, commercial and industrial loans have fallen by almost 20%, and commercial paper outstanding has fallen almost in half. one particularly valuable indicator of credit availability is the federal reserve's senior loan officer opinion survey. for all types of loans, the survey shows dramatic and unprecedented tightening in lending standards over late 2008 and early 2009, and continued tightening over the remainder of last year. the survey shows severe

tightening in the availability of loans to both small and large businesses. one recent study looks at japan where you need data set makes it possible to link firms with the main banks that they rely on for credit. the study found that when a bank's financial condition weakens, the sales of the firm that depend on it for credit fall. and the firm's exports, for which credit is particularly important, are hit especially hard. studies have also confirmed that these microeconomic links mean that lending is important to the overall performance of the economy. there is a substantial correlation between lending growth in gdp growth. studies that try to disentangle whether it is lending causing gdp, gdp causing lending, or some third factor causing both, find an important causal role for lending. in a paper david romer and i

wrote some years ago, we looked at episodes where the federal reserve intervened directly in credit markets to restrain lending, such as its imposition of credit controls in 1980. we found that within about nine months of such an intervention, industrial production had fallen about 5% below its prior pact. because of the acquittal -- because of the critical role that renewed lending can play in the recovery, the administration is proposing concrete steps to help restart credit flows. one important measure would create a $30 billion small business lending fund to provide capital to small and community banks, which are a key source of lending to small businesses that will be so critical to the recovery. the various restrictions accompanying the tarp funds that went to the large financial institutions are not appropriate for smaller banks. these banks were simply innocent bystanders in the crisis. thus the administration is

proposing that this fund be created outside of tarp, so that community banks across the country will face no barriers to participating. the government investment in these banks would be including incentives to increase small business lending, thus magnifying their impact. this program would complement the many other steps the administration has taken to support creditworthy small or businesses seeking to expand and create jobs. although there is considerable uncertainty about the precise relationship, we estimate that this $30 billion of capital will translate into several times that amount of additional lending and could help create hundreds of thousands of new jobs. and because the government will be getting capital stakes that will lead to future repayments, this will be accomplished at little long run cost to taxpayers. now the three recovery initiatives i have discussed are only part of what the administration believes need to be done. the house has already passed a

bill that includes an additional $50 billion of infrastructure investment that is consistent with the president's call for increased investments in repairing roads, bridges, and waterways. last week, the president discussed the importance of another proposal -- the home star program -- the homeour program. this program is designed to undertake energy retrofits right now when the economy has spare capacity. another key initiative that i did not discuss, simply because it is so obviously important, is extending the unemployment insurance provisions from the recovery act. nearly every analyst classifies unemployment insurance payments as one of the most cost- effective jobs programs. it is essential to both helping families struggling with unemployment and to sustain the recovery period. .

recovers but over the long haul it is predicted to grow tremendously. largely due to the effect of rising healthcare costs on government health expenditures. by 2040, given the current path the federal budget deficit will be 17% of gdp. a level that is obviously unacceptable and unsustainable. now, i won't take you through the history of how we got on this terrible path though i will recommend chapter 5 of the economic report of the president

which i think does a good job of that. other than to say that the budget problem was years in the making. it is not as some have suggested due to the actions taken this past year. as large as it was, the recovery act contributes less than a quarter of a percentage point to the budget deficit in 2020. but regardless of its source, the deficit is the challenge that simply must be addressed. now, the sensible way to address the deficit is with a long-run plan. it would be penny wise but pound foolish to deal with our long-run budget problem by tightening fiscal policy immediately or foregoing additional emergency spending to reduce unemployment. immediate fiscal contraction would inevitably nip the nascent recovery in the bud just as fiscal and monetary contraction in 1936 and 1937 led to a second severe recession before the recovery from the great

depression was complete. failure to take additional targeted actions to jumpstart job creation would lead to a slower recovery and higher unemployment for an extended period. high unemployment is not just bad for people. it's bad for the budget deficit. it is virtually impossible to get the deficit under control when the unemployment rate remains near 10%. rather than tightening the budget in the short run, we should focus on the sources of the exploding deficit in the longer run. the single most important source is growing healthcare costs. so it's essential to focus on doing healthcare reform well. only by slowing the break neck pace of rising government healthcare expenditures can we hope to get the long run budget deficit under control. now, according to the congressional budget office, the senate version of healthcare reform legislation lowers the deficit in the first 10 years and reduces it even more in the second decade. the cea's analysis finds that

the senate bill will likely slow the growth rate of healthcare costs by about 1 percentage point per year. a number that may sound small but which is hugely important especially when maintained for two decades or more. because the key cost containment features are maintained in the president's proposal we expect it to reduce cost growth by roughly the same amount. another useful and immediate budget strategy is to focus on the long run amount and quality of spending. at the same time that the president has called for more emergency spending to help put people back to work, he supported the recent reinstitution of paygo rules and proposed a three-year freeze of nonsecurity discretionary spending. the paygo rules will help to prevent measures that could worsen the long run budget outlook. the nonsecurity discretionary freeze will force policymakers to limit spending growth and to choose carefully which programs

are allowed to grow and which are forced to shrink. these are decisions that need to be made and it's good to start making them right now. finally, the president has issued an executive order creating a bipartisan fiscal commission. the commission is charged with proposing methods to shrink the deficit to a sustainable level in both the medium and the long runs. the president has made it clear that nothing is to be off the table as the commission begins its investigation. he wants to give the commission the best chance possible to come up with a solution to our budget deficit that can be supported by both parties. this is a concrete step that we are taking right now to forge the bipartisan consensus that will be necessary to truly get our fiscal house in order. you know, over the past year, the administration has taken some heat for supposedly trying to do too much. but as i hope my discussion makes clear the policy decisions

are all interrelated to continue to move forward on jobs we need to take additional targeted measures to help turn renewed growth into robust job gains. >> more about the economy. the administration has set a goal of doubling of exports over the next five years. this one-hour event is that the national press club in washington.

on behalf of our members worldwide, i would like to welcome our speaker and our and these will wide. i would also like to welcome our c-span and public radio audiences. after the speech, i will ask that many of his questions as time permits. from your right, embassy of

canada, md. arilyn gewax, andrew schneider, frederick did done -- frederica dunn, mary n. shapiro -- marion shapiro, jim oftra, and others. [applause]

one year ago today, i have been informed, the investor ron kirk was having a hearing to be the u.s. trade [unintelligible] it meant a new focus on trade policy to assist small and medium-sized businesses. it moved forward with the round of world trade negotiations. even as he seeks a more open markets for u.s. goods did even as he seeks new and more open markets for u.s. goods -- even as he seeks new and more open markets for u.s. goods [unintelligible] he brings more than 25 years of legislative and economic experience. the first african american mayor of dallas, he served as the

texas secretary of state under gov. ann richards. prior to joining the trade office, the ambassador kurt was a partner at [unintelligible] where he was named one of the 50 most influential intellectual lawyers in america. ladies and duncan, please welcome to the national press club u.s. trade representative ron kirk. [applause] >> nank you so much for the -- thank you so much for the kind introduction. i think he just proved you can i think he just proved you can do this >> i would make one correction.

admonition to turn your cell phone. if i'm still talking at 1:30, please let your cell phone ring or beep or do something. we'll find a way to bring it to a close. it's a real honor for me to be at the press club today with you and your distinguished audience. i'm especially pleased to be joined by two of our deputy ambassadors, demetrius, some of you may have known from his career previously at ustr and many years of service on the senate finance committee, and ambassador shapiro who joins us as well from a career serving in various capacities in trade in the clinton administration and running her own various successful international consulting business. they have made a wonderful, wonderful addition to our team and help us to advance the objectives that the president has laid out for us. alan mentioned it was a year ago

i was before the senate finance committee for my confirmation so you'll have to indulge me on one very practical matter because when i realized that i realized i went before the senate finance committee on my wife's birthday. that means today is her birthday. if you are watching, honey, love you, happy birthday. but it felt like i spoke to another group and they asked me what the first year was like i said i thought the first couple years had gone well and they kept reminding me it hasn't been a year. it just felt like it was just a little over a year ago that president obama took office. and one of his initial challenges to the congress, to this administration was to deploy all of our collective talent and resources to help get our economy back on its feet. and as we have worked to address those challenges, we have used some of our old shoes, but we also tried to incorporate new thinking into what the president believes should be the

foundation for our economy going forward. we have also looked back on some others for their wisdom. so i was reminded in 1934 as our country struggled to make its way through that great economic depression, president franklin roosevelt addressed congress. he told them that full and permanent domestic recovery depends in part upon a revived and strengthened international trade polcy. that was pretty good wisdom then. we think it's pretty good wisdom today. in the 75 years since president roosevelt delivered that message, u.s. ex-ports have increased ex-- exports have increased exponentially. today exports account for more than one in every $10 of america's income and exports support millions of jobs across the country. in fact in the last quarter of 2009, some economists believe that exports alone accounted for more than half of all u.s.

economic growth. if you remember it was a year ago our economy was going at a negative 6% rate, this last quarter we were growing by almost 5.7%. our exports grew at a clip of 18%. in 2010 as the world's economy recovers, export driven growth will continue to multiply. and our administration has laid out an aggressive agenda to seize the full measure of opportunities before us. we believe those are opportunities that support the creation of more and better jobs, at least a fair prices, and more choices for consumers. president obama has set a very ambitious goal for us to double our exports in the next five years. years. if we do so, that can he has also asked agencies to take part in the national export initiative to help americans

take advantage of these export opportunities. our office at the united states trade representative will play a key role in helping the president to achieve this goal by doing more of what we do best, and that is creating new market access for american exporters. we can do that in a couple of ways. we can enforce our existing american trade rights. we can also negotiate new trade opportunities. our trade agenda outlines the united states role in the community of trading nations. it has our intent to fully exercise and defend america's rights within the system. for those of you who might be joining as by television, you can get a complete copy of the president's trade policy by visiting us at usdrogov.

-- usd.gov. for us as we seek to help americans restore their belief in the wisdom and value proposition of our trade polcy. our trade agenda steps up to the biggest opportunities and confronts some of our thorniest challenges that we face in the global trading system. and our trade agenda seeks to place trade in its proper role as part of the president's broader economic reform agenda. fundamentally each of these objectives is anchored by a commitment to the global rules-based trading system. now, when times are good, that system promotes international growth and multilateral cooperation. and when the global economy suffers, as it has over the past several years, the rules based

trading system can help to keep trade flowing. but the global trade system could support even more commercial and economic growth. so our administration is seeking to support that growth in a number of ways, and that's what i want to spend some time talking about. first of all, we are working to achieve and help lead the members of the w.t.o. to a balanced and ambitious conclusion to the doha round of development talks. and we think that has to be won one that promotes meaningful market access for all members of the w.t.o., as well as enhancing the economic development of many of the world's poorest economies. we are also seeking to resolve outstanding issues with the three pending free trade agreements that we inherited in terms of panama, colombia, and korea. we are committed to resolving the issues related to each of these agreements for a simple reason, they represent great

market opportunities for our farmers, our ranchers, our entrepreneurs, our manufacturers, and they'll help us gain access to new markets and create jobs here at home. but we recognize that we have to do those in a way that allow us to work with congress and other stakeholders to move them forward at an appropriate time. at the same time we are taking other steps to expand and deliver on additional job creating opportunities to america's businesses and workers in accordance with our rights under existing free trade agreements. i believe that through frank negotiations, and where that fails exercising our legal rights through the w.t.o., our enforcement efforts can pay off in terms of new market access for america's exporters. we have already seen the results of that in many cases in a positive way. our efforts have yielded and saved jobs in the tire industry and here in america.

we have won direct distribution rights for american content companies in china and challenged unjustified restrictions on u.s. agricultural exports in a number of markets from the european union to the soviet union to across southeast asia. we have expanded on our enforcement activities as well. and this month for the first time we will introduce a new, comprehensive report that will help us to identify and address troublesome technical barriers to trade and unfair restrictions on agricultural exports through sanitary and fito sanitary barriers. as traditional trade barriers fall what we have seen increasingly is that in many cases nontariff barriers are taking place and becoming some of the more difficult challenges for american exporters. we hope these new reports will help us focus on specific s.p.s. and t.b.t. challenges and will

use them to guide our efforts to try to redress some these problems. u.s.t.r. is also taking steps to address the fundamental problem and the too common problem, frankly, of the theft of american intellectual property because americans cannot and should not be asked to compete with counterfeiters and thieves. thievery this is piracy. i worry about using that term because it sounds too romantic. in the age of american kids who grow up with johnny depp and think that's cool, but it isn't anything funny about this. we suffer losses ever billions of dollars of create -- of billions of dollars of creative energy to america's exporters and it also can have very real harm to american consumers as well. i have taken the opportunity over the last several months to increase our domestic outreach around the country. so i have been traveling around the country from west coast to east talking to stakeholders and businesses about what some of

the challenges are and opportunities in the trade world. fortunately one of the stories i heard in detroit was the same story i heard when i was on the west coast and when i was in texas and others, but it was a woman, businesswoman who told me of her frustration in many of our markets in which she has gone into market, been forced to joint venture with another business, they make an order for her product, she ships them the initial order. then they frankly take that order and either copy it and try to reverse engineer it and then cancel the rest of the word. by the time she shows up to confront it, she's looking at her business product often not well engineered, already on the market. i don't mean to pick on google or boeing. if you are boeing you can maybe survive and join me in a fight to recover your intellectual property rights. for too many of our small businesses, that can absolutely be a death knell. so we are confronting this plague of international piracy

straight on. we are working with our other partners to try to bring to a conclusion the anti-counterfeiting trade agreement that will help support efforts to regain america's competitive advantage in these cutting-edge industries and protect the intellectual property that goes into these new products and services. we hope that we are able to generate the beginning of a new international consensus that will support legitimate commerce while marginalizing if not eliminating illicit trade. because benl property 2k -- intellectual property theft doesn't just hurt our small businesses, our entrepreneurs, and investors, it also can harm unwitting consumers of potentially harmful and dangerous counterfeit goods. similarly we are committed to upholding basic international labor standards. when our trading partners violate labor obligations in our

trade agreements, or deny foreign workers their international rights to organize, this not only hurts those workers, but frankly it tilts the playing field away from american businesses and will present an unfair manner. we are working to address those. our enforcement efforts go hand in hand with the pursuit of new market openings as part of a balanced, comprehensive trade policy. president obama has said that a successful trade policy is made when we get beyond the idea the new market openings and enforcement are somehow oppositional to one another. or that trade must always be a battle 2003 international and domestic interest. or frankly between business and labor or trade at the cost of jobs. frankly between those of us who believe in trade and from my travels around the country, some of those who simply hate trade. this is too important to allow

this to become balkanized in the way we do business in washington. we are seeking a trade policy that best serves the american people and will help them recognize that all of these elements are compelling interests for a smart trade policy rather than competing interest in a subzero gain. we believe honestly that the responses to those who feel like they haven't benefited from trade and to those families and businesses and others that have knelt left -- felt left behind is an important part of rebuilding america's faith in the value proposition of our trade polcy. in the president's 2010 trade policy agenda, these building blocks rest on the solid foundation of belief and the ability of trade and exports in particular to produce the kinds of well paying jobs that americans desperately want and need during this time of economic recovery. as i mentioned earlier, i have

taken this opportunity in this quarter to travel all around the united states. and i met with shareholders on both sides of the trade debate from small business owners in nevada to auto workers in michigan, from port workers in orlando and tampa bay and textile workers just last week in south carolina. i heard from many of them their very honest concerns and skepticism about our trade policy. frankly a lot of them feel like we have let our partners just run roughshod over us, but what has encouraged me is that in every case every one of them understood and understands that a smart trade policy that will opens markets, creates the level playing field that america's exporters want and deserve, and creates jobs here at home is one that all americans can get behind and benefit from. this is the trade policy that the obama administration is committed to pursuing. as our trade policy agenda makes

clear, ustr is working around the clock to help american businesses and workers of every size. not just those larger business but our small businesses as well. you might find it interesting to know, insightful to know, of the 275,000 roughly companies that export in america, 97% of them are what we define as small businesses. so that's 250,000 of our 275,000 are small businesses. we know one thing that they know that the world desperately still craves that phrase, made in america. so the president has said if we make more we believe we can sell more. if we sell that to our friends and neighbors around the world, we can help create good-paying jobs here in america. in this difficult economic time this administration will fight for every job there is to be had. to targeted trade policy initiatives, our -- such as our small and medium sized business

initiative, we are working to help create those opportunities and help americans grow and expand their reach. one of our areas of focus is in the dynamic asia-pacific region. the international monetary fund has forecasted that over half of the world's growth in the next 10 to 15 years is going to come in the asia pacific region. that makes this home to some of the world's fastest-growing economies around the globe. i'm often asked why do we spend so much time speaking about asia pacific? why do i talk so much about exports? again i remind audiences and first of all i -- forgive me i tell them i'm a mayor at heart and i start with the proposition that 95% of the world's consumers live outside of the united states. as our former police chief used to say, that's a clue. if you look at the fact then that most of them, most of that growth is going to be in the asia pacific region, it's critically important that the united states becomes engaged in

opening up that market for our entrepreneurs, service prode advisors, our businesses -- providers, our businesses and ranchers. i think it was great excitement and anticipation when we were at the summit last fall in singapore and president obama announced that the united states would move forward toward crafting an aspirational 21st century agreement that will guarantee american exporters access to this very dynamic market. many of you know that i'm speaking about the transpacific partnership. and we have begun our consultation was congress. we have begun our consultations with stakeholders. i see many of our friends here representing a number of industry that is have been engaged with the ambassador, and we thank you very much for your input. during our initial round of negotiations, we will focus on how we can maximize export opportunities for small to medium-sized businesses. what we can do to promote innovation and competitiveness.

also what we can do to promote regulatory coherence and make it easier for americans to export throughout the asia pacific region. we are also working to expand trade opportunities through other seeks in this important region. one of which is the asia pacific economic cooperation, apec. as many of you know, we have worked throughout apec to grow jobs, expand exports, and stimulate trade-driven growth of small to medium sized businesses and others. specifically in 2010 we have an specifically in 2010 we have an ambitious work agenda to make we are also working on an exciting mission to reduce barriers immediately for trade and investment and environmental goods and services. we have been focusing on these areas and will help americans succeed within the asia-pacific region.

we can also help them to become a grain. the united states will host the aipac economic forum in 2011. president obama announced that they will host the leaders meeting in honolulu, hawaii. we also plan to leverage this unique opportunity to demonstrate our ability to play stronger and more constructive goal in the development of the asia-pacific region. we are also looking for increased market opportunities within those 10 southeast asian economies the that make up the association of southeast asian nations. collectively, they are our fifth largest trading partner. we have agreed to establish a dialogue with trade and trade finance. i will join my colleagues in a multi-city tour that will permit

us to exchange ideas about how government and business can work to expand trade and investment opportunities between the united states and them. states and asian. this is one part of the world. i want to make it plain while we explore these new opportunities in the southeast asia region, while we strengthen our regional enforcement, that we won't neglect some of our most significant trading partners as well. we continue to work with our partners within the european union, which is still our largest trading partner, to reduce nontariff barriers between the european union and the united states, and we are also working on other matters to strengthen the bilateral and multilateral relationship with this important partner. within north america we continue to work with canada and mexico to strengthen the economic engagement between our three great economies.

our three trade ministers recently convened in dallas under our nafta free-throw commission and -- free trade commission and committed to work together to strengthen the environmental commissions and begin to look at how we can bring about more regulatory cooperation, specifically with the goal, again, of making it easier for small businesses to participate in this extraordinary economic engine. these efforts and others outlined in our trade policy agenda are not merely paper commitments. ustr's lawyers, negotiators, and trade specialists are already putting in the hard work necessary to bring home the benefits of trade. and doing so is not just a priority for those of us at ustr, it's a priority for all of us within the obama administration. president obama has made it clear that trade is an essential element of our administration's

overall economic recovery. he has talked about the importance of increasing exports whether it's through our negotiations within the w.t.o., through the conclusion of our pending free trade agreements or through new market access opening opportunities. in the state of the union ave dress most recently -- address most recently in the white house business round table, the president has been very clear that to create jobs here at home, to boost economic recover i, and re-- recovery, and remain globally competitive, the united states needs to export more american goods and services to other nations. but we also recognize that a robust and aggressive trade policy initiative won't be enough to get us where we want to go. reforming our health care system will help every american business whether it's large or small. i won't go into an exhaustive debate about health care policy, but i can tell you none of us can accept a default in which

the result is that health care costs rise by 70% over the next 10 years. we also have to continue to invest in our education system. president obama and secretary duncan have directed more resources through the american recovery act towards investment and higher education than at any period of time in our history. we also have to invest in america's core infrastructure. not one of these things alone will solve of -- all of our problems, but if we do them in a thoughtful way, we can can help to fuel this economic recovery and create the good jobs americans so badly need and deserve. in the words of president roosevelt again, we must revive and strengthen not only our exports but all parts of our economy. this is a big job. and ustr can't do it alone. but we will do our part to boost american exports, to support

export sector entrepreneurs, and to increase export sector hiring. as we do so, we will continue to maintain an open dialogue with the american public. as i said when i spoke to the senate finance committee last week on the president's 2010 trade policy, we can use common sense to find common ground. on the common ground we can move forward together toward new jobs , new opportunities, and a brighter future for american workers and businesses and farmers and ranchers. i look forward to beginning that conversation with those of you today. thank you so much for the opportunity to address you. >> thank you very much for your time, ambassador kirk. we didn't even need people's cell phones. it's shy of 1:30. we have a good amount of time for questions. please keep them coming.

our first question is a philosophical question about the obama strategy on his trade missions. comment on the difference in strategy between seeking exports and seeking trade. exports, which the obama administration pledges to double s. about selling products while trade implies two-way concessions between nations. how is the obama administration strategy a trade strategy rather than export strategy? >> as todd gilman would know in texas, we might it more of an answer than a quefment you can't have -- it's easier, it's certainly more digestable for a lot of americans right now to talk about exports. but the reality if we are going to meet the president's objective to double exports over the next five years, it's going to happen as part of a comprehensive trade strategy. that's why the president also talked about this national export initiative. so as practical matter what he has done is convene all of us

who touch our trade policy in any manner whatsoever, he's tasked us to come up with the most focused, targeted, approach to expanding our exports using all of our available tools. some of that is what we laid out. some of that can be through enforcement. through stronger partnerships with our general system of preference partners. we are going to look at everything we can to open up those markets with the hope by exporting more we help create and support these jobs. >> clom's a -- colombia's president will step down in office. will he be able to see the u.s.-colombia f.t.a. passed? and what is the timetable? >> august may be a bit ambitious. i would say this, president uribe and his team have been great partners with us to address the issues raised by many members of congress about

the violence against union organizers and labor leaders. and president obama recognizes that this is a great opportunity in one case for america to get a huge win. colombia and panama are both g.s.p. fartherers in. the practical effect is that their goods are coming into the united states for the most part duty free. lost on many of our friends is the reality in the case of our g.s.p. partners, these free trade agreements are almost singularly about our ability to access those markets. we understand the concerns and are working as smartly as we can to try to address in a responsible way so we can move forward. >> two of the president's frayed nominees are being held up in the senate. what is the impact of not having those two staff members in place? >> march madness is absolutely my favorite time of the year. i love it. i live for this. but none of you would want to coach a basketball team in which

three, four of your star players are told they have to sit out of the game for no reason. they are grades are fine. they don't have an injury. they haven't violated any rules. but because of the unique wonders of our senate parliamentary procedures, we don't have an ambassador in geneva. although he has been approved by the senate finance committee. we don't have an agriculture ambassador. we are getting the work done. when i took office i had a chance to visit with one of my predecessors and real men tors, ambassador bob strauss. hi a chance to talk to charlene and carla and susan and they reminded me, we have, we believe, truly the best value proposition for the american taxpayer in ustr. we only have 227 employees. we are stretched thin. when we don't have a full complement, it means the rest of us have to do more. secretary clinton made the

observation when she testified on the hill the other day, at some point this begins to strain our credibility and the good will in a we have worked so hard to regenerate around the world. because the world believes you don't care. you don't have an ambassador in geneva, how can be serious about the doha round. we would be greatly advantaged not only just from manpower and intellectual strength these two individuals bring, but i think it would help us regain some of our credibility. >> several questions not surprisingly about the doha round. what are the chances that the doha deadline of this year called for by the g-20 nations will be missed? >> considering that we have tried and failed three successive years. i don't know that i would put too much stock in it. i would tell you this, president obama perhaps more than any

president we have had in recent times is fundamentally committed to developmental premise of doha. as difficult of a challenge as we have had with this economic tsunami here in the united states, you just can't imagine the impact this has had on the poorest countries in the world. we take very seriously the president's challenge to us to work collaboratively with our partners to try to meet the imperative at least the stretch goal from our leaders at the g-20 summit to bring the doha agreement to a close. if all of our partners are willing to sit down and engage with us, and particularly open their minds to negotiating across not only agriculture but in services, and are willing to make the hard choices necessary to produce a balanced outcome, i think we can meet that goal. i'm proud of the work that we have engaged in, short-handed as we have been, to change the

negotiating paradigm in geneva. we especially need, frankly, these advanced developing economies such as brazil, china, india, south africa to come to the table in the same spirit. >> last week australia's ambassador said his negotiating position was all products and sectors are on the table s that the u.s. position? >> we believe so. let me say this, australia, canada, european union have been very helpful, very open. but australia in particular in their trade minister, simon, have been very helpful in helping us to convince our colleagues, our partners within the w.t.o. that we have nothing to fear by putting everything on the table. the doha round was never intended to be only about agriculture. for whatever reason we seem to have stalled there and been afraid to engage in services in manufacturing and these other areas. we believe engaging not only

horizontally across all sectors but supplementing that with the sustained bilateral talks between the developed and advanced developing economies is the only way to get us across the finish line. >> is there danger that the u.s. could be blamed for a failure of the doha round? >> that's a certain possibility. but rather than operating that paradigm of blame avoidance, the president has told us this is important. forgive me for not mentioning this. if we get this right, this is a huge shot in the arm to the world's economy. as important as doing bilateral agreements are, which we won't give up on, to get an agreement among 153 economies and have a major trade liberalizing impetus could help every economy in the world. but we have to get it done right. we think it's port staying at the table and we would rather

focus on moving us to a position that we are in a stronger, more productive environment rather than worrying about who to blame if it doesn't pass. >> former mexican president has said that the relevant question about doha isn't how the w.t.o. can save the doha round but whether the w.t.o. can be saved from it. give the changes in trade in economies since the round was launched, is there an appeal to just scrapping it and starting fresh? >> we believe frankly that a lot of good work has been done. i know there's been a lot of attention on the fact it's taken seven or eight years. as we recently saw in copenhagen with the climate talks, it's hard to bring 153 of the most hard to bring 153 of the most diverse economies in the world i do not believe we should give up.

a lot of good work have been done. but we should not be afraid of honestly confronting some of the gaps that exist. there are loopholes in terms of the use of safeguards and safety mechanisms that make it impossible for some economies to determine what the kennedys are. -- with the opportunities are. >> the u.s. is currently facing the potential of wto tariffs. how does it affect u.s. efforts to convince countries to abide by their debt -- there wto commitments when the u.s. fails to do so? >> you heard me say over and

over again, the support for our trade policy begins with a staunch believe that this only works if we have a rules-based system. that this only works if we have a rules based system. that has to apply to the united states as well as it does to our partners. and i would submit and put the united states' compliance record in the w.t.o. against any of our trading partners. where we have been found and where we have exhausted our appeal remedies, we have acted to come into compliance, but we are also going to expect all of our trading partners to do so as well. dispute resolution is in fact a healthy part of any trade relationship. any american, any businessperson enters contracts every day and most contracts you anticipate and include how you are going to resolve disputes. they inevitably arise. we shouldn't lose sight of the fact if we can get this right, in the case of the european

union, this is our largest trading market. we are talking about almost $3 billion a day that goes on between the united states and the european union. in the case of mexico and canada, each of these are a billion dollar a day relationships. what aim trying to do in our office is move away from focusing on those handful of disputes to a broader discussion of what we can do to work on some of these nontariff barriers and others to facilitate and help grow trade. >> given that, what specific trade issues do you plan to address during your upcoming trip to the e.u. and equipped? -- egypt? >> in the case of egypt we are just beginning this relationship and we are looking for ways whether it's through either atifa where we can strengthen opportunities in this region of the world with an important strategy and domestic partner. we are frankly very proud through our work with egypt that we are now going to be able to remove them from our 301

priority watch list as they have made great progress in strengthening their intellectual property rights regime. when aim in the european union, one i have to do practical work. my previous colleague, who served as their trade minister, is now, as i affectionately refer to, the high priest it's for foreign affairs. she's equivalent of their secretary of state. i have had a chance to speak with carl by phone. we'll be meeting with him to begin the later round. but one irritant we have still is the fact that our poultry producers have been locked out of the european union for 14 years now. even though we have been to the w.t.o., we have won the lawsuits, we have taken it to their scientific community. we want to talk about what we can do to get them to be more client with that as well. >> what solutions is the u.s. considering to the brazil cotton

dispute? >> we have a team -- we had a team that met with the brazilians, not last week but the week before last when they were in argentina. mike and secretary locker in brazil as we speak. ambassador sha -- shapiro and her team have been engaged with our brazilian counterparts if not daily but weekly. seeing if we can't find a way to avoid this retaliation. ultimately if we can't do that we have to work with congress to see if we can't come up with a means to comply. >> mexico last year imposed $2.4 billion in tariffs on 90 u.s. products after the u.s. shut down a cross border trucking program. what steps are being taken to resolve this dispute? will we see a new cross border trucking initiative? >> we would like to. we were most pleased that the language that was included in the 2010 appropriations rider

that wiped out the funding for the cross border trucking initiative was not included in this year's budget. one, we don't have that prib torrey language in place. president obama has tasked secretary lahood and secretary lock and myself to work with congress as well as with our partners in mexico to see if we can't come up with a program that meets. so concerns raised by members of congress, but also allows mexico to step away from their tariffs. i was in ambassador shapiro and which in mexico three weeks ago. we met with president calderon dwrectly about this -- directly about this. we have heard from u.s. agricultural exporters for the most part, particularly in the west coast that have been impacted by this. so we understand the sense of urgency. we will work as quickly and thoughtfully as we can to see if we can come up with an acceptable resolution. >> on the general topic of

w.t.o. dispute set elements, should they be made so they can be retroactive so countries can be published for violations that occur before they are found guilty? >> i'm a little uncomfortable with -- i don't know that i'm ever going to be comfortable punishing anyone before they are found guilty. part of the efforts we are making in the doha round as well is we have the opportunity to revisit our rules and compliance systems and very little attention has been paid to that. it's probably best if we address that in that form. >> in line with the national export initiative, how is ustr and the administration handling the opening of markets in asia for u.s. beef exports? is the administration willing to be flexible in what product standards are set to open these markets? and where do japan and china rank in priority?

>> we were cautiously opt missic, very proud in december when we announced after 15 years or so that we had negotiated an agreement with taiwan. to essentially get them allowing beef back into their country under the same terms and conditions that we have with korea. unfortunately in this case taiwan's legislative body acted to undo that act. so one of our first priorities is to work with taiwan in working with the new administration in japan to see if we can't get them to become o.i.e. client to allow our beef into this market. for those of you that maybe aren't in the agricultural industry. these are big dollars. these are not insignificant funds. these are billions of dollars that affect cattleman and ranchers. but we continue to engage all of those partners to see if we can't bring them into compliance. again, ambassador morantis came

back from about a 17-day trip throughout southeast asia and met with every one of our counterparts on this particular subject. >> what steps is ustr taking to china's national indigenous innovation initiative program which is seen by some as a threat to u.s. intellectual property? >> we are very concerned about the so-called indigenous innovation program. we were disappointed that china put this initiative in place, particularly after what secretary gary locke and i joined by secretary vilsack believe is a fairly productive jcct meeting last fall. suffice it to say we have been engaging businesses here to bert understand what their concerns are. we met with one of the chinese vice ministers who was here in preparation for our next strategic and economic dialogue

this spring and then the jcct this fall and this was one of the prime topics of concern. we believe broadly, let me say this not just with china, throughout asia, whether it's europe, china, canada, mexico, our objective is to just get government's thumb off the scale. we are guided by one principle and one fundamental belief that america's manufacturers, ranchers, entrepreneurs, workers can compete and win with anybody if you allow us to do so fairly. whether it's indigenous innovation, intellectual property, s.p.s. barriers, government has to abide by certain internationally recognized standards. and our objective in every case is to try to move government distorting behavior from every venue that we can. and that's our approach on all of these. >> the u.s. government provides incentives for solar, wind, and

other renewable energy projects through production tax credits and d.o.e. loan guarantees which are open to and obtained by foreign companies seeking to rebuild energy projects in the us you. what are we doing to ensure u.s. economies get -- companies get the same access? >> one of the initiatives i mentioned both in the context of work that we are doing within frankly apec, one of the critical elements, more exciting elements of our proponentsed transspecific partnership is our work to reduce -- to work with what we call a coalition of the like minded to try to move quicker to eliminate all barriers on investment and environmental goods and services. president obama has noted time and time again, it's not just enough to rebuild our economy, but we ought to be looking more toward the future. where we can compete and gain a foothold. that we get a competitive advantage on the world as all of the world seeks to be more concerned about climate change. all of the world is in the race

to go green. we think it only makes sense in those proven technologies to work more rapidly to try to reduce barriers on others. but initially we are doing it within the apec region and it's incorporated into what we are doing in our talks on the t.p.p. the speaker pro tempore: you discussed green standards. how -- what prospects do you see for some future advancement between the e.u. and u.s. in developing joint transatlantic green standards? >> well, our dialogue through the european union takes place principally through the transatlantic council. one of the issues that we have been talking about is how to be more sharply focused on a number of issues that could make a difference right away. but the european union is a central player in our broader effort to have a faster harvest on the environmental goods and services trade initiative. so this is one area that we are working hand in hand with our

partners at the european union. >> mentioning the transatlantic partnerships there is a question about the transpacific partnerships. as the us you talked to japan, south korea, mexico, and canada about joining the talks? would you expect any big new -- new big economies to joint talks this year? >> first and foremost, part of our excitement about the transpacific partnership is that it does represent one of the fastest growing, most dynamic, economic regions in the world. but we recognize that to move as quickly as we would like to do, and ambitiously, we probably were better served starting off with the smaller number of like-minded countries, but ultimately our hope is that we get in on the ground level and help to craft what can become ultimately desired objective which is a agreement of the apec economies, which at some point

would obviously include japan, malaysia, all of the other apec members. initially i think we were wise in getting the united states to the table early so that we can help to frame what will be, i think, one of the most dynamic and forward-looking free trade agreements in the 21st crentry. >> one country that would love to become more involved in trade talks is russia. your trade polsaygenda released on march 1 says you are waiting for clearer signals on russia's trade plans. how much clarity will it take for russia to enter the w.t.o.? >> that's probably a question more appropriately that when you have the prime minister or the president of russia here, there is a healthy debate, i think, within russia on whether they would rather proceed as this proposed bloc of belarus and kazakhstan. we have made and were making very good progress in helping

russia get over the final hurdle of its w.t.o. accession. we continue to dialogue with them. but to some degree this is a decision that the russians will have to make. but we believe in the united states it is very much in our interest, and in the interest of american businesses and entrepreneurs, to have russia a part of a global rules-based trading community. >> the u.s. and canada recently reach agreement on buy american requirements. but there are still barriers in accessing highway projects at the state and local levels. with such policies the u.s. may be sending a message on protectionism that the u.s. may not find advantageous. not find advantageous. can we expec >> let me speak to the resolution of the "by american" issue that we have with canada appeared before the first time,

we've got can lead to comply with the government procurement act through the wto. i want to give to those again to ambassador shapiro. one of the misconceptions about our buy american provisions is that it was not wto complaint. the president insisted and language made it clear that the provision would be instituted in full concert with all of our wto requirements and agreement as well as many of our other free- trade agreement. for any country that is a signatory of the government procurement act, there would have access to most of those. . those funds spent at the federal level. until we negotiated this reciprocal market access for

u.s. businesses, canada and its provinces have never been a part of that government procurement act. what we negotiated was a very good win-win swlution because for the first time now our businesses have access to spending and procurement, canada's provincial level while giving them reciprocal access under the recovery act. this was a very smart and good result for u.s. exports. >> question, what is the update on whether the ustr will take on whether the ustr will take china's internominate sensorship w.t.o. as an unfair barrier to trade? >> i am going to assume this relates to the google case. we are still dialoguing not just with google but other internet providers to make sure we fully understand what is happening in china. i know there are still very intense negotiations, frankly, between google and the chinese

government. and then we are studying, making -- trying to make our own determination whether we believe in fact this is not w.t.o. client. and if the best resolution is to go forward and file an appeal. our preference, again my very strong preference, based on my career as a mayor and a lawyer, is that if we can get these resolved through direct negotiations or within the context of our dialogue with china in the strategic and economic dialogue or the jcct, that is so much more preferable than the uncertain path of what can be a two, three, four year legal battle through the w.t.o. i think we have demonstrated pretty clearly we are not afraid to take matters to the w.t.o. we took china on on the tires case. we have a pending raw materials case. when i talk to american businesses, what they tell me in this very difficult and economic

environment, time is simply a luxury they don't have. if it's going to take five years to get something resolved, a lot ofure business can't survive that process -- of our businesses can't survive that process. our first preference is to see if we can't get this resolved through direct negotiation rather than having to run to the w.t.o. in every case. >> in your background, background as a businessman, do you run ustr like a business? >> i wish. i would say this, having been a mayor with 15,000 employees, i never forget when i got elected mayor my city mayor said you can only be mayor if you accept the fact is the good thing is you -- i was a city attorney for six years, you have 15,000 people so excited that you are leading the city. and about 25% of them are into the whole ron kirk magic. they are onboard. they are ready to go. you got about 60% that, you

know, don't know but they'll follow. he says, we got 10% probably. you got 2% or 3% that are doing something so wrong, so bad, every day. willfully, they just don't get it. that's the nature of 15,000 employees. the flip side at ustr, i'm serious, this is the best run agency in the government. we have for the most part about 225 trade specialists who we have, frankly, stolen from commerce and agriculture and export-import bank and they get to do what they love and that's focus on direct negotiations and market openings. the agency really does run itself. it is a great place to work. we have an exceptionally talented team of dedicated professional people. >> we are almost out of time, before asking the last question we have a lot of important matters. on march 15 we have dick armey, the chairman of freedom works.

on april 15, douglas schallman, the commissioner of the internal revenue service will be talking about the tax code. and on april 15, actor dennis quaid will just the prevention of potentially deadly medical errors. second, i would like to present our guest with the traditional obligatory and could have vetted -- coveted national press club mug. so now for our final question, which was actually mentioned in your introduction, remarks, ambassador kirk, how are you going to make it up to your wife given that her birthday was the dominant thing on your mind earlier today? will you need to work some of that ron kirk magic? >> my wife is blessed to know she's the first thing on my mind every day. we had a great weekend together in new york and hopefully she'll be back up this weekend.

i know all of you that know her will call and help share the love with me and help rescue me from this faux pas. >> thank you for coming today, ambassador kirk. i would also like to thank the national press club staff, including its broadcast and library for organizing today's event. for more information about joining the national press club and how to acquire a copy of and how to acquire a copy of today's program, please go to [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> john will talk about healthcare insurance legislation. after that, melanie's loan -- melanie sloan lobbying and earmarkeks. later, mayor it will announce the winner of our in new students cam to enter contests. what "washington journal" each morning at 7:00 a.m. eastern. >> wish for president lived past 90 years old? they were john adams, herbert hoover, ronald reagan, and it gerald ford. find these and other presidential fax been c-span's book "who is buried in grant's tomb?" >> it is a travel log. it is also a mini history and biography of each of these

presidents. you can tell a lot of those people at the end of their lives. >> a resort guide would resource guide. now available at your favorite book seller. >> not the president and ceo of the center -- federal reserve bank of chicago. this is part of a conference hosted by the national association for business economics. it is about half hour. ñi>> good morning. by a member of the board of directors. it is my pleasure to introduce today speaker. he is my colleague and my boss. he is a member. dr. charles evans, the president and ceo of the federal reserve bank of chicago. we have worked together since he

joined the fed in 1991. the federal reserve bank of chicago is one of the 12 regional reserve banks throughout the country. the small banks -- 12 banks make of our nation's central bank. his background prepared him well for this job. before becoming president, he was the director of research, overseeing the study of monetary policy, financial markets, regional economic issues, and banking. much of his personal research is focused on measuring the effects of monetary policy.

he has a bachelor's degrees in economics from the university of virginia, earned a doctorate from carnegie-mellon again, and his career service preparation for his current responsibility, helping formulate monetary policy. we are so very happy that we have charlie evans with us today. >> thank you very much. that is a very nice introduction. good morning. is a pleasure to be with you today. these are of great importance to our -- to us all. we share a common interest in fostering economic recovery.

it brings together the first prospectus that will revising solutions. and i think this practice was an example of that. this is a great organization with such an expert audience. my speech is a touch longer today than we usually do. i apologize in its fans for that. today i like to discuss a few challenges that the labor market has. for a bit of context, i approach these issues not just any prospective f a fed bank president but as a macro economist and research director. i had the benefit of doing this since 1995. i have observed firsthand what they face in the door mandate. it promotes maximum employment.

for me, price stability is to serve. inflation is measured by the personal consumption. when i became the fed president in 2007, and never would have guessed that my first 2.5 years would have me boating continually for lower interest rates and more policy accommodations. i would not have expected the need for that. with the unemployment rate and 9.7 term and inflation under my benchmark, there is no conflict between our policies. the directions have been clear. today i will highlight a number of issues that lead me to think the accommodation will likely be appropriate for some time. let me emphasize that these are my views and not those of my colleagues. let me briefly mention a summary of the economic outlook. i find myself in broad agreement

with the few that restricted bank credit will continue to restrain recovery strength. these headwinds will obey these as it moves through 2010. most indicators have turned favorable already. many households and businesses remain wary that a full-fledged recovery is in frame. for many come into not feel like much of a recovery. the latest reports have been mixed. layoffs are subsiding. firms are hiring more temporary workers. after a large decline, the work which is showing signs of stabilizing and reversing course. these developments are precursors of a broader scale recovery in labor demand. today employers remain cautious. it job openings are still scarce. there are few signs the

permanent hiring has picked up. even once a labor markets turn the corner, there is a long way to go before they get back to what we would consider to be normal. the ongoing weakness of the jobless recoveries from the previous two recessions have raised concern that something has fundamentally change in the way labor markets work. somewhere a they have deteriorated more than what was expected given the decline in output during the recession. it might impinge on the speed the recovery moving forward. unemployment numbers are consistent. the usual starting point for thinking about this issue is the famous law relating gross domestic product to the change in the unemployment rate. the usual estimates say the unemployment rate should be at least a percentage point lower than the 9.7 term we saw last

friday. and it assumes the association between economic activity and an unemployment rate is not very. many indicators tend to deteriorate faster during a recession than they improve during expansion. a simple statistical model that uses the relationship between gdp growth and unemployment estimated only during recessions can actually account for a sharp rise in the unemployment rate. figure one compares actual unemployment numbers to their predicted that use using gdp data only from recessions. they are about spot bon the green line does not distinguish between behavior and expansion and is not capable of capturing

the current numbers. the canossa explain the rise on broader measures of unemployment and underemployment like the bureau of labor statistics. we did not pull this out because it is convenient. there is really rich literature is pre-existing literature. i think it is reasonable to include -- conclude it added has -- of the labor market measures are weaker than expected. some other indicators are usually week. the share of adults or outside the labor force has increased

more than the average length of a spell of unemployment. it does for a much longer than predicted. amid like to spend some time elaborating on the implications -- i would like to spend some time elaborating on the implications. the consequences of long-term unemployment of households can be quite severe. such household, especially those local or no savings are susceptible to sharp falls in consumption. long-term unemployment often a significant loss impermanent earnings even after the worker finding jobs. unemployment erasion has risen at an unprecedented rate over the past year or so. in february, 40% of the unemployed in the middle of a spell lasting more than six months, the highest proportion

in the post-world war ii era. you can see this in figure two. it plot 1948 through the present, the relationship between the unemployment rate in the average length of an ongoing spell of unemployment. i have to commit as i was watching christie romer trying to deal with the figures, i was thinking about how i might describe this. [laughter] that cloud looks a little like the state of kentucky. the progression tries to turn to west virginia of love it. [laughter] the red dot represents the monthly figures. at the beginning of the recession, the unemployment rate was 5%. the average unemployment duration was 17 months. it was already four weeks more

than what would be predicted based on the average historical relationship represented by the regression line between the two measures. this initial diversions largely accounted for by a secular shift to were longer spells of unemployment due to the aging of the work force and a stronger leader -- labor forces. there was some secular change in this relationship. the first 15 months of the recession average increase of roughly the rate you would have expected. this is indicated by the series of red dots that all along the top and are parallel to the black lines. we started off following that path. since the first quarter of 2009, the average duration has increased much more rapidly. the extension of unemployment insurance benefits, while helpful, likely accounts for a

portion. even so, we view the overall magnitude that indicated that the labor market conditions are weaker than the unemployment rate alone suggests. this may also explain why the share of those outside the labor force has also grown so much. many people have stopped searching for jobs given the lack of demand for their services. let's turn to the implications of rising long-term unemployment. this -- the rise in un -- long- term unemployment has occasions going forward. the likelihood of finding the job tends to decline as an individual remained out of work. this reflects the fact that those who typically have a difficult time finding work will tend to be unemployed longer. bunker spells are a symptom

rather than the source of an underlying problem. and long unemployment spill could cause the duration leaving some with less bright job prospects even as the economy revives. this could contribute to high unemployment duration. we can gain some insight from earlier. figure three highlights the path of the unemployment rate in duration during the last recession. we have some of the time paths from the clouds. both measures rise. during the recovery phase, unemployment duration remains consistently high for quite some time, even as the unemployment rate's decline. we expect to see a similar pattern. as i noted earlier, blunter and unemployment tends to lead to permanent losses -- long-term

unemployment tends to lead to permanent losses. the high unemployment duration could have a long-lasting effect on consumer confidence. to summarize, the labor market appears to be roughly following a conventional track given the severity of the recession. they may not fully captured the weakness in the withdrawal of the worker forced . they raise the risk that the recovery in labor markets could be slow, even as up returns to a well-established road map. the other side of the economy as high productivity growth productivity has been quite strong as of late this is often the case in the early stages of a recovery. firms meet higher demand for their products.

a key question today is the degree to which the recent productivity reflects a temporary development or a more enduring and during level. if the gains are predominately driven by cost cutting, they may be unsustainable in the ind. in this case, we would expect hiring to pick up quickly. higher chartres productivity levels -- they are clear that they have undertaken various cuts in their workforce. they have been just about right side for how they expect to be producing a meeting customers for quite some time. they will tell you that they will achieve these efficiencies. they will continue.

what did they are right? -- what if they are right? the implications for hiring are not clear in this case. higher productivity will show through in higher potential and actual output for the economy. they need not necessarily comment on the cost. it could be as the -- police more hiring an expansion or labor savings. the relative importance of these factors has consequences on our assessment of the degree to which restores slatting exists in the economy. this would imply that the recent surges in gdp increase actual and potential. no progress on resource slag would impose.

some are skeptical that the economy is even operating. they might argue that much of the drop in output was the result of a permanent reduction in the economy's productive capacity, perhaps because financial market practices have now been discredited. the strong productivity growth of recent quarters continues to offset the decline in the level of potential output. thus the last resource lag exists. this would have so bring implications for interest going forward. the unemployment rate to give this another way to encourage the degree of slack in the economy. it may lead one to think that it is even greater than what is implied by the unemployment

rate. it is possible that longer durations and lower labor force attachment can reflect broader changes, such as a mismatch between the skills of the unemployed and those handed by the employers. it prevents them from shifting to the industries. under the scenarios, labor markets might actually be lower than one might infer from the unemployment rate alone. it this feels like a tennis match, i apologize. i have given me several minutes of economist speak. this is ok. it is made, right? in the final analysis, the magnitude of unemployment is so large that there is little doubt that there is considerable slack in the economy.

the debate boils done to whether the month is like in the economy is large or extremely large. having said that, if question i have asked myself is, should the fed had done more? given this large degree, there is a legitimate question of whether monetary policy could or should have done more to combat the deer deterioration in the labor market. we first use our traditional tools, essentially cutting the federal funds rate. as he neared the zero funds rate, we turn to nontraditional tools to clear it up, providing liquidity directly.

we reduced long-term interest rates further by purchasing additional medium and long-term treasury bonds, mortgage-backed securities, and the debt of enterprises. these nontraditional actions is it could have been an even more severe economic contraction. the unemployment rate still hit concern per. had we done more, the plausible action would have been to expand our asset purchases program. it quantifies the effects. that is difficult. a good place to start is to look at the recent empirical evidence. when they were announced, are fluid market built that information immediately into asset prices. after the march 2009 purchase

announcement, 10 in-year treasury note fell 50 basis points. a comparable decline appeared on the announcement a mortgage- backed security purchases. it might be reasonable to infer that doubling the size of the staff might have doubled this imply. -- impact. well research efforts and elsewhere assess -- we do not have a robust formal model to calibrate interventions. there are reasons to expect that the impact of nontraditional policy actions might not have

skilled assembly. we initially responded to the financial crisis of their highest value of tools. we then move to our alternative policies. finally, they were designed to further lower long-term interest rates. that stimulates demand for interest in spending. [unintelligible] although it is impossible to quantify the portion of the impact of our non-traditional actions, it may have come from boosting confidence. in those dark times, i believe

households in financial markets were reassured the policymakers were acting in a decisive man ner. on a practical level, portfolio future purchases would have looked at differently. it might have been less affected. the typical monthly purchases of new entrances were so large that it left very little supply for private investors. it could enforce a larger program more heavily on treasuries or existing mbfs. these assets are likely less close. the effect of their perches on

economic activity may have been less. we must also keep in mind that more monetary stimulus also has costs. these could be considerable at higher lsat levels. many are worried about the inflation implications of the expanding balance sheet. currently, most of the increase in the monetary base is sitting idle and bank reserves because banks are not lending freezers directly. -- lending reserves directly. it would eventually pull inflationary pressures. if it was expanded much beyond where we are today, the risk of such pressures would build as the economy recovers. policy-makers already faced the task of the sizeable balance sheet.

essentially increasing the size of as the purchases could further complicate the process down the road. that said, changes in economic conditions could alter the cost. hopefully, the recovery will progress about any long-term problems. as we have repeatedly indicated, the committee will continue to comply with the purchases of securities in light of the economic outlook and conditions of financial markets. i will stop there. thank you very much for your attention. [applause] >> thank you very much, charlie. charlie has agreed to take questions from the audience. if we could respect those to the members of names, that would be appreciated. please, be sure to use the microphone.

>> one of the things that was striking was when you are talking but implications of the structural move. >> right. >> have you worked on in the estimates are planned with the full rate of unemployment may have changed? my assumption is that it is it the beginning higher than what it was. how much higher could it be? >> that is a good question. it depends on how you look at national unemployment. i like to look at it as much more slowly moving measure of employment. there probably used to think it was 4 and 3/4. i thought maybe 5% would be better, rounder. that is certainly the case with some of the structural issues as i was talking about.

he probably could get some estimates that are substantially higher, maybe as much as a percentage point. i prefer to think about the longer term. maybe it has picked up. for what we are looking at in terms of the policy, over the next three or four years, the capital in the unemployment rate and any measure of the national rate is so large that i think inflation expectation should be kept in check. >> good morning. wells fargo. a few years ago, the instrument of fed policy seem to be uncertain. the fed is managing the economy with other instruments. he talked of the industry and the reserves. do you think those street as

being the new fed rate policy instrument? >> >> i didn't have the benefit. terms of the exit strategy, we have a lot of accommodations in place with a very large amount of excess reserves. when the time comes, when it is time to move to less than highly accommodative policies. we are going to have to either find a way to withdraw the reserves or to somehow distinguish their power. one way to extinguish the power would be to provide an opportunity costs for banks to not be in the mood to lend as much. we are talking with the economy is growing well. we were lending to take off.

this is one possible tool to do that. actions would also have that effect. for myself, as the fed funds rate cut close to zero. the funds rate to a soft relative to what our attention was. i think we will be a little bit concerned that there will be softened as we move with excess reserves. i will not be surprised if we rely heavily on excess reserves. we will expect the funds rate to fall of that. you will probably talk about that. wanted to reestablish itself, it

will be of iran 9%. frankly, we will be re-examining that. >> i like to follow up on that. once the exit strategy has been implemented they will be closely related may be the funds rate will be found. the thing that i'm wondering about is that two of these three interest rates -- monetary policy is this. their mind as recently that the changes in the two rates did not necessarily coincide. i am wondering if this is an issue.

it will give a legal distinction that the rates are determined by the board. >> that is a fair question given our different government structures. it is different than what will actually matter. during the current environment, they have had a very collaborative approach. the president has come to washington. we work with governors. there is the federal open market committee. we exchange views. but talk about the corporate level of accommodation. -- we talk about the appropriate level of accommodation.

do need more accommodation or less accommodation? the actions will reflect that the best thinking. i hesitate to even say the committee. the federal open market committee is 12 individuals. there are many ways in which our governing structure does not with the capture how we go about doing the decision making process. >> we make an interesting and compelling case for the change in the labor market situation. fox use say you cannot have a reliable monetary policy on unemployment. >> that comment was about our

non-traditional policy. >> i think this would be more less the same of more traditional means. what i'm driving at is -- do you have any way of getting at changes in the labor market which could lead to a factor monetary policy? -- to assess the changes in the monetary policies are labor policy structure, which are not related correctly? it is outsourcing the use of asian labor. >> those are difficult issues to reliably calibrate. that is why research is such a vibrant activity. there is a lot that we do not understand and a lot we can learn. from the standpoint of making

monetary policy and living with an hour doorman dates, was talking up the labor market, the first thing on my mind was not what is the best way to engineer the lowest possible unemployment rate. it has to be sustainable. it has to be sustainable growth. that is what we are after. what are the implications of these developments for our inflation outlook, because we have an awful lot of accommodation in place. there was confidence that there were factors holding back inflation, holding firms back from marking up prices in some very large fashion. it would give the great cause to undertake these policies. as a bucket the unemployment rate, and the fed measures of output.

-- as i look at the unemployment rate, i look at the fed's measures of output. the model is a great thing for researchers to do. i contributed to that live bircher -- literature. this is going to keep macro economists busy for the next few decades. >> the procedural issues -- could you -- i spent a lot of time explaining to audiences how the fomc makes the decisions and how he make the decisions before you go. can you just briefly run through heavy prepare for a meeting, what sorts of papers, materials, etc.? just procedural. not any detail.

>> with the reserve banks, we have dedicated research staffs dedicated to thinking about of the economy is playing out. we also have our bank supervision staff which relies to a banking conditions are at grassroots level and how things are recording well with local conditions. we begin this process two weeks before w. we have already been getting a lot of information. the research staffs a string together reports. -- starts putting together report. what effect might the have? when they announced they might do 1 and 1/4 trillion dollars, it changes interest rates by 50 basis points. there is a ton of research that goes into that assessment.

weenies before we go to washington. we bring information to washington for the to see it in accordance -- we as seen the boards in their analysis. it is a value in terms of other things that each of the gatt. there may go to washington and you have 18 people sitting around the table. all views are listened to. chairman bernanke has been a leader. he is been a collaborator. he has been a listener. cannot imagine a sinkless the

wood of imperfect. it cannot imagine a thing that would have been perfect. >> thank you very much, charlie. [applause] we have been working break until 10:45 p.m. thank you. >> up next, u.s. military leaders testified on capitol hill about military operations in afghanistan. they had a president obama's council of economic divisors, christina rummer talks about the economy, jobs, and the federal

deficit. >> a couple of live events too touchy about. the insurance industry groupñr hosts a health policy forum beginning at 8:00 a.m. eastern. speakers include kathleen sebelius. later, timothy geithner testifies on capitol hill about his department's budget request for next year. >> c-span, our public affairs content, is available on television, radio, and,. and also connected as on twitter, this book, and you too. you can sign up for our other e- mails of its c-span.org. >> the senate armed services

committee heard from three leaders about afghanistan operations as well as the development of a missile defense system in africa. this is a series looking at different parts of the proposed defense department budget but that it is just over two hours. rigid budget. it is just over two hours. >> good morning. today's hearing is the first in a series of hearings that our committee will hold over the coming weeks. they will receive their testimony. this is part of the committee's review of the fiscal year 2011, the fed national authorization request. this morning, and the committee receive testimony from admiral james rodriguez in nato's

supreme allied command. we request the pass along our gratitude in carrying out the missions of your command. at the mall rodriguez is not do to appear before it this committee. this is his first time testifying as the commander of europe. u.s. european command with our agent has been a central component in the transatlantic relationship. nowhere are the benefits of this relationship more clearly demonstrated than in

afghanistan. the vast majority come with countries in the yukon area responsibilities. their effort to build the capacity of our allies are an important contribution to the commission to bring to bear acting detouring stability to -- to the commission to bring stability to our area. president obama announced the addition u.s. forces in december. the soldiers from britain and estonia and canada joined u.s. soldiers and marines and afghan troops in the recent combat operations in the helmand province. we honor their sacrifice and the

sacrifice of their families. an issue that the one to get in further is the continuing shortfall by our nato allies to provide the additional trainers could give the need to build the afghan national army and police. it is apparent that growing at can security force so they can take responsibility is essential for the success of our counter insurgency strategy and for meeting the july 2011 date the president obama has set for the stock a day for the start of the reduction. there is no shortage of reduction of troops things to the day that has energized the afghan leaders to bring in more recruits. according to general bill caldwell.

a major problem is the continuing shortage of trainers to provide the basic training. trained afghan army should embrace despite their willingness to be on the frontline of the fight. they pledge fewer than the half of the trainers sought by general caldwell. that is more than disappointing. it is unacceptable. they face a number of other security challenges of in this area. president obama pose a new plan for missile defense in europe is supported by a nato allies. later this year, neda will complete a revised conflict with how they should adapt the challenge.

the challenges are staggering. the rage across borders. they are sentenced the best and only hope for security and stability for extremists well confronting some of these issues falls in the lap of a military command. many do not. your command is the acid -- is being asked to participate in nontraditional ways. the committee this for to your testimony on these issues.

this is cause for deep concern. the tinted christmas day bombing remind everyone that violent extremists are not just located in the afghanistan and pakistan region but in places like somalia and in nigeria. the committee is eager to hear how africa is looking to confront those threats. i hope the general will discuss how they have changed and promoted the practices that result in more efficient policies in coordination that

affect the joint operations. we are interested in hearing about the role of the joint forces command specific interest will be how it affects the ability to shorten the command requirements, how the government will execute the job done and how will the services are meeting their readiness rates. as persisting conflicts continue to stress our forces, a committee is interested in hearing your assessment on the readiness of declaiming -- on deploying forces. we look forward to your

testimony. >> thank you. thank you all the witnesses for being here today. i am grateful for your services. many of my colleagues and i have been strong supporters of our transatlantic partnerships. neda succeeded in promoting and protecting the freedom of democracy. today the alliance is facing a number of very significant challenges. "unless the strategic concepts spurs operation and inspirational changes, it cannot be worked -- it will not be worth the paper it is printed on. they have serious budget problems. the problem is not the current

underfunding. they consistently have declined were only five of the 20 member states are obligating is required then spending of 2% of gross domestic product. the shortcomings are not new. and they have led the cap abilities they have let the capabilities decline. they needed to be effective in pakistan or any other future conflict. they should be explaining to their parliaments that nato bases, and threats in shares common goals. i am concerned that they continue to allow the idea to build up among their ideas that

nato's fighting wars because america is making them do it. it must be more of them about filling our obligations. it was also served to build partner capacity with the alliance and beyond. only think we begin to collect our alliance to one of common security. i look forward to hearing your thoughts on the feature of our spending and your prescription for developing a better leverage. i strongly believe it is important to nurture and scrutinize old friendships. it is important to develop and foster new ones. we often heard to complacent but unlike the foresight to per share for the things he did not expect. i'm glad we have the africa command. africa has always been

vulnerable to illicit trafficking. somalis continue to flow into yemen. we do not have to look any further than the christmas day bomber as proof that violent extremists exist in many places. we have partners in the region. they lost as many as 13 trips the summer. african nations are vulnerable to a blighty of terrorism -- to a lot of terrorism. i did forward to hearing your testimony and your need for trainers, forces, and resources. general maddox, your leadership comes at a time when our troops are engaged in joint operns