businesses that have to compete. it is not the government that competes. when thinking about the right climate, i think that there are two driving forces. the first is having the investment necessary to compete in the second is having innovation necessary to compete. what is capital and won his people. let me start with the policies relating to the people. first, when it comes to attracting the best people, it seems to me that we have to focus on education. there is a great deal of money spent on the training of our people and trying to improve our schools and trying to encourage adult education. we ever rise and are spending a

lot of time trying -- we at a verizon are, as a nation, looking at a huge amount of work to do. we have to have people who are competitive with their counterparts elsewhere in the world. when you have 40% of students now graduating from high school, you know that you have a significant problem in terms of the ability of the nation to attract people and have people with the skills necessary to amend the in -- the enterprises -- to man the enterprises. i will also meant to -- mention emigration. we'd bring a lot of people in --

we bring a lot of people in and have them stay here and attract others that are attractive to us. in addition to attracting good people, the other issue that is not fun to discuss it is the ability to replace people in an enterprise. in order for an enterprise to be competitive, you have to replace people who were not as strong with someone who is stronger. one of the difficulties we have in the education system is the inability to do this this is an inability to make the change in the work force to make those who were not performing and get someone who is a high performer.

all of those laws and rules that prevent you from bringing the best people into your work force and moving out those that may not be as good for our rules and laws that present us -- prevent us from having that innovation. you have to be able to improve our education system and you have to be able to bring them in from around the world. the second big band is attracting investment or capital. the world is much different than what it was when i was in congress. at that time, it was not easy to move capital from one part of the world to another. second, is the speed of light. people are making decisions as

to where they are going to invest their capital. this is critical in terms of determining the environment within which enterprises do business. the first thing i would have on my list is the tax policy. if you have the tax policy, which discourages you for putting capital into that environment, then you will put your capital somewhere else. this discourages a competitive climate. i certainly agree that the best policy is to have a low tax on capital and a lower tax on reparations. i would say that we spend a lot of time with a high corporate tax rate and change behaviors

with tax breaks. we see that right now with congress. this encourages investment. so, this is almost april. congress has been talking about the administration having a bonus package to encourage jobs. this has been going on since last year could this is part of the effort to create jobs. at this juncture, this has not happened yet. you either make more investment and now, or you have some stability and policy.

second -- the second area is regulatory policy. in our industry, i but could not say if we are blessed or cursed. we have heavy regulation of our industry. we have had parts of our industry surrounding the internet and wireless business. i guess that the bottom line is if you have heavy regulation, is a heavy tax. -- is a heavy tax. it prevents you from being able to experiment. the regulatory climate can be

stifled or it can help stimulate it. there are two aspects to trade policy. one is to not trade policy of a nation. make it easy for a company to do business outside of a nation. it is in the interest of the united states to compete effectively. government determines whether or not we have access to those markets. we are able to play in the international arena. the second aspect of trade policy received less attention, and that is the trade policy but drivers the rule law across the

world. this is very real right now. if you can protect your intellectual property in as a result of the trade policies that were reached by the nation, you are in a much better position to compete. government does, through its trade policy, determine what the innovation and that occurs in this nation is able to be protected and that the rewards are able to be reached through . the policies that encourage investment make us more or less competitive.

>> we will open and up to the audience >> we will have microphones coming around in a minute. -- we will have microphones coming around in a minute. the speech that i mentioned at the outset spoke directly to this. maybe we can try to make sense of what is going on the other promise that i made during the campaign -- what is going on. the other promise that i made during the campaign was that his interest is to reward companies to create more jobs and do more business within the borders of this country. that is not anti-business, it is

pro-america. the chart shows this widening of corporate tax rates between the united states and oecd countries. can you make sense of what the president is saying? >> the idea is that u.s. firms can do for u.s. taxation's if they locate activity offshore. you can think of it as being like this. if you want to sell in germany, you have to compete with companies that are producing comparable products at a tax rate that is a few points lower. one way that you can do that is to locate a subsidiary in ireland and then that

subsidiary will sell to germany and the profits will land in ireland. it seems crazy to assert that the company that does that is evil. then we would take away the opportunity for the u.s. firms to compete in germany. there would probably lose. right now, there are multinationals because they are allowed to avoid u.s. taxation. the way that you attract

business to the u.s. is to make it so that you do not have to go to ireland to go through germany. if you wonder why there are so many unemployed people, it is amazing that they would say something like that. >> i think that what the president said it is just old- fashioned mercantilism. there is some confusion as to what multinational companies do. i could take a plant while most multinationals owned the intangibles. if the intangible goes up, a lot

of economists suggest that there is some strong comparative said. i guess i question the intellectual underpinning of the speech. >> this is a political statement. it is not an economic or business statement. as it was designed to deal with certain constituencies, i really cannot believe that serious people, when analyzing the issue, would reach that conclusion. it is unfortunate that our political system sometimes uphills to others. we would prefer the we do a little more education. in this case, and i just want to make tw 0 points.

the second factor is that companies that are worldwide are around the world. the studies are overwhelming. multinational companies that are doing business worldwide, they also have more employees and more wealth creation in the u.s.. >> one other thing is an argument that the city in in the u.s.. our tax revenues are relatively low. the reason that we observe that is because the corporate tax rate is so high that no one

wants to locate profits in the u.s.. then, when we observe this, we are getting revenue elsewhere. this shows the kind of lull of misunderstanding. i can that this has to be addressed if we are going to create 20 million jobs. >> the revenue maximizing is in the mid-20s. >> we talked about international tax competitiveness. i would like to drill down on that.

in the last week or two, you gave a major speech on u.s. regulatory policy as it relates to the telecommunications industry one of the things that jumped out at main is a 20th- century broadbent that have a lot of rules that were written in the 1930's and 1920's. is it -- how much of a problem is that? what is your sense relative to other countries in how they look at the regulatory structures in which there leading edge industries must compete. >> first, it is true that policies relating to the issue

were built for eroded industry. it looks at how your regulate and monotony. -- and monopoly. -- a monopoly. you do not have the same kind of structure. there are many players competing and we have a very robust and dynamic marketplace. you have all of these groups competing with each other at the same time. for example, we will be partnering with motorola and bugle and -- bugle -- google and and thatververizon.

you have these companies that are constantly competing. it is a very robust and dynamic marketplace. the clinton administration essentially said that they were taking bare hands of the internet and that they were not want to regulate that space. that is the policy that the u.s. has promoted around the world. this is one of the reasons why we have had such robust growth and the amazing development of infrastructure and huge capital investment by the private sector. this has attracted the most capital investment. all that is good. the problem is that we have players who are attempting to fit this industry into the old

communications policy infrastructure and make that apply to the internet world of today because they want government to come in and manage this sector. we contend that the sector does not need management. secondly, if we are going to have policy for this sector, it should be a policy based on the current world. it is time for congress to look at this issue. they would try to use the old law, but at least update the old law. by the way, i should say, as a footnote, we are not opposed to government oversight. we are fine with the rule of law, we just want a law that makes sense.

>> you also mentioned in your remarks that this may be another area where we could talk about competitiveness issues. this is based on the ability to have some control over hiring and firing. what we know about the academic literature? >> this is a very big idea. this is entirely due to the labour market. if you look at capital losses in the u.s., they are roughly in the middle of the pack. how could you come out on top? this is really because of labor

flexibility. this is easy to celebrate. we have long had the ability to effectively hire and dismiss employees. a policy is moving into the other direction. it is moving deliberately to changing the hiring and firing costs. that will affect the unemployment rate in the country. what is interesting is how interconnected this all is. it right now, the integral capital stocks are bigger than the tangible capital stocks. this interacts with the corporate tax and a fascinating

way if you want to try to complete local elite as a u.s. firm, then you have to try to locate your profits in lower tax jurisdictions. in order to do that, the best way to do that is to locate the r and d and -- the rr&d. there is a generation of ideas and it ends up having a big impact on those countries because you might go there to work for microsoft for a while, but then, after working for microsoft, you start your new company. before we know it, there is a high tech bloon.

i am very concerned that this policy is really damaging our country. it is turning us into a group where growth is coming from ideas, but people have the advantage to move their good idea people somewhere else. that cannot be good for the country. >> economists who study innovations a that there are really two schools of thought. it happens because to do things and you do them better. if we stop doing that, we will miss that innovation. another 21st century industry is financial-services. much of our regulation of

financial services draws its breath from the depression-era legislation. i am a little bit surprised that much of what just happened seems to be unrelated to the policy discussion. we need better consumer protection, but that does not really get to what happened. the volcker rule has nothing to do with what just happened in the financial crisis. this is clearly an area where we need regulatory measures. >> one more question, and then i want to open it up to the audience. the comment about intangible capital and the role it plays in economic growth, this is an area that i looked at in technology issues did what we know about the role that different

policies play as it relates to innovation? this could be another area were countries could be competing in the policy space. >> i have written a paper on this a while ago. we find that there is a clear correlation. we actually found this in the bush and administration. i am sure that the criticism would still hold. we set our system of a long time ago. the u.s. is good at protecting textiles. i am fine with textiles.

we are really terrible at protecting intellectual property. some companies write software and the level of piracy around the world is stunning. there has not been a lot of action. on the other hand, textiles and those kinds of things are most important. they are the focus of our activities. >> not to be too negative, but the support that the government provides for basic research provides for a lot of this. our major universities have had big waves of commercialization. intellectual property

protection, but the u.s. has done a good job in that regard. >> a company that innovates relies on various debates >> there are two observations that i would offer. the first is that we have to recognize that the u.s. creates the men and armor were the most innovation occurs. this is the innovation occurring in the united states. we provide better protection for intellectual property than a lot of other places. we do, as a nation, continue to attract great people that can innovate. we have to recognize that. here in the u.s., we have a real problem with patent law.

it is turning from a protection for intellectual property to ensure that the innovator in reached the rewards of that innovation to a little game. we have various groups that are trying to buy a patent and in order to take on lawsuits. i do not know what the answer is to this, but we do have a growing problem with the current laws and litigation surrounding that. the third observation relates to our international exposure and what our industry is doing to piracy. this is a big problem. part of the difficulty is that we do not have the cooperation

of other countries and in force and the copyright laws -- other countries in enforcing the copyright laws. we have a challenge that probably need some more technological help in addressing. >> i mentioned one of this to be a conversation with the audience and will open it up. i see a couple of hands. we're working, over the course of the year, on this discussion aspect. this helps us hear what your thinking. >> one quick comment and then the question. i think that, for taxes, you need to go to asia and china