they have always done the right thing, after they have exhausted all other possible remedy. the same holds true for reform, restructuring, cuts. none of us want that. we squeal and scream and tried to make noise legitimately because they are stakeholders in that which they have invested in. .

>> on employment security, commission reform, workers' comp reform. all of those things occurred to the benefit of companies looking to relocate to south carolina. they are fundamental conditions for the businesses in our state. >> one thing is energy. in our state, we are the most oil-dependent state in the country. 80% of our needs are imported. gone to -- we have gone to wind. we have a foundation for energy efficiency, renewal but energy, domestic efficiency did we think it is a national policy that

could help with jobs. >> you are not going to tax those? >> i was very disinterested in what he was saying. >> one thing that we have done -- our comparative advantage is the export entity. we have concentrated on the power lines and investment with the private sector in natural gas pipelines and railroads, simply because as an energy- exports day, those are the underlying for infrastructure, more so than highways. the private sector is willing to make the investment. that has manifested itself in our current fiscal circumstance. we have more than doubled the capacity to move natural gas, which has a revenue implications for us, which is a reason that we're in good shape. >> you ask for one thing. one thing that we identified -- where is our economic future as the most trade-dependent state in the nation? we also identified energy.

we have invested in research and development. we set the goal for energy jobs totaling 25,000 by the year 2020. we did an energy portfolio. we did tax incentives. we're the fourth largest producer of wind power. we're the largest-growing in terms of solar energy, biomass, and so on. the goal is 25,000 jobs by 2020. we surveyed last year and we are at almost 100,000. that is not only giving us jobs, but it is allowing us to do some exports that we have heretofore not done. we have identified it as a single industry where we can get four more jobs than in any other single sector in the state of washington. >> in 2003, we did what we call the 2010 business initiative that was designed to be a

business plan like a private business. the goal was to become a recognized leader in civic areas of research and development. we created tens as a big research centers. we created 23 new ph.d. programs -- and a specific -- ten specific research centers. we created 23 new ph.d. programs. it is changing landscape. >> do you see the change? >> we do. we're keeping the children here. we have record enrollment at our universities. but yes, sir. >> two -- yes, sir. >> there was a signatory reduction in the amount of time it takes us to respond to inquiries -- a significant reduction in the amount of time it takes us to respond to inquiries. it is a very fast time frame from the department

transportation and the department of natural resources. they're not putting the people of delaware to work if they are filling out forms. that is critically important. again on -- you cannot overstate the importance of education. the race to the top composition was huge. the economic development committee meeting after this will focus on these issues. that is an advertisement. >> governor ritter? >> we really staked their future on 21st century sustainable industries. -- staked our future on 21st- century sustainable industries. biomass, aerospace, energy. we have signed 56 laws in two years that deal specifically with clean energy. we joined all of our major resource institute's -- research institutes would the -- with a

collaboration on clean energy that has attracted private- sector research and development which will help build this global institute for alternative and renewable fuels in colorado, along with big manufacturing jobs coming as well. that is just the north american plants. there are 2500 jobs. it is when the first places outside of germany where these have been built. they are manufacturing. they're about innovation. we think that is the way forward for us as a country, and certainly as a state. >> governor o'malley? >> we believe the most important thing we can do for our economy today and the future is to invest in the innovative capacity of our people. last year, we led all states in terms of job growth in our tax sector. we move from fourth to second place in terms of biotech.

was it in the corridor of science and technological innovation -- we are in the quarter science and technological innovation. -- we are in the area of science and technological innovation. we have invested in the education of our people. we have made college more affordable. we are connecting innovation to the entrepreneurs were creating new opportunities and new jobs which will allow us to have a rate of job growth twice that of the nation's. >> governor paterson, one thing? >> one thing that happened in new york that may be a little bit different is that, obviously, legislators are very queasy, particularly in election years, about making some tough decisions and cuts. in new york, apparently, we did not have to wait for a session to have that problem. our budgets for late 25 out of the last 30 years. in that time, what the state had

done for a while was far from its own general fund to keep the state functioning until the budget was passed. then we passed a law about emergency appropriations to keep the garment running from week to week. what we did this year -- the government running fromeek to week. what we did this year -- our budget was passed in april, the only one in the country passed at the time. we started putting got into the emergency appropriations themselves. -- but cuts into the emergency appropriations themselves. inevitably, it took the legislators off the hook from making the decisions and placed it squarely on the executive branch. we were able, in a series of weeks of doing this, to basically pass a budget. it changed the culture. we have found a way to address the issue of reductions without

making people from both partners -- parties as politically vulnerable as they would have been. >> and we have a number of policies over the years. from a physical standpoint, the way we're able to balance the budget without additional medicaid money, without cutting taxes, is this something we call challenges for change. the legislature of vermont is of the other political party. we realize we have defined a bipartisan solution. we have worked with the legislature to pass a law that reduced the main -- the remaining budget gap of 3% without knowing exactly how we do it. it is a leap of faith. we have to fundamentally restructure how we provide services the government. we have inserted a performance- based contract in system.

we created a chartered units, where we say to one agency, you do not have to follow the strict rules of personnel and purchasing and other kinds of things in state government. here is your preparation. do it your way. inmateeducing our population through attrition -- through transitional housing and other means, which increased -- which reduce costs. we're going through this. >> i will change the question of a little bit in a minute. >> what i'm about to say is much more macro. >> not just one thing? >> it infiltrates the microbe that everyone is talking about. for us, in particular, and some of these folks may take it for granted, but we do not. we have been viewed a mindset and attitude -- imbued a mind

that an attitude that links the economy and education to the point that everybody thinks of it, just like they think of it like they do with breakfast now. i hope you will appreciate this. governor o'malley brags about maryland being first in the education rankings. he should be proud. it is something that he should not take for granted. we're 10th. who would have believed, a few years ago, arkansas would be tent in those rankings? what it has done is change to both inside and outside our state the image and the view and the relationship -- it is from high tech, and hewlett-packard, verizon, all of those jobs, to the manufacturing sector, where we have created over 25,000 jobs -- new jobs. with increased what we -- we have increased what we already have an attractive new business.

it is all the micra things everyone is talking about. -- micro things that everyone is talking about. you keep people in your state. you educate them. you provide good jobs. yet is all of the individual things that everybody is talk -- is all of the individual things that everybody is talking about. -- it is all of the individual things that everybody is talking about. education is key to economic development -- cradle to grave. workforce training, retraining. if you have one single thing to point to as a state, where you will be this country out of the malaise is in, it is the understanding by your people that the relationship between education of every type and economic opportunity for tomorrow are inextricably linked. >> we're back to education.

yes, of governor bertrand -- gov. fortuna? number one on the list, number 10 on the list -- we know those. those of you who were numbers two through nine, i do not want to leave you out. >> massachusetts has a top- performing student achievement for the nation for three years in a row. >> i have started something now. anybody else? >> we wanted to create the best business climate in the country. we did a number of things. our process was out of what. we cut by 2/3 the permiting that you need to put together a business. we understood that we would not have the funds needed for infrastructure development. we approved and are implementing

-- are implementing the largest and most ambitious public- private partnership program in the country. it is not just a couple of projects. it is an entire program with every single. you can think of. i agree with some of my colleagues that energy is key. our economy is 45% manufacturing. the cost of energy is important. we live on an island. it is very tough to produce cost-effective energy. we're moving that direction with portfolios. because of all the tough decisions we made last year, cutting taxes across the board. >> i want to change the question all little bit. governor camacho, go ahead. >> we're so distant and remote.

we are very much a microcosm. our mainstays have been tourism and the department of defense with military installations. i try to implement changes by investing in infrastructure, building schools, investing in our community college or university, are seaboard -- our seaport, airport, landfills. these have all provided jobs. we invest in foundational investments that allow for growth in the future. we also try to do with as many longstanding issues -- lawsuits, entitlements, unfunded federal mandates -- things that have haunted us for decades. it was mostly foundational. that is the approach of taken to

try to build for the future. >> governor brewer i want to get -- governor brewer, i want to get you in here. tell me one thing. we have heard several things. i give up. tell me as many things as you want to tell me. >> thank you. i have been governor just over 500 days. we were facing the largest deficit that the state of arizona had ever faced in history. we began by trying to get our budget balanced. which is very important for the business community. we need to stabilize government. we have a structural deficit going into next year. certainly, we did a yeoman's job, considering the fact that we had about $8.2 billion revenue stream with a $10.3

billion cost for budgeting. we did get the budget balanced. we went out for a temporary sales tax, which the voters responded overwhelmingly to for that 1 cent sales tax increase over three years. it has helped us get through these hard times. >> you did it to pay for? >> education. it was very important. we understand that it is at the top of the issues in regards to jobs. it is very important. we have addressed everything in those 500 days that you bought talked about. we have been on it, we have been successful. i am very proud. the bottom line is that the business needs to know the government is stable, they have a well-educated work force, and then, they need to -- in needs to be easier for them to do their work in arizona.

that meant putting a moratorium on rules and regulations and helping people who are looking to come to arizona get through the red tape and the green tape. i wanted to reach out and help businesses to stabilize. we have been successful. we have brought in over $1 billion of capital assets. we have brought in thousands of jobs. we're proud of that. we accomplished a lot in 500 days. >> has this immigration mess been a distraction from that agenda? [laughter] er.i am multitask >> do you regret the fact that -- did you know it was going to be this big of a firestorm? >> i did not. i knew it would have a tremendous effect in the state of arizona. people throughout the country realize that what happens in arizona affects their state to do. it is an impossible system --

their state, too. it is an impossible situation. we feel that it is our responsibility to step up. >> if you had a duel over, would you put that one off? >> no. >> different question. this time, i will hold you to one. tell me the one thing that you did not do that you really wish you had. many of you are leaving office this year or early next year. you will be succeeded by someone else, maybe the one thing that you wish you had done and you hope your successor does. some of you will be back for more punishment. it might be the one thing that you have not been able to do. the one thing that you have not done that you wish you had done to put your state in the position it needs to be for the

next 5 to 10 years. >> one thing i wish i could have given more of was tax reform. that is really important. it is on my agenda. we will move forward with that. >> next? >> control property taxes. they are very high. it is tough for families where incomes are below the national average to find a decent place to live. we have the lowest vacancy rate in rental housing in the country. we're very low for owner- occupied as well. we have seen a decline in our student population of 30 -- of 13% in the last decade. property-tax is and local school spending keep increasing. it needs to be addressed. >> governor sanford? >> we proposed limiting the income-tax in south carolina and we were unsuccessful. we were able to cut the marginal income-tax rate for the first time in our states history from

7% to 5% for limited liability corporations. you have to go to the root cause, which is income tax. >> get rid of it altogether. >> to what extent is that about your competitive position. -- your competitive position? we're discussing the situation of this country, the degree to which we have relied on consumers, the lack of large deficits imported from the rest of the world. if we turn that around in the next 10 years, we have to export. it cannot be about moving the jobs around. >> we buy into thomas friedman's notion that if the world is flat. of 6.5 billion people scattered across the earth. capital is fluid. it will go across -- it will go to places where the natural order encourages it. we have looked at taxes. >> that is why lebron james

went down there. >> i think it is. >> we need to empower and strengthen voters. i believe an initiative, referendum, recall -- i went like to see more opportunity for consumers and taxpayers to enact laws by direct petition and referendum. >> i wish governor schwarzenegger was here. they have that power in california and it creates a mess. does anyone agree? >> you get the situation i referred to earlier. when you have a vote of the people, it may look appealing on the ballot to vote for reducing class size and increasing teachers' pay, but it is not free. there is no revenue that comes with it. and you feel like you are being anti-democracy -- >> you feel like you are being anti-

democracy? >> by no means. it ought to have the same scrutiny. it should be that did publicly. you have to know how to pay for it. -- it should be vetted publicly. >> do you have something to say? go ahead, quickly. >> i believe that we must make government responsive to our constituents. one way to do that is through e-government. we can do a lot more there. we can use the internet. in europe and other places, they have really come along way. we can do more. we have an initiative. i want to do a lot more there. >> to get more responsive?

>> exactly, so people can do a lot of what they normally do with government from their businesses or homes without moving from their desks. >> it in our case, i think the initiative that we have undertaken, but have yet to complete, is with the information technology. there is a lot of data and information out there. harvesting that data and ensuring that it is used properly to make informed decisions is critical. we have taken major initiatives to try to develop the architecture for government. i hope my successor completes that. with data and information, it needs to be accurate and efficient so that people can make informed decisions. >> governor paterson, one thing that you did not do? you have had a record year. we know at least 24 governors will be out of office. you will be gone. what is your big regret?

>> upon myself to the u.s. senate. -- a point myself to the u.s. senatoe. [laughter] [applause] >> the most concise answer of the day. come on. somebody follow that. come on. you are not shy. >> i think -- i wish i would have found asking for funding higher education -- a dedicated program for funding higher education. in deep recessions, it is a very vulnerable area. it is not caseload driven. we spend 97% of our budget on five areas. the two areas that are not

totally case-load driven are more vulnerable. they take such a hit. it is very counterproductive to economic development in the long run. a short-term recession has turned into something longer than what people thought it would be. we need some systematic in our state to make sure that we adequately fund higher education. >> governor beebe? go now. >> i did not want to follow patterson -- paterson. the one thing i regret -- hopefully we will finish this, given the opportunity. we did not completely remove the sales tax -- we were one of this -- the states that tax boost to the highest percentage. they have been talking about this for 50 years -- republicans and democrats alike. we knocked four of the six off

in two years. we are down to 2 cents. i regret that we did not get rid of that. hopefully, we're not done. >> coakley, i will be around for a few more years. we passed the largest -- we need to lower taxes more to be competitive in the job market domestically and internationally. lower taxes. but can you afford to do that? -- >> can you afford to do that? >> can you afford not to? i think you have to. >> i wished we had been able to do more targeted tax credits or innovations -- research and development, and biotech, the things that are in our strength as an innovative economy. they pay themselves back. we have increased it somewhat, and i think those are one area -- >> you do not worry that that gets the government into picking

and choosing -- >> no. >> tax credits for certain activities and not others? >> it you do a survey of your state in an honest and open way, you can identify your strengths. it makes everyone stronger. it allows you to make the tide rise for the service industry and other things not connected to appeared we have been successful. has not hurt us. -- it has not hurt us. >> do you want to respond? >> i hear this argument all the time. we ought to have a robust and simplified tax system to encourage business development. playing to your strengths -- our strengths are unique in each state, and also reflecting that focus in the tax policy is right. we like sciences initiative

here. it is a $10 billion -- a $1 billion initiative over 10 years. it hasn't targeted tax incentives. -- has some targeted tax incentives. it is one of the reasons we have not gone as deep into recession as the rest of the country and it is why we are coming out faster than the rest of the country. clean tech, i.t. -- these are areas where we have an innovation economy. the or the sweet spot for us in the commonwealth. -- debate are the sweet spot for us in the commonwealth. --they are the sweet spot force in the commonwealth. -- for us in the commonwealth. my big regret is that we have spent a lot of time and effort trying to address the concern businesses raised about one-stop shopping when it comes to dealing with state government. they want someone to take them by the hand and walk them

through a simplified, regulatory process. we made good progress. poor people want the same thing. they want a one-stop shopping experience when the present their needs. they do not want to be sent to multiple offices. they want simplicity in dealing with their government. i think governor fortuno's point about e-government is one way to respond to that. their access to internet may compromise that idea. we need to deliver it to the regular person as we do for business. >> governor crist the? -- christie? >> i have only been here six months. >> what is the big plan for next year? >> what about regrets? the big plan is, given that we're still not competitive from

a tax perspective, is to continue to reduce spending in a way that allows us to become more competitive with our neighboring states, including pennsylvania. we are not. we have to be on a long-term plan over the next several years to be able to do that. we dove this hole for ourselves. we put aside the national recession. by the policies we chose in new jersey, we dug the hole for ourselves but we have to dig out. >> governor markell? >> one of the concerns and here is an inability to access to affordable credit. we created a program to facilitate it, but have not been able to take it to scale. i would like to focus on that. >> who have we not heard from? >> like the governor of new jersey, i have only been in office for about one year. i have no regrets.

we are doing what we need to do for the state of utah. what has become self-evident is that every state has unique challenges. there are unique opportunities. they're unique solutions for each solution -- for each situation. we have states with very little public land. some of us have a lot of public land. we're blessed with natural resources and traditional fuels. it is more difficult for us to be on the renewable side as the only source of energy. we're one of the fastest-growing states in america with the highest birth rate of any place in america. my education challenge is very different from some other states. some have in-migration, some have out-migration. the challenges are different. for me and all of us, the challenges are to express to our constituency what we're doing to address those unique challenges. we sometimes get drowned out by

what is happening in washington, d.c., and some of the national challenges. people do not realize that there are national challenges that are not the same unique challenges we face as individual states. i think the states need to take the lead on all of these issues. win believe -- i believe in federalism. i believe there should be a balanced approach to governing a state, a counterbalance effect to washington, d.c. this organization can really do that in our own unique ways. >> let me follow up and ask a few people about it before we go. i do not want to go back to health care. we have covered that pretty thoroughly -- what you want from washington and do not want from washington in terms of health care. health care aside, what is it you would like to see from

washington that would make your jobs better -- would enable you to do what you want to do over the course of the next five or 10 years? >> i would like to follow up on my colleague from utah's point. we would like a lot less attention from the federal government and a lot more capacity to actually integrate the development of those public properties with the remaining economy of the state. it is like living with a 900- pound gorilla that just flails around. >> anyone else? >> sustainable fiscal policy in washington -- that is the giant elephant in the room when you think about washington. the value of one's currency at this point, based on international expectations that

" interest rates are low. currency is holding up well. -- -- >> interest rates are low. currency is holding up well. >> for the time being. >> governor baldacci? >> i would like to see true flexibility out of washington and true partnership with the states. we can help them solve a lot of problems. we do not need the money as what as we need the flexibility. -- as much as we need the flexibility. >> some people really want that money. [no audio] >> they are back. the regulators have made it very

difficult for small businesses to get access to credit, even when it seems like they should, given their history. we appreciate the need for different types of regulation of the financial system, but it feels to me like a crimp the system in the wrong place, especially in states like colorado which relies heavily on small businesses or our economy. they are a big part of the economy, yet they have cramped our ability to grow because there is no access to credit. we put together our own program called the small owners serve. it works at a minor scale, compared to what the federal government could do if they appreciated small businesses. the regulators could take a more rational view toward the need for them to have access to their credit, and not over regulate. >> i agree with everything that

has been said on the access for small business -- the credit access. i would add that the transportation and infrastructure investments -- the things we used to do as a major league country -- that our competitors in china and europe are doing -- we have to make those investments in infrastructure to have a better future for our children. >> opening up as many export markets as possible. >> no unfunded mandate. >> governor camacho? >> i speak for the insular areas of the territories tt there be equality and equity. many times, there are federal programs like medicaid and medicare -- pre-existing conditions docilely applied to states, but not equally to the territories. there is inequality as federal policies relate to territories. >> ok. we have crammed a lot of information into one hour and a half. i will ask one more question.

given the pain of the last couple of years, if you had to do it all over again, would you? >> we have heard from governor paterson. if the answer is yes, let me see your hands. it is slow, but they are getting there. governor baldacci? thank you very much. thank you. i have enjoyed it. [applause] >> thank you so much. thank you to my colleagues for their participation. as governor markell said, the economic development committee will continue at 3:00. please join them. we have adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> our lives c-span coverage of

the national governors' association meeting will continue tomorrow with leaders of the task force created by president obama who are working to find ways to reduce the deficit. former republican senator alan simpson and former clinton white house chief of staff will co- chair the national commission on fiscal responsibility and reformer. live coverage is sending money and 9:30 a.m. eastern here on c- span -- is sunday morning at 9:30 a.m. eastern here on c- span. >> the most important mission in journalism is to confront both war and power -- to confront those who are in power so that we can prevent the abuse of power. >> he is anchored the nightly news on univision -- the largest spanish-language television network in the united states. we will spend an hour with him sunday night on c-span's "q&a." >> this weekend on book tv's

"afterwords," napolitano talks about the "lies the government told you." you'll be interviewed by ralph nader. nonfiction books all weekend on the tv -- "booktv." >> now, a conversation about the economic recovery from today's "washington journal." this is just under 45 minutes. [no audio]

[no audio] used they wrote an article about the economic recovery being driven by global imbalances. what do you mean by that? guest: things were out of whack. there were and balances where china and other asian nations were saving too much and spending too little. we had a consumption binge in america. it was funded by those asian nations. there are similar imbalances within europe. a lot of people thought that

once this recession arrived and the crisis happened that finally all the imbalances would get righted and we would end up in a sustainable place in theworld economy. what seems to be happening is something different. all the old patterns are coming back in various countries are going back to the old. there has been a steep rise in consumption which means trends of going back to usg debt to fuel economic activity. that delays reconciling in dealing with these problems for another day. host: to paraphrase an old song, everything old is new again. if the behavior's do not change, where will this ultimately lead us? gue: it cannot go on forever. an analogy i will use is you are a customer in a store and you can spend more than you make in the store can extend your store credit. you can consume more than your income would allo but eventually the store will say,

"i am not sure you'll be able to pay off that that." there is a line from herbert stein, what cannot go on forever will not. the question now is how these trends that go on forever, how they get resolved and whether this happens in an orderly way ward in a way that is more disasters. host: you write that obama renewed his call for a doubling of u.s. exports. that has been made more difficult given the value of the dollar has driven 7.5% against the other major currencies this year making american exports more expensive. explain how this works. guest: one of the things that would help the balance is that the u.s. is importing more than we export. we consume and use more than we actually make and ship out. one thing that needs to happen bring the world economy back inta sustainable balance is to export more. that is the present's strategy. he wants to encourage tde

agreements and encourage exports. the problem is what is working against that is the fact that people around the world are worried about this renewed sense of crisis and problems in europe. they're driving of the value of the dollar. if you are a u.s. exporter suddenly your goods are 10% more expensivehan they were at the beginning of the year. that is hard competitively and it hurts our ability to export. host:, to this is driven by the fact that in the united states, perhaps we are just not making with the world wants to buy? guest: that is part of it. we have had an economy that is very oriented towards consumer goods, domestic services. those are things that are hard to shipped elsewhere. part of what we need do as a naion is find ways and what

we're good at exporting like boeing airplanes, turbine engines, and we need to find ways to develop more industries like that. it is true of the firm -- the pharmaceutical and movie industries. finding ways to do more things like that where we have a competitive advantage and the rest of the world once our stuff. host: we're talking about risks in the global economic recovery with neil irwin of the "the washington post." the numbers are on your screen. ou can also send us messages via e-mail or twitter. our first call comes from santa clarita, calif., on our online for republicans. 01, are you with us? -- owen, are you with us?

go ahead. caller: yes, i have a question. what did we put up for collateral? when i got the loans for the trillions of dollars, was it mount rushmore? the grand canyon? these are the things that i was interested in hearing. i have not heard anyone talk about that. host: it is not collateral in the traditional sense -- guest: it is not collateral in the traditional sense. they bought bonds. it is not collateralized by mount rushmore but it is by the u.s. government and all of our tax dollars. they have invested in mortgage- backed securities, home mortgages all over the country which is collateralized, i suppose, buy houses. there are other forms of debts

which include corporate debt, and consumer debts, so not collateralized by mount rushmore in the literal sense but we are definitely on the hook. host: blue rock, ark., on our line for democrats. caller: good morning. i would like to know how the recovery will take place went so much money is being transported across the bder by illegal immigrants. they come in, take the jobs, lower the economy, then they spend most of -- en they send most of their money back into mexico. that has to be millions of dollars and tax dollars from workers that would be put back into the u.s. economy. thank you. guest: most economists would not

view what is called remittances by immigrants to their home countries as a major drag on the country. it is not used to buy consumer goods or invest in anything in the united states, but the numbers are not massive enough to be something that really holds back a recovery. host: this week asks, in the world as the u.s. to be with factories filled with slave labor like the foxconn tree where the ipad is made? guest: there are two situations there. these factories are horrible, and said, involve children, and are beyond the sorts of things that we do. then there is the economic question of when we import things from countries where there are very low wages and working conditions that people would not be happy with here, it is not involving a moral issue.

on the first, we have the various policies to try and avoid situations where there are truly immoral stuff going on. the wage differential is the essence of trade. there are plenty of countries on earth where the average wage a lot lower than what we are used in the u.s. or other developed nations, but that is how trade works. we focus on what we are good at which involves high-tech products, and as i mentioned earlier, boeing airplanes, blockbuster movies, to any number of high-value produs. my understanding of what goes on in china is more assembly. more of the chips and high-tech stuff is produced in other countries where there are higher wage-- higher wages. there is a wa gap between u.s. and developing nations but that is how to read works. host: kansas on our line for

republicans. you are on west neil irwin -- you are on with neilrwin. caller: there is a lot of stuff. everyone has a lot of stuff. a lot of things, there is not a lot for of a market. i think tre is a lot of stuff that is becoming obsolete and there is no longer a market for it. i'm curious about these third world countries that will continue to supply us with goods. the world is becoming pact with stuff. everyone has too much. host: sounds a lot like george carlin. go ahead. guest: there is clearly overcapacity and oversupply. there is stuff stacking up in stores but also houses. we have an excess supply of houses in certain cities.

it is not clear when the demand will be strong enough to have demand for the empty houses. probably the same is true for automobiles and other kinds of household objects and consumer goods. there is an overcapacity of things, but part of that is driven by an absence of demand in the economy driven by high unemployment. insteadof a 9.5% unemployment and we had a 5% or 6% unemployment, it would create more demand. there are people sitting on the sidelines not able to work for a variety of reasons. if we get back to a strong economy, everyone would be better off and there would be more people with the income buy that stuff. host: on thursday under the headline, he wrote the federal reser officials are concerned over signs that the economic recovery are faltering and are considering new steps to bolster growth.

one of the steps they're taking were considering taking to bolster growth? -- what are the steps? guest: this recovery began about one year ago. it has not been going at a blockbuster pace, but we have steady growth. in this last few weeks, these last two or three months the economy will not be as strong as it was. one of the concerns is the job numbers have not been improving. we had a couple months in march, and april. in may and june we went back to very weak job growth. the stock market has been volatile and down over the last couple of months. there are reasons to worry that the pace of grth will not be very stro as government stimulus gets withdrawn, as the inventory balance that people are benefiting from goes away. the question is what happens going forward? if you are a policy maker, what

do you do? on capitol hill there is an ongoing debate whether to extend unemployment benefits and find other ways to pump money into the economy. at the federal reserve, they have their short-term interest rate targeted at zero. they do not have much they can do on that front. there ar some other thin they could do if they think things are getting worse. some of the more modest alternatives, they can cut in inrest rate on excess reserves that is now have 0.25%. they did indicate they will leave rates lower than people expect. then there are better options. if this recovery goes off the railand we did a double dip, they will consider buying hundreds of billions of dollars worth of mortgage securities or bonds to try and push long-term interest rates down. that only happens if we see conditions worseng in the economy in the months ahead. host: los angeles, calif., on our line for democrats.

go ahead. caller: i have a question. i was reading recently about how companies like ge anbig corporations have all these tax shelters in places like the cayman islands and how trillions of dollars we could be getting in taxes from these large corporations we do not get in america because of they are in the tax shelters. i was wondering would be of some of the better for our economy if we did not let them do that or if that could stimulate the economy to have them pay taxes somehow. that was my question. host: -- guest: the corporate tax code involves opportunities for companies to shift income around the world. they have the structures to make sure they have the highest income in the places where they have very low or zro income tax rate to minimize the amount of

ney they make in high taxed countries. it is a distortion of incentives. all the effort that goes into hiring lawyers and accountants to manipulate where your earnings are, that is running you're not spending on building products increases in value for your customers and shareholders. i think most everyone who looks at this from an economic perspective would say getting a world where there are not a lot of loopholes would be better for economic efficiency. that being said come any time talk about eliminati loopholes or -- on an industry, they will push very hard to stop it. there is a push to do a broader tax reform legislation. and have been in986 where there was a sweeping overhaul tax reform that dealt with a lot of these kinds of issues. a lot of people were arguing it is timeo do that again. it takes a lot of time and

effort. there are lot of lobbyists trying to make money manipulating those resul. that is the kind of thing that could have economic benefits if it would happen. host: and next call rarding risks in the global economic recovery comes from our line of independence of georgia. go ahead. caller: good morning. i would like to cover some basic economic principl that were taught to me by a fifth grade educating father that raised nine children. he told me you cannot borrow yourself out of debt and you cannot spend yourself rich. this seems to be with the unid states thinks that they can do. its simply impossible, first of all. second, we do not make. we are a consuming nation. the president encourages us to go out and consume, but we did not have the money to consume any longer. our wages have stagnated at $11 an hour and gas has gotten

tremendously high, who has gone a tremendously high. you namet and it has gotten high. we do not have any expendable income to consume even the things that we would need much less what we want. as soon as they sign of the trade agreements and they will send our jobs overseas. the company i work for five years ago moved all the jobs to china. i work in the distribution center. they ship the product back to george room and then we exported straight back to china who are the only ones with the money to buy it. interesting thought, is it not? host: who do you work for? caller: i would rather not say. guest: we will not sell them. it is tough. trade can cause a lot of

difficult times for people in the industries that are effecd. when production moves whether it is automotives in detroit or any other industry, when the production moves overseas it causes a lot of displacement and distress for the people involved. i think what most advocates of trade would say that the overall gains are better. we, as the united states, the focus on the industries that we are moreuccessful in. the problem is the people benefit from those industries are not the same as the people who suffer when the higher imports and activities with oversee is -- move overseas. there are challenging ways to try and figure out how to smooth the downside and find ways to minimize the impact of people in industries where w are not as competitive so the people who benefit in those areas can share the gains. it is tough to make it happen

and it is a shame it happens that way sometimes. host: waxahachie, texas, underlined for democrats. good morning. -- on our line for democrats. caller: i am curious how we've had companies that will finance our debt when our people, as we have seen over the course of the last 10 years or longer, have continued to run up their own personal debt. when personal that goes up, you get to the point where no one will lend you more and you get into a situation where our economy gets into a pickle. we do not have as many people working. our output goes down. what makes us continue to receive the financial dollars

that we would get when things were going great? how do we continueo receive money from china, europe? in d.c. where i am going with this? -- do y see where i am going with this? guest: china is a big exporting nation. your -- you're thinking is that you build this growth model around exports. shipping your uff to the other developing nations who then buy it. they have a great incentive to maintain that pattern. that is what i mean when i say we go back to these global imbalances that helped contribute to this. in the run the world and think, i need the u.s. to buy my stuff. to do that and -- the value of my currency affordable -- to do that i need to keep the value of my currency affordable. this drives up the dollar. the dollar is more valuable than it would be if it were not for

this activity. that makes it more affordable for us to buy their stuff. it is a circular transaction. that is what i mean when i use the analogy at the store. you can extend store credit and they can buy more than their income. as you point out, that cannot go on forever. ultimately, you can make more than you consume -- consume more than you make, but you cannot do it forever. eventually the debts coming due and you need to pay. how does that happen? does it happen in a nice, derly way or do we when they have another force that causes a rethinking of all this and everything collapses? host: to use your analogy, how does the store make a profit when as they are also extending you the loan to buy this that they're selling? guest: there is a lot of consumer behavior involved here as well.

china is not the only place where they buy treary bonds. they have a very high rsonal savings rate in china. their workers, to gdynia the analogy, -- to continue this analogy, the employees of the store instea of consuming themselves as they are funneling that back into the stohr coffers into savings. there is a high savings rate because of you need to support yourself because there is n a lot of safety nets in tere. that is part of the story of money falling back to us in the form of debt. host: neil irwin rights for "the washington post" the economy and the federal reserve. he has also covered technology, real estate, and the washington, d.c., regional economy. we have him for another 20

minutes. denver, colorado, on our line for republicans. caller: the morning. i will try to get this out quickly. the one thing i have not heard are the reasons truly why we are in debt. the two reasons we are in that is the high interest they put on these loans for when we go to war. the second thing is that we are now, i think, in our fourth generation of wfare. we live in a society where we invite cultures in. we are the only society to do this and we are the second beta test for this. the last thing i heard you say, too, is you cannot really buy bonds. that actually goes into the government. now, that is a good idea in 1929 with the great american robbery. buying bonds is not the correct way to do it. contrary to popular belief, there is no more money. that is what people have to understand.

we cannot go out and make a buck any more. the wage rate is done, like you said, at foxconn, that is what we do. we read them for $1 a year, to do the job, and shut up. that is disgusting. we need to change our values. we have lost strength in the court. the supreme court shows no law at all. you cannot tax employees. the supreme court does not show there is a lot for this. that shows you right there that the federal reserve owns the banks. host: we will leave it there. neil irwin? guest: i think his view of the economy is rather different than my own and that of most people who analyze economic trends. host: he started off talking

about the cost of war. we are in iraq and afghanistan. how much does that play into how our economy is or is not working and the global economy? guest:i cannot remember the exact numbers, but there is substantial and they are part of the deficit problem and these imbalances. part of that is related to these large budget deficits. i think most people would argue that you have to judge your foreign policy based on your foreign policy goals. the question is, are there areas to cut if we use these words as necessities that are in the best interest of the united states? the rest of the 2000's we did not. we went to war in afghanistan and iraq. we did not see tax increases or comparable cuts in the government to pay for it. that is part of the deficit story. host: here is a tweed that says

is a team -- saysf the yuan flows as it once and they continue to buy u.s. bonds, will we be more competitive? guest: those are more competitive than you might think. but the way of the chinese had kept the value of the r.m.b. down is by buying u.s. assets. if they were going to let their currencies float entirely it may appreciate by 20% 25%. they would try to manipulate that currency and keep the value down. yes, if the currency were allowed to float these imbalances would ease over time. the reason the chinese would not do that is because it would hurt their exports a lot and damage the domestic growth, at least in the nr term, and caused economic problems. host: on the front page of "the financial times," the inflows

into money-market funds. the of the tens of thousands of dollars into money-market fund is considered to be bought some of the safest assets amidst fears that a double-dip recession -- a double-dip recession could send financial rkets tumbling. guest: any time things get a little hairy, people put money into cash and something close to cash. bond rates have been down over the last few months and money- market mutual funds were people park their cash they do not use. they do not want to use it in other risky assets. given the publications in europe and the european debt crisis given the volatility we have seen, it is unsurprising people are parking their money in money funds. host: in the last year or so, you see commercials talking about investing your money in gold. how does that play into the global economy? i did not expect that you are an

investment analyst, but in the long term, is that a safe place to put cash? guest: gold is a funny thing. it is a commodity in the same way the oil is that people use it for the jewelry and industrials. it has even more weight as a safe haven when economic times are rough. if you are in a war-torn country, gold might hold its value better than currency. that is part of what is driving t rising gold prices. there is a sense of fear that the entire world economy is at risk and things might not go well in the future. that has driven the price of gold up. it is a riskier investment. things calmed down and we ge back to a global growth path, you can easily see the price falling. people should be aware of the risk. but they should be aware and be able to handle that sk. it does not create a yield. i like putting the money in a

bank or investing in the stock market, there is no ongoing cash gold -- cash flow. it costs you money to store it and keep safe. it is not something that produces a yield, but it can be a safe haven in times of distress and apparel. host: our next call for neil irwin comes from new york, new york. caller: good morning. neil, this is a comment about two of the callers and how it relates to our current economy. one, the woman who called earlier complaining about companies have in offshore tax shelters and so on, people complain about companies. my response tohat is always the same. buy stock in companies, american companies that produce dividends higher than the banks produce. why are people complaining about the activities of companies that actually have the production

like ge? a buy stock in the companies. the second thing is, the man that called earlier complaining about losing jobs to foreign companies. those companies have become powerful because americans want to buy inexpensive products from stores. these are products that americans cannot afford to make. my response to that is very simple. spend more money on american goods. i'm not even a proponent of buy american. by more expensive products and stop trying to get deals at wal- mart and sears because that is where all the foreign products live. stopped buying cheap products and we will have a resurgence of new jobs created here to create standard commodity goods. just stop buying cheap goods. everyone wants to complain about these companies, but they do not want to stop buying cheap goods because it makes th feel rich. guest: keep in mind, people

buying when they think what offers the best value is how the capitalist economy works. when people think that one company's product has a better value than another, it forces other companies to become more competitive d create better and cheaper products for us all. i am not sure if help -- telling people to buy more expensive stuff just for the sake of doing so is much of a long-term answer to our economic woes. people forget that because so many manufacturing jobs have gone overseas, there are things to find ways to emphasize to get out of this matter -- to get out of this mess. host: centerville, arkansas. you are on "washington jrnal." caller: i have a quick, then the question. first of all, i live out in the

middle of nowhere. luckily i have broadband. i do not have television. i do a completely over the internet so i am able to see news coverage from around the world. mr. irwin, with the new prime minister of great britain, mr. cameron, he is slicing a lot of that out of the economy. there are a lot of things going on in theorld that people in the centerville, ark., are completely ignorant of i use that were respectfully, but they just do not know what is going on in the world can give us some perspective on how our economy and our problems with the economy are not only reflected throughout the world but as their economies are reflected within hours? i will hang up and listen to your answer.

guest: this is a global economic downturn. it is a global recovery. the linkages between the world has been more significant in this downturn than any in the significant past. what is happening in the great britain is the new conservative prime minister, david cameron, and they are embarking on a very aggressive campaign to trim the budget and get themselves on a sustainable but the track. in some ways, they have been in a rough spot than the u.s.. the question is whether great britain and other european countries, especially germany and also france, as they cut their spending the day after the exacerbates the global problem? the country's, so some americans -- some european countries are being forced by markets to cut their budgets aggressively and do not have much choice. when it germany, france, and

great britain cut spending, does that slow economic activity in a way that creates risks for the global economy, a deflationary situation? that is what the u.s. administration, timothy geithner, and the president, have all been arguing at the g- 20 summit in toronto, the countries that are in position to continue spending, which includes germany, we should be spending now and try to prop up economic activity given that other countries are pulling back. that does not seem to be the directi things are going in europe. there has been a push to cut spending aggressively. we will see how that does. host: king county, new york, on our line for republicans. caller: i have a company -- more

than 35% people i china are out of work. most of the companies in china are run by [unintelligible] we need to spend money to make jobs in america. people do not mind to pay more to buy american. the companies are owned by the americans and europeans. guest: it is true that a lot of th company's are on the bi yaris -- by u.s. and econom. more chinese have ne from barely scraping by and feeding themselves to lower middle income and middle income jobs where they are manufacturing or doing other jobs in chinese cities to produce goods. just the fact that some of these

companies arewn by firms in the u.s. or in europe it ds not mean they have not paid. we have not had any real net job growth over the last decade. we have been in a very rough time for u.s. employment. at are the industries that can drive us for work? host: there is an article in today's "the wall street jornal." it will street journal analysis of trends in 11 countries say that manageable debt burdens and help the banking systems, areas in which the u.s. does not xl, are proving to be crucial factors in creating jobs.

your response to tt? guest: it is important not to confuse causation with correlation. countries without banking crises and manageable levels of public debt have stronger job growth. that is the relationship you are seeing. it may be that the things that caused the deep global downturn are the very conditions that led to the recession to begin with. it is not necessarily the case -- let me put it this way. it is clear that countries with the worst financial crises have worse economic conditions. i would love to look at it more carefully, but it is not a shopper that in countries where things are worse had weaker job growth. host: appleton, wisconsin, on the line for independence. caller: howdy. a comment for the gentleman in new york. people buy cheaper products because the corporations have

continued to neither cut or stagnate wages. wheat purchase what we can. i would love to buy an expensive car but i cannot because my wage would not cover it. my question is, if we are borrowing from the savings of the people in china, which is basically what you said before, they are larger savers, the government uses that will of money to take on our dead, what happens when this thing collapses? it is not very similar to a huge ponzi scheme? guest: that is the risk. in the years before the crisis, we actually did experience, starting in 2007. a lot of very smart economists, it was this set of conditions they were worried about. there were worried there would be a debt crisis in the u.s., a dramatic decline in the dollar that would cause a lot of distress. that is the the crisis that happened.

we had something averted in the real-estate market and all of the ugly events of the last three years that we all know of. the question is whether we are setting the stage for the original kind of crisis, a crisis of the dollar yet again. it will not happen as long as we have an order path toward a more sustainable balance. over the next decade, we gradually bring the trade deficit down, bring the budget down, then we can be fine and the world economy will prosper. if we continue and go back to the old path and the imbalances -- the balance is continue growing, there will be a day of reckoning. is that a disorderly crisis of some kind? that will be very scary for all americans. the goal is to have that happen over a more steady, long-ter time. host: st. augustine, fla., on r line for democrats. caller: you take off the

ideological blinders just for a minute, you realize that capitalism really does not work. how many great depressions do you really have to go through before you realize it does not work? second, the richness of capitalism does not work. that is why they run to socialism. oil companies alone get $70 billion per year from taxpayers free. this is not a tax break. this -- this is money they get from the federal government. for the corporations that gets subsidies from the taxpayer, cut them. talk about welfare. just for a change, you know, move away from the idea that capitalism is great. it is not. host: you made your point. guest: capitalism has a lot of

flaws. there are recessions, but it is also a system that has created prosperity that even 100 years ago people would be shocked by. the products we take for granted whether it is electronic devices or the ability to fly anywhere in the world. these are things that are produced out of a capitalist system. would argue that not too many other systems have produce that kind of prosperity. there are not a lot of counterexamples we can point to and say that is the society i want. they have been communists for the last 50 years. there are flaws in capitalism that we can manage and i think the system is not going anywhere. host: last call for neil irwin comes from maryland.

caller: good morning. america replaced england at the end of world war ii. we have been the reserve currency. from 1945 to 1987 we were the world credit agency. america became the world's debt nation. china has $789 billion of american dead. a few months ago, they refused to hold it. japan took a dislike. now channel -- now china on the $750 billion. the biggest mistake is moving from the dollar to the gold standard -- from the gold standard. in 1933-1934, that is one of the

main reasons we went to war against iraq. petroleum is done through the dollar. they were going to change it to the euro. frankfurt, germany, holds the second load of gold. host: we will leave it there. guest: the u.s. is a reserve currency, is that as we took over from britain. this is a blessing and a curse. people use dollars when they want to exchange. when things looked shaky, people pour money into dollars. that is what has happened. once a month in india by india -- buys oil from saudi arabia, the exchange in dollars and not in domestic currencies. the benefit of that is that we are able to borrow money cheaply. the government makes money on spending money. our borrowing rates are lit -- are lower.

the downside is it pushes the value of the dollar up over what it would be otherwise which makes our exporters less competitive. us being the reserve come -- the reserve currency to to reach to these imbalces in important ways by making exporters more competitive. it seems over the last decade that the euro would arise as a competitor for the world reserve currency. that has shifted over the last year in the last few months. the future of the euro has been in doubt with greece and these other southern european nations. the euro is looking shaky some people are pouring money back into the dollars. will that be the case in 50 years that everyone uses dollars as the world currency? itrongly doubt it. i think other currencies will rise, perhaps as a china less there's flow more, as the euro becomes m

besides braces to succeed two u.s. senators are featured on tonight's coverage. a congressman and tied his at eight peter -- 830 eastern time. we'll show president obama speaking at a campaign fund- raiser at 9:30. then, congressman roy blunt talks about the economy and jobs. the misery seat is opening up. campaign 2010 -- and the missouri seat is opening up. campaign 2010 coverage on c- span. >> this weekend, fax -- fox

news analyst janet napolitano on unconstitutional behavior of the bush and obama administration. is interviewed by consumer advocate and four-time presidential candidate ralph nader. check the schedule. >> the senate judicial committee returns next week to vote on the nomination of elena kagan as the newest supreme court justice. watch coverage on the c-span networks and learn more about the nation put the highest courts in c-span2 latest book, "the supreme court." >> >>, authors of a new report on the drug trade in afghanistan. they argue that the current drug policy in use by les united states and nato is helping

rather than hurting. the former attorney general shares these views. it is hosted by the united states institute for peace. it is just over 90 minutes. >> good morning. my name is bill taylor. i am on vice president. we do stabilization. we do afghanistan. today, we are here to talk about one aspect of the afghanistan issue, a very important one. we have 3 ph these and a professor -- ph.d.'s and a professor and a former attorney general, as well as the drugs are, and a representative from richard holbrooke's office. this is a great crowd, a well- informed crowd.

understanding the importance of this issue and the drug components of afghanistan. the institute of peace, and the center of international corp. have done a couple of these reports -- cooperation have been a couple of these reports. one of these reports was written by to people that are here. one of these reports has already had an effect on the policy of this administration, moving from the medication, which had been the policy before, the one of the focus -- a focus on the movement. we will have an opportunity today to listen to this new report being presented. in the words of the preface to this report, it is even more radical than the first one.

it is very timely today, in that you probably read in the paper that afghan security forces with nato support killed 64 people on a raid in a truck facility. it was three days long. they destroyed 16 tons of narcotics. they confiscated explosives. they destroyed production facilities. this is a very timely piece we will talk about today. the report, is, i think, very interesting, as i said in the words of the practice, it is more radical than previous recommendations. when " is that "all but feasible attempts will result in increasing the economic size of the industry and therefore corrupt officials.

there is a striking conclusion. alternative livelihoods. they target the insurgent areas. this will be an interesting presentation. in sure you will join me listening carefully. we have three ph.d.'s. in the order of their speaking, we have a current adviser to the republic of georgia and strategy development. we have a -- he will be followed by the professor of operations and research at carnegie-mellon university. he served as the co-director of rand's drug policy.

he will be followed by dr. mark, a professor of public policy at the university of rochester. his latest book is "when a group forced sales." he is also be author of marijuana drug abuse. these three will speak. they will present their findings. then, we are very fortunate to have a professor who was deputy attorney general. he was assistant state secretary. he has a lot of law enforcement

aspects. as i say, we have the , whoistration's drugs arczar has agreed to make a comment or two. unless there is any further business -- if you havcell phone, please turn them off. otherwise, let me turn it over to jonathan. >> thank you. >> it might be worthwhile standing here, so our friends in the back can hear. >> for those of you who have the handout, i will try to alert you to the most important pages that have some useful data and figures. >> those of you who don't, will have by the end of the presentation. this is an audible.

we will have these handouts for you. >> talking about options for counter-narcotics policy in afghanistan, and the possible or likely consequences -- we are here today because our current counter-narcotics policy, which is justified largely by concerns about funding of the insurgency is, in fact, profiting the taliban. that is untenable. it is certainly a problem for afghanistan itself, its neighbors in the region, and for most of the rest of the world. it promotes a public health crisis of addiction. it drives corruption. it feeds governance reform. but significantly for american

interest, that profits criminals, and surgeons, and terrorists would not have our best interest at heart. that does not mean that every measure intended to address that problem has the desired effect. if you turn to page four, there are essentially four class's of options for counter-narcotics policy. three for the supply side, and one for demand. one goes to the source, that is the most immediate means of preventing the production of opium or heroin in the first place. law enforcement, at all levels, whether it is going after a processing lab or smuggling, is a second option. the third is alternative development, or alternative

likelihood -- this is a carrot, rather than a stick. the idea is that people involved in the drug trade from the farmers, up to smugglers, are making a rational, and economic decision that this is their best choice. if you give them an alternative, that is less risky and more lucrative, they will do that. the fourth option is demand reduction, which there has been quite little gun in afghanistan itself, and it is not clear how much we could gain by doing that, but, that, certainly needs to be kept under consideration buried by u.s. and collisions have pursued some mixture of the four. there were policy changes last year.

this was met with varying reactions in different places. eradication has been canceled in favor of enhanced law enforcement and alternative development. if you the page five, you can see the important data that we need as background. we do not know precisely what global consumption of opium is, but there is no indication that demand is decreasing. it is difficult to measure. we have more reliable data. what we see is that for the last several decades, global production has been increasing, not every year. there are occasional blips, but the trend is not downward. today, global production is somewhere around 8,000 tons a year. global consumption is around

4,000 tons a year. the that leaves a large stockpile. exactly where, we do not know, but probably in the hands of our adversaries. these assessments are hard to come by. there are probably around 12,000 tons. it is important to keep in mind, when considering the consequences of reducing supplies. if you turn to page 6, you will see that over the year, which over the years, as global protection has been increasing, so has afghanistan's share. today, some 85% to 90% of the global production of an illicit opium comes from afghanistan. that does not mean that afghanistan must forever remain the overwhelming dominant producer, but what is important here is that having a near- monopoly production does tend to

sustain itself, and efforts to discuss production are not likely to change that scenario. if you look at the next slide, the pie chart on page 7, you see that the majority of the opium in the world is consumed in asia. this includes both consumption of opium and heroin. what is interesting that i will point out here is that there is little that the u.s. can do on the demand side to the fact afghanistan. if the u.s. consumes about 5% of the world's opium. almost all of that comes from colombia and mexico. if magically, america stopped using heroin all together, that production would hardly be noticed in afghanistan. afghanistan's neighbors consume

the majority, and about 20% is consumed in europe. european demand reduction would have a greater effect because the wholesale price in europe is so much higher than in asia that it would reduce revenues to the opening -- opium industry. the afghanistan does have a serious problem with opium. it is a public health problem with nearly 10% of the population effected. this phenomenon has been increasing rapidly in the last several years, especially among children and women. it is also significant distortion to the afghan economy. total revenues from narcotics trade in afghanistan are approximately $3.5 billion, which is a small part of the

global revenue of more than $60 billion, but a substantial part of afghanistan put the total economy of about $12 million. the farmers, who are not inherently our adversaries, but only about half of $1 billion. the greater profit goes to the smugglers. all of that activity impacts the taliban. the extent of that is difficult to measure. new york stock exchange estimates are somewhere between -- estimates are somewhere between $70 million. there is a lot of uncertainty. as much as that is, that is not the line's share of the revenue. there is the potential for the taliban to earn more than that

are currently getting. it is hard to measure, but they are almost certainly deriving something in the range of hundreds of millions of dollars a year. we are on slide #9. when we think of afghanistan, we have to realize the situation is not uniform across the country. it is highly localized, with two thirds of the country either poppy-free, or essentially poppy-free. one province the site of the recent coalition effective produces sufficient opium to meet the entire world's and demand. -- world's demand. the variations by region is an opportunity for targeted anti- narcotic efforts. one size does not fit all, and

with limited resources, they can be deployed were they are likely to be most effective, or, at least, do the least harm. he said chile, where the taliban -- essentially, or the taliban are in control, opium is grown. with the government is in if you turn to page 10 and 11, it illustrates the imperative to do something is widely held. if anyone -- anyone in a position of power does not want to sit idly by. exactly for what one calls to be

done depends on the perspective. iran and russia bear the biggest brunt of the heroin epidemic. iranian and russian officials, who do not necessarily have our best interests at heart have legitimate concerns about heroin and opium coming from afghanistan. the weak case they make is that nato coalition forces are indifferent. the strong case made by some of them is that the coalition is and isng from the trade supporting it to weaken russia and iran. the eu and the indignation region to the united nations takes a more comprehensive view

of think -- the united nations takes a more comprehensive view of things. the counter-narcotics policy is consistently held in the united states. the emphasis on counter- insurgency and alternative development is really the hallmark of the new administration put the policy. with that, i will turn the left turn over. -- the left turn over. >> drug markets are very complicated and full of unintended consequences. afghanistan is extremely complicated. jonathan's job was to take the convergence of these complicated systems and make it clear by laying out the clear fact. my job is to give you the sour grapes and bad news. before i do that, i really do

want to say that all of us have tremendous respect for the people on the line, risking their lives, implementing these programs. we are not, in any way or shape, or form, opposed to drug control. that is not we are. that is not our message. the message in some sense is that afghanistan is different. the thinking that we understand and respect gets turned on its head in afghanistan. someone in this town once famously said follow the money. today, i think the point starts with we should pay attention to the money. usually, you think about the number of drug users, and the quantity of drugs used. that is what drugs the dependence and the overdose death. you design policies amount --

around the amount of use. we are here today to talk about counter narcotics in counter- insurgency. there, it is the money. it is several billion dollars, which is a lot in afghanistan. it goes a long way, and creates a lot of mischief. the fundamental insight or punch line here is that when you shrink or -- the amount of opiates that are produced in afghanistan, you actually increase the money that is going to the criminals that is going -- going to the criminals. criminals are all sorts. some are corrupt officials. none of them are folks that we want to enrich. the key point is if you reduce project and and exports, you increase their revenues, and

that applies no matter how you do that. it applies to conventional enforcement and alternative development. most people, when i say that, say "that cannot be." if we eliminated production in afghanistan, the revenues would go to zero. that is true, but the point is the relationship is nonlinear. if you want to open up slide 14, you can see it. if you do not have a slide, it is not complicated. the vertical access is the money available to the bad guys, and the horizontal access the production. if you start with the current level of production, and you work hard, and cut back production by 5% or 10%, or even 20%, you are still at the right hand side of that bill.

pulling back the quantity produced actually increases the money that is available to the various criminal elements in afghanistan. why is that? why do we have this hump-shaped, non linear, counter-intuitive relationship? let me give you an expulsion -- an explanation. opium is an agricultural commodity. if you have spent time in farming parts of the country, in no hoff farmers react to -- how farmers react to bumper harvests. when you have a bumper harvest, prices dropped when they hit the market, and farmers make less money. it works the other way. if there is a below average harvest, prices go up, and the farming sector gets higher revenue.

in this case, the farming sector is the whole of the economy. some of you have actually studied economics, so we can speak about this in a much more direct way. effectively, afghanistan is the monopolist. they are by far the most lowest- cost producer. for various reasons, production stays where it is established. small reductions in quantity generate big increases and price. -- in price. that is the motivation for opec. what opec tries to do is have all of the oil exporting countries limit production to keep prices high because it is advantageous to them. they have to struggle with coordination, because it is hard to know what each other is doing and they have a mixed track record.

counter-narcotic intervention in afghanistan, some say that solves the problem for the drug traffickers and increases revenue. you can think about this in the mathematical terms. it is just the price times the quantity. the bad news is when the price goes up by a large percentage, the quantity goes down. the reason is the tremendous escalation in prices as the drugs move down the distribution chain. normally, it is about two thousand dollars a kilogram. suppose we're able to drive up to four thousand dollars a kilogram . retail price varies around the

world. you might take, as a ballpark, which had average, that as about $20 a gram. if you are pushing the price up by 10%. we will give it the benefit of the down, -- the doubt, and suppose it is a $4 a gram increase. economists have studied how drug users respond. the good news is they actually use less when prices go up. a 20% increase in price might give you a 50% reduction in -- a 15% reduction in its use. it is good and bad. it means it is only a 15% reduction in the quantity

exported. that is a good deal. you spend 50% less, but at twice the price. -- 15% less, but at twice the price. that, in some sense is the explanation. if you could pull all the way back to a limited production altogether, you would eliminate the revenue, of course padded that is not possible. afghanistan -- that is not plausible. let me give you some caveat. i am talking about a time horizon of about three or eight years. if you eradicate or disrupt by a lot, the price goes up, and the farmers react. in the short run, you can get this oscillation. in the long run, who knows?

if 25 years down the road, afghanistan is a sit -- is a stable, middle left -- middle class country, then perhaps things could change. the second caveat is what applies to the opium distribution. it is not so obviously impossible that you could kick the refining stage out of afghanistan, and pushed it into pakistan, or somewhere else. i am not even saying that is a win, but i want to point out that caveat. unfortunately, i still have a little bit more apparent the two main pillars are alternative development and enforcement. they have some other rarely appreciated downside.

with their medications, the downside was they get angry -- with your medications, the downside was that they get angry. there are some problems, perhaps more subtle. which alternative development, one of the basic challenges or risks, or realities that are so frustrating is that some portion of those alternative development dollars go directly into the pockets of the criminals we would like not to enrich. when you make a protection payment, that protection payment is not going to responsible government parties. exactly who it goes to depends on the particular province. some people worry like something like a 10% or 20% tax on certain programs. if you multiplied the budget by

10% or 20%, you get a number that is not so small compared to what we think that taliban is making from the drug trade. there is another twist. perhaps i misled you when i said the money is price times revenue. not every criminal is equally troublesome. what we really care about is price times quantity times revenue share. as jonathan said, at the moment, the taliban, for reasons that are not entirely clear, has not been successful in capturing a large section of those several billions of dollars. when you upset the apple cart, and move that market around, it

could get worse. when you increase enforcement, think about this -- which trafficking organizations are most disadvantaged and which ones are advantaged? it would be the most powerful organizations, who have the greatest ability to corrupt or intimidate law enforcement and their intelligence forces, who will be heard the least, and may even benefit if the less powerful organizations are effectively the target, intentional or otherwise, of the enforcement. overall, aggressive enforcement that is not carefully targeted might empower the organizations that are most capable of intimidating or corrupting the sources. i do not normally like to be sour grapes. it was my job. mark will give you something else.

>> thank you, john. i drink good news. the baptists, -- i bring good news. the bad news, as we just heard, is that our current policy consists mostly of banging our heads against a brick wall. the good news is it feels really good when you stop. we have some straightforward things to do, which is west of the things that are hurting us. there is a story told about president coolidge. coming out of church, a reporter asked him about the sermon, what the preacher talked about. he said sinn, he was against it. as jonathan pointed out, it is widely agreed that we should be against drugs.

heroin growing in afghanistan is dead for heroin addicts, their families, their neighbors, the afghan government, and it is good for the taliban. therefore, it is said, since drugs are bad, counter-narcotics efforts are good, and if some is good, more is better. there is a widely shared piety that drugs are bad, and we should all be doing more to fight them. you'll get a lot of head nod about that. in particular, it is claimed that since the taliban and makes money off of the drug trade and the afghan government is weakened by the drug trade, counter-narcotics is counter- insurgency. but, it is not necessarily sell. the natural result of counter- narcotics efforts is to increase the flow of funds to dealers,

and to increase the share of those funds going to insurgents, war lords, and corrupt officials. every enforcement action creates a loser. someone is drunk at sea, someone gets arrested, someone gets sent to prison, but everyone else in the trade is a winner. they just lost a competitor. if we bombed all of the ford plant, chrysler would be happy. as john pointed out, the winners are likely to be the people with the muscle, whether that is military, law enforcement, or corrupt. increasing the enforcement intensity increases the competitive advantage of the worst organizations.

and, again, as has been pointed out, it tends to concentrate drug activity with the government is weakest. if you read the reports, you see a lot of people boasting. 27 of the 34 provinces are substantially poppy-free. that is an accomplishment we can be proud of, until you realize that that means the other seven provinces of afghanistan now produce virtually the entire supply of opium for the entire world. we have given the taliban taxing authority over virtually the entire opium supply for the world. stated that way, it does not sound like an accomplishment. my kindergarten teacher told me you should always offer constructive criticism.

so we do have some ideas. we can target enforcement. the natural tendency of enforcement is to benefit the worst bad guys. but we do not have to give in to that tendency. to take the u.s. example, the fbi's concentration in the mafia meant the mafia never had a piece of the cocaine trade which was the richest industry in the history of the world. we had a large group of organized criminal groups and they never got a piece of it. it was too dangerous to deal with. the fbi was so all over them that no cocaine dealer would have anything to do with the mafia. but we can imagine doing that in afghanistan. we can imagine going to traffickers in afghanistan and saying, look, there is opium that comes from the taliban and that that does not, if you are selling the wrong stuff, you'll be the focus of our attention. the sad fact of afghanistan is that many of the groups that helped us throw the taliban out, in 2001, the number alliance

groups -- a word trade association of heroin dealers. it was the national restaurant association of heroin dealers. and yet those same warlords were perfectly happy to sell helmand- derived heroin on north into central asia. you can imagine going to those groups and saying we are paying attention to your rival sources and which ever exporter is selling the most heroin will get our undivided attention. that would require knowing more the stuff came from, which would require more detailed chemical signatures than what we are doing. and the capacity to actually target the enforcement, which, under afghan conditions, may be complicated. the problem with targeting enforcement is that it opens up the door to influence and

corruption. how you distinguish targeted enforcement from corrupt enforcement is not so easy a problem. number two as we could fight corruption. corruption is unambiguously bed. -- bad. if we could displace the corrupt government officials and replace them with on a cent -- honest officials that would be wonderful. it is not clear how much the past to the u.s. government has for that or how much tolerance the afghan government would have for that. it is also possible to reduce the level of corruption by reorganizing the enforcement machinery. concentrated enforcement is an inducement to corruption. there is only one agency doing the enforcement, that if you can correct that agency, you are boldin. the officials have a very valuable licensed to sell. think about drug enforcement in the u.s. multiple state, federal, and local agencies working the same

account. a trafficker buys protection from a local police chief is not buying all that much, and the fbi is looking at the police chief. so if there were many drug enforcement efforts in afghanistan, rather than one, each one of them might be left -- less corruptible. that is recommending a change in the afghan government that we do not have the capacity to bring about an might have other consequences, since multiple enforcement agencies as we discovered here when there was the federal bureau of narcotics and customs service, sometimes will wind up arresting each other. that is how the dea was formed. we could do rural development. not robbing people not to grow poppy. not obvious that we wanted in the places the government does not control. if we went to the farmers and said, how can we make you rich

rather than how can we get you we couldgrowing copoppy, do the development in the right way and that would focus it in the way the government controls. you do not want to tell the farmers in afghanistan, if you want attention and help in growing pomegranates, you better make sure there is poppy growing because that is what brings the alternative money in. if we uncouple the rural development from the hopeless development of producing opium, we might actually make it ourselves some friends. all of the traffickers' lose if people use less. if we of a drug treatment or prevention program that works even a little bit, that is better than nothing. and also, even the gesture might

make us some friends. so those are all, i hope, constructive suggestions. but i hope i have been clear on how limited the capacity is. i am a little bit worried that if we focus entirely on the constructive suggestions, we will wind up relabeling all of our current efforts and keep doing what we are doing, which is, mostly -- even if there is not much we can do that does more good than harm, that is still the reason to keep doing all lot of stuff that does more harm than good. if you are beating your head against a brick wall, then the fact there is a stone wall available as an alternative is not reason to keep doing it. the point is to stop. our overwhelming recommendation, on top of doing these useful things if we can learn how to do them, is to do less of what is hurting us. now, that will lead to

complaints from iran and russia. the cutbacks -- has already led to substantial push back from russia and iran, who are saying to the u.s. government, on behalf of its afghan client, what the u.s. has been saying to mexico and colombia for the last four years, which is why our to solving our drug problem for us? and we are in the position the way the mexicans are responding to us, which is, why don't you stop using our drug stocs? the price may fall. if the price fell, consumption would go up. not for a much. a 50% reduction in production -- a 50% increase in price in afghanistan might lead to something like 7% to 10% increase in consumption in iran and russia. it is not trivial.

one thing that we could do is help the drug prevention and treatment efforts in russia. iran has been aggressive about drug treatment because of its enormous problem. russia has been much less so. russia is in a primitive drug war phase of its drug policy. we might help them out of that. but we have to expect that any cut back with lee to criticism. criticism.o it is not clear to me that we which the dutch -- should be taking advice from two governments that want us to fail. so, our current counter- narcotics policy in afghanistan provides material support and resources to the taliban. that is our basic conclusion. and basic advice is to stop, or at least do less of what we're

doing that is harmful. if we want to bring the momentum of the taliban, well, a good place to start would be to not fill their coffers. that is our story, and we are sticking to it. now to tell us the actual truth is phil. >> as a professor comes up, you can see with a presentation of this study, that was supposed to be the good news. this is also why we have you here to present a view from the administration as well as barney rubin from ambassador holbrooke's office. there will have an opportunity shortly to give their thoughts on this, but before that, the professor. >> i am about 10% as good an economist is any of the three,

and that worries me a little bit about giving my thoughts. on the other hand, economists led us to the economy we now have. and sometimes they're wrong. indeed, often they are wrong. and the question i want to put to you and to them is how sure we are of what part of their conclusions. john cockins said that the drug world is very complicated and afghan -- in afghanistan is very complicated. when you put them together you get an extremely complicated situation. in fairness to the authors, they have tonoted that they be modest about their conclusions because of the publication of the situation --

the publication of the situation. but they have simple, straightforward general principles ought to apply to a very complicated situation -- principles to apply to a very complicated situation. there is extremely simple minded answer which they are rejecting, and that is drugs are bad, so counter-drugs are good. they are -- they have moved us to an intermediate level where they are applying michael economics, intelligently to the problem -- micro-economics intelligently to the problem, but there is a ground level to uncertainty.meadmit that is the area that i will be exploring a little bit. it gives me pause to think that if we ask the taliban to vote on whether there should be reduced drug production that they are taxing, we are being told

intelligently that they would answer, yes. we do see the drug production would increase the tax revenues. their position would be exactly the same as our present position. now, that is pretty powerfully counterintuitive. reallyee why they might want to object to increase of law enforcement against their taxation of drug production. but let me step back first and say what i think is strong and what i think is weak. the argument of the panelists is that there are only two reasons why we might be going after drugs in afghanistan. one, to reduce the drug problem.

two, to reduce the insurgency problem. they make a case that the argument that of those constance would take place into a significant extent is very weak. and they have convinced me of that. the result of that is to say we should not be paying much attention to drug enforcement in afghanistan. i think they take the argument further and say that, i know they take the argument further and say, indeed, indeed we are harming ourselves, or both in the drug war and in the war against the taliban if we engage in drug enforcement. that takes it a little bit further than i am comfortable going with them. now, let me just state why find

a more modest version of their argument convincing. on drugs, i find the modest version convincing because there are so many alternative locations to grow the drugs, inside and outside of afghanistan. and because demand is very in elastic, even at the retail level, and the effect on demand of anything that take place at the growing level, which is a tiny part of the retail price, is not likely to have much effect. so i do not think we can have much effect on the drug problem, even if it were our problem rather than europe pose a problem and russia's problem and iran's the problem, i do not think we could have much effect on that much for the reasons they say.

by drug enforcement in afghanistan. on the other hand, as they 17nted otu, iut, in those provinces that are largely free of poppy growth it would not take much to keep them poppy- free, and as they suggest, i would certainly keep them poppy- free. the question is, how much attention should we pay to stopping the poppy growth in sales from the seven remaining provinces? and i think they make the case that as a drug issue it does not make an awful lot of difference. by the way, not just our growth possibilities all over afghanistan but they are all for that part of the world,

throughout all of the stans. you could grow poppies and large quantities and you could move them easily. i find a modest form of argument that this is bad counterinsurgency law a little weaker, and that is the part that i wonder about. at one point, they argue that drugs constitute a small part of the taliban's total revenues. but there is a cost of replacing them with -- dependent on other countries, a dependence on wealthy, more moderate countries who might make demands in exchange. so that is not a total -- the fact that that is $70 billion of that could be replaced out of saudi coffers does not establish that it is not a good form of

counterinsurgency to make them rely on saudi bankers. and the second part of the argument is -- this is the park that troubles may -- they make me nervous because they are better economists -- this is the part that troubles me. the second part is, if you increase the cost of production by law-enforcement in of the seven provinces -- in the seven provinces, let's say by100 a kilo, that that will result in an increase in price at retail of at least $100 per kilo. i'll buy that. and a reduced in quantity that is less than proportional to

that increase in price. the resultant decrease in quantity that is less the proportion of that and the result will be the total revenues will increase. all that, by the way, tends to ignore -- i am sure they have thought about it but have not written or tol about it -- a very large stockpile that jonathan said, opium that is waiting there to be released. but increasing total revenues does not necessarily increase the take of the taliban. if the taliban has to provide protection, which at a cost, which passing through increases

total revenue, they will get greater revenues but not necessarily greater profits. now, that is the place i am troubled. i would like to hear from you guys about that. everybody with me? in other words, there will be greater revenues but there may not be greater profits. ok. if they are right about that -- now i really feel like i am stepping off into deep water -- jonathan is right and mark and the other jonathan about the desirability of having a bad farmershy don't wheat demanded increase in taxation of wheat to raise the price? why -- i am asking the

question. jonathan said afghanistan is different. but what makes afghanistan different in that regard? and why is not there a strong argument, -- isn't there a strong argument against law enforcement in every case. in every case, law enforcement will raise the price of something that sells on and inelastic markets, at least if it is a commodity like opium, and will increase the total revenues. if they are right, why is this not a much broader argument? they might have a very good answer to that. that is what i hesitate to ask that. it is probably going through your mind, too, so i wanted to ask it. their whole argument is based,

as i think it's fairly safe weekend be based, on the advantage of the taliban of getting increased revenues. i just raised the question it if they will get increased profits when they get increase revenues. but let's assume they did get increase profits. pursuing law -- when you think about what to do with an organization like al qaeda, a good starting place is to think of all the things they need to operate. besides resources, they need havens, weapons, popular support, and absence of informants, leadership, recruits, intimidation capacity, corruption capacity, a communications, outside alliances.

i just went through a lot, but you would not be able to think of many more things they need. the argument only goes as far as to say that their revenues increase with law-enforcement. law enforcement may decrease the availability of recruits. it may be that planters of 0 or the families of planters, are ripe source of recruits. again, that could turn out to be complicated. i am about 9% with them on this. but you have to ask the question, -- i am about 90% with them on this. what does law enforcement do helpfully or harmful in terms of all the other things that the taliban needs. ?

and then, finally, i am left wondering how much of a difference -- oh, i am wondering how much of a difference in actual plans on the ground there are demint will make. again, i'm interested to hear -- on the ground on the plans they will make. they do not want to stop the law enforcement necessary to keep 17 provinces relatively opium-free. so that will not change. we have a fairly small capacity to fight the drug trade on the ground in the other seven provinces. we have to pursue counterinsurgency in other ways first. what is it exactly that they

would change, except the -- the american spirit of hopeful be ridiculousy to think that we could have an effect on insurgency by fighting the drug war were the surplus of drugs is immense and from which the drug production can easily move elsewhere. ok. [applause] >> you will have an opportunity to answer the professor posey questions. but first, let me invite the head of the white house office that deals with these issues to make a couple of comments.

obvious questions that have been raised by the state. -- by the study. we are very pleased to have you here. barney, i would ask if he would like to say something after. >> thank you very much. i very much appreciate the institute hosted this and putting this together and the work of john and jonathan and mark. and also phil's remarks about the peace. i think for the people who do not live and breathe drug policy every day and particularly in afghanistan, you have been very helpful in explaining just how incredibly complex this is. the other part i appreciate is that you have been able to distinguish among various countries, what perhaps may have been somewhat effective or more

effective in mexico does not necessarily mean that same strategy is effective in colombia, or effective in afghanistan. i think there are some other things that are at play in this very dynamic and fast-moving environment, especially with the change of command in afghanistan and the fact that the policy, as the president has said, would remain the same. we have the opportunity to work closely with ambassador holbrooke and with a number of people to write counter narcotics strategy appeared the other part that i think deserves mention is that there is governor-led revocatio eradicat. there is also the good performers initiative their rewards those provinces that have produced considerably less.

the other part is that it is not just the united states that has a new look on or a new format for our drug policy which puts it far more emphasis in the areas of prevention and treatment than merely law enforcement and criminal justice. it is also that a number of institutions, a number of nations all around the world, are also approaching their drug problem in a much more balanced way. as we engage very quickly after the two presidents obama c-and to have the by national meeting on drugs. it was not just about hair wher. it was also how could their demand be lowered and how could you do with a very large addict population?

i think you're bringing this to the attention of the world community, about the problems and complexity, is one that is appreciate it by many of us who live and breed term policy every day. thank you so muchch. >> barney, would you comment? >> thanks. before i came to work of the state department, i was working at the center on international cooperation at new york university, which is the sponsor of this study, and my colleague jake from cic is here with me. we started this project before a joint the government. -- i joined the government. was an extension of work that we previously carried out on counterinsurgency in afghanistan, because precisely

we were very concerned at that simple equation that mark mentioned earlier. and i wanted to bring out one point that jonathan made clearly, that in the political context, it is the money rather than the drugs per se that does the harm. we felt that had not been incorporated into the policy analysis. we decided to go further than we had done in our previous work by trying to find real experts and policy analysis, in particular, the policy analysis of law enforcement, drug markets, and so on, and we were very fortunate in doing that. however, that said, we have no control over the outcome of the study. now that i am in the government, we welcome the findings and we hope to learn from them. my presence here does not mean we endorse them. nonetheless, the president has said that our operations in afghanistan and pakistan and the region are the most important

national security priority. japanese, not only do we hav to dthat means we have to keep thinking constantly about what we are doing in this complex situation. this analysis will be of great help to us in doing that, but the real test will be the results on the ground. this analysis will help us but it will not substitute. i do thank the panelist for the provocative analysis and look forward to more discussion. i want to clarify to go. wo points. i want to know that the professor made some reference to the saudi assistance to the taliban. the government of saudi arabia is an important partner of the united states in combating terrorist financing, including financing for the taliban, and this is an increasing over time. it is one of the best

partnerships we have. it is true that private individuals of their and in other countries in the region do make contributions. finally, the administration, in addition to moving away from eradication, has moved towards a rural develop a policy that is not tied strictly to alternative development or alternative livelihood. we have a huge agricultural program for afghanistan, which is a nationwide. when we came into office, the united states had allocated more money for opium eradication and for agriculture. that is no longer the case. we have a huge program that is targeted at the entire sector. thank you. >> thank you very much. professor, you ask a couple of good questions. as you formulate your questions, and we will invite you and a moment to ask them, but a couple good questions. would the taliban object to

reduce production? yes, revenue goes up, but with profits go up? why don't wheat farms ask for this help? revenues to increase with law enforcement. and the this -- interesting one as well as what difference on the ground with your recommendations be? who would like to answer? >> first, i should say that it is true that economists have messed up the economy. fortunately, this piece of analysis was done by three people, none of whom have a degree in economics. my degree is in policy analysis. so none of us are to be blamed for the meltdown. farmers as aeat reduction in wheat production?

they do. the idea was to cut back on production to support agricultural prices. peanut farmers want peanut tariffs and milk producers have a complicated milk system. would the taliban want less production? it is complicated. one thing is certain that the taliban would want less protection where they are not. this is a point where we did not see perfectly eye to eye. my view is that the governor-led it eradication and the good performance initiative is paying people not to grow poppy so it can be grown by people taxed by the taliban. i am sure the taliban would hate it if they started growing poppy in the north.

at the moment, we act as if we would hate it. there are governance issues. with respect to enforcement within the taliban's area, i assume that there would organize a they could make a profit despite the initial cost. but i will leave my colleagues to handle the hard questions. i learned a long time ago that the professor posey easy questions are hard enough for me. >-- the professor's easy questions are hard enough for me. >> why law enforcement has p erverse effects there? you only really like the contraction of supply if you are effectively monopoly. if you are a small producer with lots of other producers, you do not want somebody to come and a shrink your supply. a fundamental premise of the analysis is that afghanistan

does dominate global production, 90%, plus and that will pertain for the next 5-10 years. let me answer by pushing the metaphor of taxing. we use the term -- it is not a tax. there is not a statute in afghanistan that defines this as a tax rate. but let's use the metaphor. if the character of the tax or an excise tax, so they got kilogram. if it is more like a sales tax, a percentage of the value of the goods, and shrinking the production drives up the total value of the markets and what they can tax. thank you to phil for forcing us to make explicit and implicit assumption that our image is

that the taliban will capture a share of the total dollar flow. not that they are not taxing like an excise tax. asked,ally glad phiul doesn't that logic apply to law enforcement everywhere? the answer is no. there is the term about the elasticity of demand. it has to do with how much price goes up when quantity goes down a little bit. i tried it, not entirely successfully, to explain that that key parameter for the exports from afghanistan is only maybe 1/5 as large as it is inside a final market country like united states or england. that is a crucial difference. it has to do with that great inflation in the value per kg as the drugs move downward in the

distribution chain. that is much less favorable to law enforcement back up in afghanistan then it would be here. the second reason why law enforcement looks a little different in this context is when you squeeze on supply, you will do good things to the quantity consumed and not as good or perhaps even perverse things to the total dollars. most of the time, when we think about law-enforcement in united states, we are willing to maybe not make progress on reducing the dollar's if we are making good progress on the quantity being consumed. but when the united states is thinking about afghanistan, but produced is not affect the people and our country because the heroin market is hemispheric.

it stays in the eastern hemisphere. we get most of our hair when from the western hemisphere. there is the flip side that we do not really like regular old criminals and united states to make extra money but the extent to which we disliked extra money going to the insurgency maybe more intense. >> which is not to say that the majority of u.s. drug law enforcement is well spent. if we had 1/4 million drug dealers in prison rather than 1/2, there would not be much impact on drug consumption. that is a completely different story. >> that is for another discussion. phil, any response before we go to questions? if you have questions, please stand right up here. this is a question, not an argument. if it is not the quantity

produced that goes down, obviously it would be some of both, but the cost of producing that that goes up by having to hire guards or having to pay more in the wake of corruption -- the way of corruption, does your logic apply then? >> you said that before and it is a good point. it is easiest perhaps to think through for eradication, reducing the amount of opium coming off the farm. right now the people who are producing here when it collectively are spending $80 per kg -- producing the heroin are spending $80 per kilogram. what happens if there to pay the farmers $150 instead of $80?

if they did not change their export prices and that increase in cost to away their net revenues or net profits, then the analysis, that changes everything. you're absolutely right. another implicit assumption is that this distribution chain, like most distribution chains, will pass on price increases. what you can come back and say to me is, do you have direct, empirical evidence of that? can you point to the data set? and the answer is, no. our answers on the distribution chain inside afghanistan are not adequate to say that we know for sure that that change has fallen on price increases. so we are affording a belief based on just how distribution chains work in general, both in the legal economy and other illegal drug distribution chains. >> mark, let me ask you one

other question. the last question that film made earlier. what difference on the ground are your conclusions driving to -- the last question that phil made? >> um, focus on corruption. the foreground is corruption rather than leaving it as a background problem. figure out how to do the targeting. i am sure there is a lot of targeting going on, but what this says is that the non- targeted enforcement is worse than useless. it is actually helping the bad guys. so let's not do any enforcement activity that is not directed at somebody we have reason to think is somehow supporting something bad. it raises a serious question about whether we want to keep poppy out of regions where it is not growing. we do not completely agree on this, but i am not -- the

analysis at least raises the question about the governor-led eradication and the performance initiative. and the implication about prevention and treatment. it is sort of sitting there. one operational thing we have to do is respond to russian and iranian complaints. i think this gives us something to say back, which is partly, how is your drug treatment system? >> if i could add very briefly? in as much as we are a little dour on the direct consequences of drug policies, it raises the salience of their symbolic importance. we may, in some sense, be giving permission to folks making policy to think about symbolism

and this relates to phil's comment -- is it only the money >? ? if some dimension of drug policy can be pursued in a way that captures hearts and minds, we are saying you are not going -- you are free to think more and weight more heavily those considerations. if the treatment centers in kabul make a modest impact, but have an impact on how people in afghanistan perceive the concern and compassion from american taxpayers for their problem, then that they need more salient than it would be if he thought the drug policy was having a larger effect in a direct sense. >> very good. ok. let's go to questions. sir? >> good morning, gentlemen. national defence council foundation. first i would like to thank you very much.

my question involves -- we have talked about russia and about afghanistan of little bit. but what about pockets down, is pakistan?tory the is-- about specifically the isi? are they receiving narco-dollars and moving their own agenda? to my very much. >> anyone want to take a shot at the pakistan ankle. it is not a direct focus of the study. >> mostly, we will dock because it is not a direct focus. two comments. there are people in pakistan that are making money from this drug trade. some fraction of the hair when export goes to pakistan -- heroin export goes through pakistan.

we talk about the fact that you might be able to move the trade more easily than you can eliminated. -- eliminate it. moving it out of afghanistan may benefit if you focus only on afghanistan. depending on where it moves, it may not be all to the good how it moves. moving it to pakistan could not to really be ruled out. >> first, i would like to point out the obvious. this is washington and no one likes to add here that had news. it means a lot to me that the would come.s office many addicts in afghanistan have got addicted to smoking afghan heroin, which is pure. if by some miracle we were able to reduce the supply, as we've

seen in other places, traffickers tend to dilute their drugs to the printer whereas no longer smokeable. -- to the point where is it is o longer smokeable. are they in any shape to handle the massive spike intravenous drug use with regard to hiv and hepatitis? >> we did not see an increase in price. we did not model of the consequences. i will have to pass carr. it is a serious point, that even if we could make success against the world heroin problem by pushing up prices in afghanistan, that is not good. if afghanistan got driven out of the trade, there are other

places to grow poppy. the prospects for a large increase in the price of heroin are not very big. >> you mentioned hiv. we know that hiv is a serious problem. if it is about hearts and minds, it seems that someone might want to think about whether or not we wanted to discuss the prevention of hiv, which is a terrible problem you can anticipate is relatively lightly. there are pros and cons. you can imagine there being a backlash of unintended consequences if we are perceived as distributing needles in a society that is conservative, and it is beyond my pay grade to think through the public relations and cultural dimensions of that. but hiv will be an important problem, and someone might want

to think about whether or not there are actions there that would further the interests of counterinsurgency. that is a separate issue than the dollars. >> good morning kar. i was just wondering how your recommendations might change, if at all, given the current efforts at reconciliation under way. in other words, the bad guys are no longer easily identifiable. >> i guess my basic take on the reconciliation process is that if i believe that, will you tell me another? yes, it will certainly be true

if somehow the current insurgency elements could be reconciled to the government, then attacking them is no longer an objective. presumably, that will not be everybody. at whatever level reconciliation takes place, there will still be out-groups. there will be the other warlords. it seems to me to still make sense to try to shape your drug enforcement in the interests of securing governments in the country, which are not identical to the interests of keeping open production down.ium we do not have any more details to record >> i am with the voice of america. i wanted to ask about one of the problems with alternative development is that the taliban is taxing legitimate crops as

they are being exported. you think we should pull back on ternative development in poppy-free areas? estion. a great qu i am not an expert on afghanistan. i am more a counter-narcotics expert. what i would like is that my answer be one of the thoughts that is listened to around a table with a lot of other factors. and that is that, yeah, if you just focus on this dollars to the taliban, it is an argument for stressing alternative development in the more secure parts of the country. in fact, rewarding the parts of the country that have succeeded

in getting away from poppy cultivation rather than thinking of alternative development in combined arms tactics, riding side by side with the marines and their guns, which makes sense if you think, as soon as the marines are done it shooting, then all of the insurgents and warlords' influence and power has disappeared. but they knew it -- that may not be the case. it may be that even in places where we have won the shooting, you may still have to worry about these protection payments to the extent that is true, it would be an argument for shifting more to the secure parts of the country. >> let me follow.

go ahead. mark raised this as well. your thoughts on the governor- led eradication, the incentives? >> i will make my case and then market can tell you why i am wrong. -- mark can tell you why i am wrong. there are two different strategies and you make -- to have to make a hard chores. one approach is to say let the poppies bloom lots of places because the market share of those heavily influenced by the taliban shrinks. to turn a blind eye to potential competitors. i understand that logic. i just cannot a imagine that we would embrace that wholeheartedly. i end up sitting in the opposite

side of the camp which is to say, no, we should have afghanistan try to be as normal as possible, to be able to genuinely say to afghanistan and the russians and the world we we've worked hard in this area and made accomplishments. it is not that we are opposed to eradication, it is opposed to the revocation in those places where -- opposed to the eradication in those places could berngry farmsers recruited. >> i am glad we got both sides. >> i am from the criminal justice policy foundation. if we are spending about $100 billion a year right now on the afghanistan problem and the farmer's income is about 1/2 billion, what are the

implications if the united states were to say, let's by all that from the farmers? how does that play out? to the extent that what we are doing now envisions that we are targeting certain farmers or we have certain kinds of intelligence, would there be a way that we could work effectively control the market and affect the monopoly in using our own economic power directly? >> two different issues here. there is a proposal on the table to buy all the poppy in afghanistan and make morphine for madisoedicine. they have regulations. 4% of the airable land is now used for poppy farming. what would happen? they would grow two poppy crops.

there is a couple of years of production already in inventory. all we do is push up the price, make the people holding those inventories return. the different question is, what would happen if we airdropped $100 bills all over afghanistan? we could make every farmer in afghanistan which for a tiny fraction of what we are spending for blowing the place up. there are all sorts of issues, particularly about corruption, when you think about disturbing money. but, boy, if i were in charge, i would think very hard about effectively doing that. buy -- i would not buy the poppy crop. i would buy all of the cropys. s. that is a larger discussion. >> any comments? >> i agree. >> good. thank you very much.

if there are any other questions, now is the opportunity. veryl tahnhank our panel much for the work they have done not only on the peace but on the work and presenting it. one of our questioners made a good point of having the drug office of the administration join us today. we are here to ask hard questions. you have bad news and bad news, which have presented -- you have presented. having questions to do with those is the purpose of your study. ashelyley, thank you very much forward. join me in thanking the panel. thank you very much. good job. [applause] [captioning performed by

national captioning institute] [captions copyright national cable satellite corp. 2010] >> watch world leaders from the white house to parliaments around the globe, from this week in the past 25 years, with the c-span video library, online, all free. it is washington and the world your way. >> races to succeed two u.s. senators are featured on tonight's 2010 campaign coverage. first, i can sit debate with republican primary candidates. that is at 8:30 eastern time. secretary of state is

seeking the democratic nomination for senate and it we will show the president speaking at a campaign fund-raiser for tonight. that is at 9:30. then a congressman roy blunt in the running for the republican nomination. he talks about the economy and jobs at 10:10 tonight. the missouri seat is opening up with the retirement of the senator kit bond. campaign coverage on c-span. now, tennis champion venus williams on her new book. it is titled "pumped to win" on how sports can help in the world of business. it is an hour. >> thank you, guys, for coming and listening. i hope you enjoy what i have to

say. if not, you can just pretend. maybe feel good. most of you all know me as a tennis player feare. i am from compton, california. i started at the age of four. we played tennis as a family thing. if he were not hitting balls, you are picking up balls. we used to drive to the courts every day after school with a shopping cart filled with balls. love to hituse4d td to every ball in the basket. if my dad did not let me hit every ball, i would start crying. there was a tradition we got to the last fall, he would say, "last fall." ball." he really just stopped saying that a few years ago. started at four, and now i'm at 30. i want to say things right off the start to my sister.

she has been one of the biggest supporters in my career, on and off the court. she is a wonderful tennis player, also appeared it was really a family thing for us starting to play tennis. serena is a tennis player, also. first name basis. we grew up in unique environments. . .

>> our parents taught us to make our own path and make a difference in our own way. that made a huge difference in the way that we do things on the court. a different style of tennis, a different way of approaching life, living who you are shine through. i definitely credit my parents for where we are today. they were our role models growing up and they still are. i turned out just like them. [laughter] hopefully that is good. tennis has taught me a lot of lessons. what i would like to talk about is how export mary's life and live mary's sport. -- house fourth marries life and

live marries sport. even if your not going to the professional level, it teaches you so many lessons. you have to be focused and you have to be disciplined. you have to be willing to show up every day if you want to be good, if you want to perform well when you get into competition. if you have to be focused during the whole practice. you cannot let your mind wander. that translates into life. when you are in school and at work and trying to achieve something, whatever it takes, you have to stay focused. discipline is huge. you have to be disciplined. often we would say that we had no discipline. we did not make ourself to what we needed to do. it is the same thing in life.

you have to have discipline in order to put the work in and it is not always easy. it is something that comes with time. as a young person, sports teaches you to be disciplined and to apply yourself and it makes a difference. it is just a lesson, especially when you have good coaches around you, like when i had my mom and my dad, i had good people around me that and still that and made it fun without even realizing that these are the lessons that you are learning. success and failure. sports prepares you for life in terms of learning how to succeed and also failing. i have had failures. it helps you to be successful. i turned professional at age 14 and that is kind of common. it does not happen as much anymore.

i did turn professional at 14. i did not play a lot of tennis. i had to be grandfathered in. i went to high school as a regular kid. i turned professional and then i played my first full year about a round of 1997. i have a lot of hype around me and a lot of expectations. i went out and started beating players and after that first year, i think that ended in the top 20 because that was my goal. we were always setting goals and we were taught to write them down. my dad told me to never have in your head, always have it on paper. when you see it with your eyes,

it goes into your head and it becomes something real. that was one of my goals that year, to get into the top 20 and be the newcomer of the year and see my name on that list. i played well, but i have not won a major yet. let's back up to 1999. i was in the u.s. open finals. i am sure you're familiar with the u.s. open. she played her match really well and i did not make the right decisions and i got nervous. i was not able to make the right choices. that was a huge failure for me.

it would have been huge. that failure made me realize that i had to do whatever it took on the court and stick to what i knew and execute it and not have doubt. i credit that failure to my successes. that is a lesson in failure in sports and how it really can propel you. sometimes you have to have that big loss or that i opener that takes to to the next level. at the same time, as much as you can learn from failing, succeeding is equally as important in learning how to succeed and learning how to win and knowing how to be a winner and having that winning attitude and having that attitude of positivity, doing whatever it takes to win.

confidence, there is nothing like pushing yourself physically, mentally and emotionally to this place that you never thought you could get to. you learn so much about yourself. you strengthen your character. you learn that you really can do anything that you push your mind to do that is a lesson that i try to wind still -- that i try to instill in young people, how it gives you that confidence, that you did this on the field or you did this in varsity sports. i can do this in the classroom. i can do this in life. learn to compete. that is always a natural thing.

i think i am a good competitor and i think i have a lot of talent, but early on, i did not have that huge heart. a friend of mine and i play off of each other and we learn something from each other. she was really a young kid, about 16 years old, and she was playing against the no. 1 player in the world and she was not even in the top 100. she was basically down 6-2, 5-1, double match point. that did not mean a thing to her. [laughter] i remember that we were in sydney australia and there was this headline that said "white city's great escape." that was the name of the city. we would read it every now and then and i would read it in an australian voice. we recall those moments, and

when i won my first tournament, it was the same year, a little later. i was playing the player, but i have lost to her three times and she got the best of me and i recall that i went on the side and started crying. i did not want anybody to see me. this was destroy my career. after 30 seconds, my cry was over and i got up and i thought about how sirena got through it and i needed that same heart. that is the day that my heart group. even if you do not know how to compete in the beginning, sports will continue to teach you how to compete. it will help you come back from that loss. i have learned a lot of lessons in sports. one of the most important ones is being humble. i think that sports keeps you

humble. it does not matter how good you are, it does not matter if your number one in the world and you won 15 matches, you were going to lose. you have to learn to come back from that. you are going to have to learn to deal with people saying that you may not make it back even though you were number one. you're going to have to deal with criticism and take it all in stride, either from outside sources or from coaches or even from yourself. the criticism -- all of us are our hardest critics. i feel that sports keeps you humble because each and every time, you know that you have to be prepared. you know that you have to give your best. it keeps you humble enough so that you know that you have to keep working hard and you cannot let up. the consequences of that are

difficult. i could keep going on in on, with lots and lots of stories, especially about my losses. who cares about the wins? we always talk about the mistakes we made and we laugh about them. we talk about that bad shot. it is interesting. it is important to be a complete person. as much as i would like to say that tennis does not consume me, i am not a tennis player, i am a whole person. i get up every day and that is what i think about. especially when i got to be an adult and it was my responsibility to make sure my career was the way that it was.

you get up and that is all but you think about how my going to stay healthy? everything is around the sport. it is like a marriage. people ask if i want to get married, and i say i am already married. sometimes it is not easy. i have to make this relationship work. [laughter] as much as it is consuming, if you can imagine something that you were obsessed with and it has been over 20 years that you have been obsessed, it is easy to lose who you are in that sport and not know who you are outside of it. i think that our parents were very smart to make sure that we pursued other things, so that we could know who we were so that when it is all over, and god forbid we had a career ending injury, and we were wondering what we were want to do with the rest of our lives. i think that was important.

if we did not get good grades, we were not allowed to go to practice. so we got good grades. i do not recall if i wanted to go to practice. that was my life. we got up and went to practice, that was that. i was a tennis player. that was me. my dad tricked us. he tricked us into thinking that we could be champions. [laughter] it was not that it was maybe a dream or we would hope that we would win at wimbledon. he had us brainwashed. it was a matter of getting old enough, not even good enough. obviously we trained at the right things and we worked hard.

we were literally brainwashed. we would pick a tournament that we wanted to win. if there was-my sister was the youngest girl. she always copy me and wanted to wear what i would wear. she could not make a combined one to do until i did. not much has changed [laughter] we would be in the locker room and she would ask if i would shower first or just go straight home. if i said that i was going straight home, she said she would go home. i would ask her to make up her mind. [laughter] i wanted to win wimbledon, and my sister would say that she wanted to play wimbledon and mind dad said that she had to pick her own, so she chose the u.s. open.

people ask me how to train their kids and i tell them to make sure is fun. tell them that they can do it. tell them that they can win. i was about eight-years old and i have this coverage. i would see him once the weekend he would give us some lessons. he also worked with john mcenroe. one day, he had us set up with pete sampras before he won the u.s. open. we also played with john mcenroe. with john mcenroe, it is all about touch and feel and he does not hit the ball hard, he focuses on position. we went back to compton in the bus and went back to practice and i explained to my dad how i would beat john mcenroe.

at first, he was telling me that i could not be john. then decided that i could beat john mcenroe. he told me that i would be him. he told me that i can. it was definitely a positive environment growing up. our parents also taught us to think for ourselves and to be entrepreneurs. my dreams were always own my own business. we toured 10 or 11 months a year and it was really not an option to do those things, but i managed to go to school. it took me eight years to graduate and a through my hat the highest. i did not graduate in the top of my class, but i have the best

shoes. [laughter] my output was all about these sparkling shoes -- my outfit was all about these sparkling shoes. i never wanted to let my parents down. i started my own business in fashion design. it was all about the philosophy of being your best. i have a lot of fun designing my clothes for the court and i started my design company. i love design and interior design. i like to make things perfect, so i do it over and over again until it is right. on the tour, i sat on the player

council for the top players and i helped make decisions in the sport and i sat on the council for ages, for maybe 12 years. there were some important things that happened in women's tennis lately. it was an interesting move because it is something that my sister and i did early on. we wanted to do this as long as possible. equal prize money for women at the championship. [applause] that was definitely an important goal for the two were in the last few years.

it has been an open era since the players got paychecks, and the women were always paid less than the man. their arguments of whether we should play the same amount of sets or whether women's tennis has much value as the man. historically, men's tennis is more popular, and sometimes it is women. the players would go into the grand slam meeting with the representatives and present their case and every year, we would stand for rejection. in the last few years, when we did get equal pay, we had a campaign that was very organized. instead of having at one meeting per year, we planned on getting that equal prize money because we felt like it was a premier sports for women around the

world. we were role models. what kind of example are we setting if we were not being paid as much as the men. it was not the principle of making more money, the discrepancy was small. it was probably less than 1% less. i went into one of the grand slam meetings and they were all men. men are good people. [laughter] not to discriminate. i knew i had to say something that was important to them, so i asked everyone to close their eyes and asked if they could tell the difference if the next person next to them was a man or woman. if they had a son or daughter, would they want to tell their daughter that she should get paid less because she is a woman? i also told them not to peek.

hopefully, that speech made a difference along with our campaign. win wimbledon announced that there would be equal prize money, after 35 years, when it gets announced, long before you think it would happen, it was an amazing moment. the french open was last about equal prize money. a week later, of day -- the day did it as well. -- they did it as well. when i am all done and retired, they will save the i did something for women. in giving back is something that our parents always told us to do. i recall when we were younker

that our dad would actually have as to each other kids. we were only eight years old. he would say that we had to give back. we have to teach kids that didn't know how to play tennis. today, there is a sports program for gender equality for women that got started. when you see these people in extreme china -- triumphe, you see these women that had to play behind concrete walls. as women, they could not play because of the things were going against them because of culture. when i saw them and i got this award, they were still trying. we said that we had to do something.

i agree to go on board with the w ca -- i agreed to go on board with the wca. we felt it would be important for women players to continue to be role models and to coninue to give back. recently, i wrote a book titled "come to win." the book is about sports marrying life and health sports gives us -- and how sports gives so much to your life. i found it very encouraging, as the book was being written, and we were doing interviews, all these things that people would say, it is like they were saying it to me. if you lose, the only tragedy is that you did not learn from

failure. i write notes sometimes. i write what i want to accomplish and i bring it out on the court with me. i don't always look at it, but just knowing that i wrote it down, it makes a difference to me. i heard that arthur ashe did that also. i would like to give a big things to don davis, my publisher that really understood my vision. i feel this will be something that will be around 14 years that i can take off the shelf for motivation. -- for 10 years so that i can

take off the shelf for motivation. i would like to thank you guys for listening to me today and i guess we have some questions. [applause] >> we do, and we will keep them coming. we have a good amount of time to ask some questions and thank you for making yourself available. our first question is dealing with the course of your career. how has the development of tennis players changed since she began in the 1990's? >> it is possible for someone to come from public courts. most of the players that are in the top right now are from

eastern europe. we know that eastern europe has come a long way in the last 10 years, but it was not a place of prosperity when you think about russia or the ukraine. i think there are a lot of young people that are hungry in these areas as opposed to children who might have a little easier. i think it is where our champions should come from. >> you talk about wimbledon. why did it take wimbledon so long to award equal prize money to men and women and how did you get tony blair on your side? >> i told tony aside and said, "listen." [laughter] i don't know how. perhaps he lacks a call that makes sense. why did it take so long? i think that they generally did not think that women deserve equal prize money. at a point when it did seem like

the right thing to do, it was hard to it meant that maybe they were not right. that is not easy. i am really proud and happy that they were able to make that change. >> you are playing tonight. this is a rematch. how do you prepare for a championship match with your sister and how would that compare to a match against another player? are there any differences? >> yes. i prepare for the match in similar ways, but depending on the player, i will practice different things. it depends on their strength or weakness. i will practice according to that so that when i get to the match, i can execute those plays and put them in an uncomfortable position. practicing with my sister, i have the most respect for her on tour and i think she has the

most respect for me. how much you respect someone on court means a lot. >> this questionnaire asks what advice you would give to a teenage daughter to help her from burning at? >> i think that my parents were really good about that. we practiced a lot. it takes a lot of practice and a lot of repetition to get it right. it has to be muscle memory. it has to come naturally. you have to correct mistakes if you make some. it takes a lot of time. we would be at the park and we would get to play tetherball for 10 minutes and we would come back to the court. we would go swimming in the summer and do different things to make sure that we were still kids, even though we were training for something big. always be positive.

be willing to give constructive criticism. it is important to do both and keep her encouraged. >> how many of the men's professional players can you beat? [laughter] >> i have played mixed doubles before and i have didn't -- beaten some teams with a man on them, as far as i would like to play against a man, i do not know if that will ever happen. >> this leads to a question about billie jean king. could you discuss the impact she had on your life then why did she hold a special place in your heart? the second question is, who would win between you and billie

jean king in her mind -- in her prime. >> i first met billy jean king as a kid. i was probably about eight years old. it was at the world team tennis. i was actually at a world team tennis clinic and she was pitching balls and i remember how she was thinking how impressive i was. i wanted to hit my best balls so she could see how well i could play. i have the time of my life. as i give tennis clinics today, i always remember that. hopefully these kids are having the same experience i had and i remember how exciting it was. that was my first encounter with her. why was the second part of the question? why do i respect her so much?

i learned a lot from her. she has enthusiasm for life, for tennis, and i have never seen anyone else have that. i love tennis, but she loves tennis. she always says that champions the just. she has all of these different sayings. life is hard, but accept that. they make so much sense. she helped me with my backhand volley. that was huge. who would win? i do not know if it is fair to vote against myself, but it would be a close match. it would be a tossup if both of us were in our prime. >> you mention your booked that just came out in the last week or so. we have a couple of advance

copies here at the press club. one thing you discussed were the differences in what you learn in a team sport as opposed to a single sport. having developed that as your sport, what lessons may you have missed out on and what have you gained? >> i think that team sports are so much different. you have to learn how to win together and how to work together and to trust the person to do their job and not to interfere by getting in their way. at the same time, you have to learn how to lose together and how to work together as a team to win and be confident in each other. there is a huge difference. i think doubles is very similar to that because you have to trust your partner.

my sister and i plan pans on every point. sometimes you have to wait for the other person to get their confidence. what did i miss out on in team sports? probably all of the things that i said before, of learning to trust in the other person and work as a team. if you get that to a degree in doubles, but there is so much independence in the singles. there is only you. there is no one coming in. you have to do it or you don't. there is that independence that you build. >> you are clearly an advocate of sports and a builder of character and values. our sports the only way to get

that sort of team training? music training, the drama training is there a qualitative difference? >> i think there is a difference. i have never done trauma because i do not think i can act very well. sports is a wholesome way -- is the ultimate way to build confidence. you have to set goals and learn how to succeed. i am not saying that it is the only way, but it is the best way. >> one of the people you spoke to was magic johnson. a magic johnson talks about how being a teenager in lansing, mich., he would take his first job and sit in the ceo's chair and dream about being a ceo. did you ever have that fantasy?

>> absolutely. i love magics story also. we do not always have the best reputation as far as having a lot of smarts, but it was very encouraging to read his story. do i have those decisions? yes, because i like to tell people what to do. in a few years, i will sit in that chair. [laughter] i am obsessive. i think that any athlete is obsessive. if you have to be to do it over and over again and get it right. i need something to obsess over once this is said and done. i do love organization and i do love business. i will find a way to combine those. >> roger stock -- rotors of black -- a roger staubach said

that you do not know if somebody wants an autograph. >> i have been pretty fortunate that most people do want to have their space designed or have a different design projects for fashion. fortunately, it does happen some time that people do not taking seriously. i realize that you do not start at the top of anything. you start were you start and you work your way up. the battle is the fun part. i have done that in tennis. i started at the bottom and work my way to the top. i look forward to continue to battle to the top off the court.

>> one area that athletes have had struggles is a basic financial literacy. what is your take on the need for financial literacy and what are the biggest pitfalls that you see athletes go through as they deal with these windfalls of money that they may or may not be prepared to deal with? >> the athlete's mentality. what can i say to that? i have never one to be a statistic in any statistic that is a bad one. good ones are great. i do not know why all of athletes think that way. i do not have an answer for that. i have never wanted to be that way. i think it is important to read your own bank statement, to know what is coming in, to go over once a month and to be realistic with what is coming in and what is going out. that is not always easy.

sometimes you have a lot of people that you are taking care of and you have to be realistic about their expectations. it is not always easy. sometimes you focus so much on the sport that you do not think about the reality on the outside until letters to late. i think that intervention training is important. >> a couple of people have passed questions about specific athletes. what advice would you have for lunch games -- lebron james? >> miami is certainly the best place. i actually have a slide show prepared in case you want to watch, that shows why.

>> what advice would you give tiger woods to give back on track? -- to get back on track? [laughter] >> if i am going to answer the question, i would just say that life happens. as a country and a world, we are way too judgmental, especially on the things that we may be doing also. [applause] we need to stop judging the next person and start judging our own life. he is a champion. he plays so well. it is crazy. he has already won so many. he knows how to do it. i'm sure he will be playing very well in no time. >> several questions dealing with health.

why can't athletes do more to challenge american adults and teenagers to live healthier lives? should athletes be leading the crusade against obesity and bad eating habits? >> exactly. we have so many streets in america. -- treats in america. in europe, it is not the same period in america, we have a certain lifestyle. clinton is also working on child obesity. it is important to start at the beginning. teach the right eating habits. otherwise, they do not know when they get locked into bad habits. it is all about moderation. >> ms. williams, as another call

a woman tennis player with feet proportionate to her height, do you find it hard to find tissues' larger than a size 10? >> i wear my shoes bigger on the court than in real life. i am really fortunate. i wear a 11.5 on the court but off the court, i where smaller i cannot have kids, because they say that your feet grow when you have kids. [laughter] i cannot have a kid ruining my wardrobe. [laughter] adoption is a choice for me [laughter] [unintelligible] this was a vision that i hand,

it was not about anything else. it blew up into something so crazy that i almost decided to retire the illusion. it was what i called the illusion. it was like the dress seen around the world. the challenge is to make something even cooler. [laughter] i hope that i can. >> earlier today you mentioned that sports is something that humbles you and you will lose a big one that hurts. what was the loss that hurt you the most? >> man, that was a hard one. the last loss was really irritating.

wimbledon last year, i was numb for a week. it is not easy. i try to get perspective. i really do. i was at a book signing yesterday and this woman came over and she gave me a magazine and said that she wanted me to have this. i read the article. she was from rwanda and her family was killed in the genocide in she contracted aids and i was thinking that i did not need to feel sorry for myself anymore. you are fine. it was a tough loss. i am actually want to keep that magazine with me, her story. it was so moving. no more tough losses. i will always remember that her loss was much more. [applause]

>> as you mentioned earlier, the funny stories to not come from the great shots, but from mistakes. is there anything funny about wimbledon, yet? >> perspective, perspective. gosh, no. [laughter] >> we will be sure to check back with you. you mentioned many times that your parents were your role models. who else was a role model for you in your early years. definitely my sisters, all of my older sisters, i have three. we all looked up to each other. my older sister tricked us a lot. she would tell us we could not clean the room in five minutes. we would say that weekend. now i am hit to that.

as far as tennis players, i used to serve to boris becker. he would rock back and forth and i would just be rotten in the juniors. i think iraq about 10 times too many. i should have gotten a time violation. >> part of your motivation of going into business is you want something to transition into when your tennis career is over. how will you trances and into business full time? is it possible to be an elite tennis player if you're not completely focus on tennis? >> it is definitely possible to be an elite tennis player if you are not 100% focus on tennis. if you do that, you would not like it anymore. be a balanced person and know who you are off the court.

i looked up to my sister who has nine degrees. she went to georgetown and howard and has an m.b.a. and as a lawyer. i think she is for to be a cook because she is an amazing cook. does that answer your question? >> as your career in to this continues, how many majors to you think that you still have in you? what's at least 25. -- >> at least 25. [laughter] [applause] it is all about the majors. i guess i know what it takes to win them. aegis up to the welfare and do it. >> we have had several questions about your workout routine in your diet, if you could give any details about how used a fifth

-- about how you stay fit. >> my life is one huge work out. in the morning, a train on the court for two hours, sometimes no longer than three. once i hit the 2.5 hour mark in the gym, i am not enjoying it anymore. probably about five hours. i spend a lot of time on the table. once you break your body down like that you have to resurrect it. i will be at a tournament probably every day. as far as nutrition, my motto is to eat to live, do not live to eat. i have to eat a lot as a player. win wimbledon is over, i am taking a break from eating. i will eat pasta in the morning before a match and you need a lot of food.

i focus on carbohydrates and protein for fuelling myself. i try to avoid too many fried foods. there is a formula to allow all. i could talk about that for a long time. >> what do you do to relax? >> i love to read. i recently started swimming, which i love. i have a dog that travels with me. my little body. i hang out with my sisters. we laugh all day. i am a workaholic. i am happiest when i'm accomplishing something. there are times when i have to make myself sit still. >> do you talk to serena about your life in post-tennis?

>> yes, we talk about it. we live together in the same house. she is threatening that i cannot move out. i am stuck. help. we do this together and we say that we should never lived -- and never leave each other and if we get married, we should look here. -- we should live here. she has different companies that she does, also. we just enjoy our life outside of the court and make something of ourselves outside of the court, also. >> we are at the national press club where cabinet officials and heads of state speak. do you ever see yourself going into politics? can you see serena going into politics?

what's know, too many skeletons in the closet. -- >> know, too many skeletons in the closet -- no, too many skeletons in the plazcloset. [laughter] >> we are almost out of time. just a moment here for some announcements. before asking the last question, we have a couple of important matters to take care of. let me remind our guests of future speakers. on july 60, fitness and sony tony horton will speak of declining fitness levels of u.s. military recruits. bring your gym shoes and a towel. the next day, tony horton will

also be involved with the national press club in the it 5 k race. to register for the race, go to www.press.org. second, we would like to present our guest with the fabled national press club mug. [applause] if you did your sister to come here, you could toast your coffee mugs together. final question. i understand you just got to washington this morning and it is going to be a quick trip. people are going to watch you play martina. you'd have been playing martina for years.

should she be trembling in her shoes tonight? >> i am not a trash talker. tennis is supposed to be a gentleman's sport. she is a competitor. she knows how to play. she is a major champion. i am going to expect her to play very well and i hope that i can play well for my team. if i let you down, please be positive. i think it will be fun for all of us. i will be using this mud on court tonight. or watch for it. what's thank you, miss williams. -- >> thank you, miss williams. [applause]

>> and thank you to you all for coming today. i would also like to thank the national press club staff, including its library and broadcast operations center for organizing state prevents which you will be seeing over c-span. for more information about donating to the national press club, visit www.pres.or g/library. please go to our web site at www.press.org. thank you for your time in coming to the national press club today. this meeting is adjourned. [gavel sounds]

hosc-sph [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> first, a kansas debate with republican primary candidates vying for the seat of sam brownback who is running for governor. that is at a 30 p.m. eastern time. missouri secretary of state is seeking the missouri senate seat. that is at 9:30 p.m.. then congressman roy blunt in the republican nomination. he speaks about the economy and jobs at 10:10 p.m. tonight.

campaign 2010 coverage on c- span. >> the senate judiciary committee returns next week to vote on the nomination of elena kagan as the newest supreme court justice. learn more about the nation's highest court in c-span's latest book, "the supreme court: canid conversations with supreme court's both sitting in retired." >> the senate returns from july 4 recess next week to pile of work. that includes the financial regulatory overhaul and renewal of jobless benefits. plus, additional funding for fiscal year 2010. the bill also contains additional disaster spending

with other domestic spending proposals. the senate judiciary committee could vote tuesday on elena kagan's nomination to the supreme court. any panel member can request a one week delay. committee approval would move forward to the senate. live coverage when the senate returns tuesday on c-span2. reworking national flood insurance program coverage. live coverage occurs tuesday on c-span. the summer meeting is underway in boston. we are bringing you live coverage throughout the weekend. tomorrow's topic is the federal budget and national debt with leaders of the task force created by president obama to find ways to reduce the deficit. a former republican senator alan

simpson and former clinton white house chief of staff co-chair the commission on fiscal responsibility and reform. live coverage of sunday morning at 9:30 a.m. eastern on c-span. >> this week, defense secretary robert gates said that he is recommending a marine general to the u.s. central command. he would replace general david petraeus. secretary gates also recommended a new requirement for top officials. they must request permission before reporting to reporters. >> today, i am pleased to announce that we nominate the general to u.s. central command. the general currently has joined forces command and is one of our

military's outstanding combat leaders and strategic thinkers, bringing an essential mix of experience, judgment and perspective to this important post. he has served and commanded at all levels and has held a number of key leadership positions. including battalion commander in the first gulf war, leading the first conventional ground forces inserted in afghanistan, commanding the first marine division during the initial combat and stability phases of the iraq war and command of the marine corps forces in central command. whether commanding troops in battle, leading the marine corps combat development command or developing new operational concepts the general has proven to be one of the military's innovative thinkers. his insights into the nature of warfare in the 21st century has influenced my own views about how the armed forces must be

shaped and postured. he has inside and independent thinking and that is why i selected him to leave the red team on the department's 2010 quadrennial defense review. the post he is taking is a critical one at a critical time. the united states has vital longstanding interests in central asia and the gulf region going back decades. interests and commitments that transcend multiple presidencies of both political parties. i consider it essential to have a confirmed a full-time commander in place as quickly as possible as we confront the challenges posed by the ongoing operations in afghanistan, our troop withdrawal and iraq and iran's nuclear program as well as the threat represented by terrorist groups throughout the region. .

i told military audiences that the press was not the enemy and that it was counterproductive to treat it as such. accordingly, in my approach to media relations, i have attempted to be as straightforward and cooperative as possible, and had encouraged

this department's leaders to do the same year that has not changed. last week's memo was not about how the media does its job, but about how this department's leadership does ours. it is not a change of policy, but a reaffirmation of an existing policy that was being followed selectively at best. it reflected the fact that, for some time, long before the recent article in "rolling stone," i have grown concerned that we a become disorganized and in some cases sloppy -- we have become a disorganized and, in some cases, sloppy in the way with that we interact with the press. some of the information has been lacking in proper context. reports and other documents, including sensitive subjects, are routinely provided to the press and other elements in this town before we know anything about them at the white house. even more, highly classified and

sensitive information has been divulged without authorization or accountability. my hope and expectation is that this new guidance will improve the quality of present age and, by assuring that the people the media talk to can speak with -- quality of presentation, and, by assuring that the people the media talk to can speak with full knowledge. an additional personal observation -- both the last two years, i lost the first three central command commander and an outstanding commander of i first-ratelost an central command commander and an outstanding commander of isaf. i have had two very different presidents expressed concern to me about senior defense --

express concerns to me about senior defense officials. these instances, with my own frustration, led me to conclude several weeks ago that we need greater coordination and discipline. effectively communicating what we do and how we do it remains a top priority. in fact, i consider that my duty. it is a response -- it is the responsibility that i have to the american people, as well as the media and the commander-in- chief. i take this very seriously and i expect those in the department to do the same. on that note, we will take your questions. >> i and many of my colleagues have a lot of very basic questions about how this new media policy is going to work on the ground. i hope that you will have some very specific guidance about who

is covered, what is covered, and whether this amounts to a pre- screening policy. i want to ask you something more brought on that. since your predecessor was widely criticized for reining in dealings with the press, said to have had a bunker mentality, does this mean you are also developing a worry that the press has become the enemy? >> no, not at all. this is not about you. this is about us. we're doing things in an uncoordinated way. it is about people in this department speaking about issues or they do not have all the facts or the perspective. it is about somebody in one part of the world in the military court a senior defense civilian speaking out on an issue without realizing -- in the military or

a senior defense civilian speaking out on an issue without realizing its sensitivity. we want to give them situational awareness. a lot of the interviews you ask for are already vetted or orchestrated through public affairs. this is as much about our being better coordinated and our making sure what the parameters of an interview are so that people that are being interviewed, if you will, stay within their lane and are not speaking out about issues that they do not know everything about or where they may not be informed at all. this is more about our being more intelligent and thoughtful about how we respond to requests for interviews, and to try and make sure that the information

you are getting is accurate, as well as making sure that our people are not speaking out about issues where they may be treading on sent to the ground and not even know that. >> i want to ask you both about the nomination of general mattis. i am sure you both recall the incident in 2005 where, in front of television cameras, in southern california, general mattis said, "actually, it is a lot of fun to fight. you know, it is a hell of a hoot. you have guys who slapped around women in afghanistan because they do not wear veils. guys like that have no manhood left anyway. it is fun to shoot them. -- them." given the fact that you say you are nominating him because of his judgment, he was reprimanded in 2005 by the commandant of the marine corps at t time and asked to watch his words more carefully,

nonetheless, he is going into an extraordinarily sensitive part of the world where the military is trying to demonstrate it is about something more than killing. do you have concerns about those remarks and his views about this issue? >> as you pull out, that was five years ago. the appropriate action -- point out, that was five years ago. appropriate action was taken at the time. the subsequent five years demonstrate that the corporate lesson was learned. in the wake of the "rolling stone" interview, we discussed this kind of thing. i have every confidence that the general will be -- that general mattis will respond to questions and speak publicly about the matters for which he is responsible in the an entirely appropriate way. >> can you also comment briefly

on the medial memo? you say that any means of media and public engagement -- any means -- with a possible national or international implications. i think that is perhaps the broadest, by any measure or, rebounding or restriction -- any means of public engagements. could you explain, do troops, commanders, people in the military give up their right to free speech -- does any public engagements they have, which is what your words say, now have to be screened? what right of free speech does a person in the united states military have? >> this is not about the first amendment. it is very much about what the secretary laid out in terms of coordination and synchronization.

it is not coming in any way, shape, or form, meant to preclude -- it is not, in any way, shape, or four, meant to preclude involvement with the press. we follow certain guidelines. we emphasize guidance that has been out there for an extensive period of time. we just walked away from it. i think, in light of what has happened recently -- it is not just that "rolling stone" peace. that reaffirmed what the secretary said. we've talked about it for longer than that. there is a need to, in fact come ensure that we coordinate and synchronized. we need to tell -- in fact, ensure that we coordinate in synchronize. -- and synchronize. we need to tell our story. we do not need to see the press as an enemy.

we do not need to overreact. it is at challenge today because of the 24 -- it is a challenge today because of the 24-hour news cycle. in engaging with the press and the media, we have to do that in the position that we're qualified to do that. >> i do not need to take much time, but in these engagements, are you saying that a troop in the field, before he e-mails, has a telephone conversation, post something on his facebook page, twitters, as any public engagement with the media, it must be cleared -- >> if i were to use the trooper in the field, the rules with respect to that should be understood going in. just follow those rules very specifically. one other comment i would like to make about general mattis -- i have watched general mattis

for a number of years. i have watched him very closely in the last couple of years. one of the house that he had in addition to joint forces command -- hats that he had in addition to join forces command was as a commander in nato -- to joint forces command was as a commander in nato. i have every confidence -- i watched his skills. i watched him do get exceptionally well. i've great confidence -- great confidence that he will be able to carry out the duties this command -- duties of his command, without prison his confirmation. >> do those remarks trouble you question -- without presuming his confirmation. >> to those remarks trouble you? -- and do those remarks trouble you? >> i will let the secretary

address that. >> are you concerned that your memo could have a further chilling effect on their willingness to talk, not only to the media, but the american people? out of curiosity, what was your reaction when your memo against leaks was leaked? [laughter] >> that it was highly predictable. let me address this more broadly. we need more internal discipline about how we coordinate the substance when people are going to be interviewed or going on a television talk show or sitting down with you all, in order to make sure that they are not talking about issues that are outside their area of knowledge, their area of expertise, and to make sure that they know if, there are some areas within their expertise, that some of

those might be sensitive because they are in the middle of a decision-making process or something. the idea is not to turn off the interview, but to try and help the person who is giving the interview understand the sensitivity. every time before the chairman and i come down here, we sit down with people from our public affairs office and we hear about the issues. we hear what the press has in mind. that is the kind of thing we are talking about. when people do have interviews, they will have greater situational awareness. we have to use some judgment. the reality is, stories in the press, and you have heard this before from me, whether it was the stories on the treatment of outpatient wounded four years at walter reed in the "washington post," or stories ion m-