understand the type of mud and cement that will be needed to actually kill the well. in other words, we pump it in and pest trobal -- it's probably a lousy analogy but if you think of holly tree rings. you want to go into the first tree ring and fill that with mud and then cement it so it's closed and then once that's done the tree got smarle. you drill back through what you just did, you're in a smaller tree. there'll be successive drills between the casing and the well bore and go into the casing itself. 10 that's what's going to happen when they get down there. that's the reason you heard a variation on how quickly those could happen. if you had to go clear to the inner part after the tree, it'll take clear to august. if you find oil in the outer part and close the well at that point, it could happen earlier. that's why we say mid august. but knowing the coffin the well bore and the amount of pressure it can hold is really important because the more pressure it can hold the easier it will be

to fill the well and kill it. .

>> i am wondering what about the seismic tests might have convinced you to move for it? was there a particular fact, result of the test that may be meiji's think, let's go? >> i think it was -- made you think, let's go? >> it was the information provided by bp regarding the engineering and the strength of the casings and it was more detailed discussions provided by extern the experts about what conditions -- or the stability of the formation of around the world.

there -- around the well. there was a study done on the 26 that april after the event. after the 48-hour test cycle, the pressure readings and take us there, we would do another one we have a baseline data to compare it against and if there has been an anomaly, a change in the sea floor, a change in a formation that might indicate that oral was moving forward and there might be a breach, -- oil was moving forward and there might be a breach, they might know that. >> we will take questions from the foul line at this tiphonen . line. >> hello, admiral, yesterday, both bp and you were really

gung-ho for this test. and then the delay for 24 hours seemed somewhat sudden last night. are you really confident there has not been an of damage or damage in that wall board that caused oil and gas to go outside of the crevices in the casing? >> i was a gung-ho for this test. i remain gung-ho for this test. the implications of what we can do will be extraordinary and we need to move for. after i did the president yesterday, hyper dissipated in a three hour meeting -- i participated in a three hour meeting. we agreed that we ought to take 24 hours and look into it. we wanted to make sure that we have informed consent moving ford and considered all the factors and a couple more were introduced and we were not aware of. we were doing due diligence. next question? hi, thank you.

what are your concerns regarding [inaudible] the cap at the top of the well? >> having a knowledge of the pressure at the top of that have been stabbed and having knowledge of whether or not there has been that damage to the well bore and casings is helpful because and informs us of how difficult it is going to be, how much mud and how heavy the mud should be, and how we should go about sealing the well. the greater the pressure, the easier it is to kill the well because you have that pressure pushing against the hollow to be you are trying to fill. you have the chance where some of that mud is going to escape and go out through a break, a breach in the casing or wallboard, you can still kill

the well. -- or well bore, you can still kill the well. there is a direct relationship with the information it gained in this integrity test that will help us and killing the wilell. next question? >> can i follow up? when you build up this pressure, is there any chance it could interfere -- >> i don't believe so. has been noeant -- and no indication. we are holding the second relief well to make sure there is no interference. the areas we are looking at that potentially might be a problem, and this is based on estimates of what might have occurred during the event and what we learned from the top kill, we

think these problems are probably well above the intersection point for the relief wells. >> hi. just to be clear, it sounds like what you are saying that previously you have not seen anything that indicated there was any leakage in the casing. it sounds like you are saying the results this morning confirm that it does not appear there is anything below that line. is that accurate? are there some indications of some flow through the well head itself? >> i think that is accurate. let me tell you why we have been obsessing over this.

we had tried the top killed back in may. and we can all lot of mud into the well. we were suppressing the oil, but the maximum pressure we were able to achieve in pumping that mud down the well bore was only around 6000 psi./ why were we not able to achieve a greater pressure in the top kill? it was just going go through the top of the clot prevented. there was a lot of mud left there. -- top of the blowout preventer. it might be escaping through a breach in the casing. the indy sure that something is potentially wrong when we had this discussion was due to the fact that we had never been comfortable with what the 6000 psi meant and not being able to

achieve a higher pressure. was that responsive? >> i think so. it sounds like the tests this morning did indicate there was hydrocarbons that or not there before. is that right? >> it removed the possibility of a negative event. that is correct. next question? >> i think i speak for a lot of us here, this signature moment is when we see the main board actually close. can you tell us whether the metal ramp closure is the quick madeleimechanism? >> i did not ask them how quick that happens. i know this from discussing with the engineers, the middle ram and the kill lions are both open annes are both open and closed. we intentionally put a different

choke mechanism on so weaken slowly increase the pressure by choking off the line. if we got to a certain setting and we were at 5000 psi and returned it three more times and it was still 5000, there is reason to believe we have problems still below. my guess is it will not be very long at all. >> the last question. >> is there any chance that shutting in this ram even for a matter of minutes can create an incident? what are the chances of creating a cratering incident? >> let me ask you a question. do you mean there would be scouring around the well bore that would create instability in the geological formation? >> yes. >> i am glad i got it right.

>> that was one of the issues we discussed in the last 24 hours. there were instances elsewhere -- they are few and far between work after release, the only way for the oil to go was straight up along the well bore. that resulted in liquidation of the surrounding to logical area. we have come to the conclusion that the ideological formation or around this well is not the same -- the geological formation or around this well is not the same. we are ruling out the prize -- the probability of high consequence outcomes before moving forward. thakn you. nk you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> in a few moments, the joint

economic committee ask christina romer about the economy and jobs. and less than two hours, the hearing on the future of individual tax rates and whether or not bush-year tax cuts should be extended. then today's pentagon briefing. the senate judiciary committee votes on the supreme court nomination of elena kagan next tuesday. committee republicans asked for a week's delay. live coverage on c-span 3 at 10:00 a.m. eastern. >> we added a new feature -- bill search. you can search for any congressional bill, watch a video from the house and senate floors. click the congress tab and you will see bill surge on the page.

it is online and free. the c-span video library -- it is washington your way. >> white house economic adviser, christina romer, testified before the joint economic committee on a report says the stimulus act has created 3 million jobs. our coverage begins with questions from members and is a little less than two hours. >> i would like to ask a question about my home state of new york. i saw in your report that you released today that the recovery act has created an estimated 206,000 jobs in new york state. of course, i am pleased to see that. new yorkers need every single one of those jobs. along those lines, can you tell me how much private investment in new york state has been. purred by the $100

million in investment? >> [inaudible] i wanted to first say a word about the state employment numbers, because as was mentioned, we say those are inherently more uncertain than our overall estimates. it is important to realize we get direct reports from a small fraction of the recipients of funds. no one fills out a form about unemployment insurance or tax cuts. it is only direct insurance. that gives us one read by straight. ate. we do the best we can, but it is harder when you are trying to do it for 50 individual states. the best that we can, but it is inherently harder trying to do it for 15 individu states. in terms of how much ofhe

leverage is happening in particular states, we haven't actually done that analysis. it was hard enough to get the overall level of analysis but that's certainly something that i think we would very much like to work on. i know the vice president's office is planning to do a follow-on to our work. we're the first step in evaluating these leverage provions. i think looking state by state would be very interesting to the degree it's possible. >> that would be helpful. but could you elaborate on what sectors or what areaare benefitting from this $100 billion in leverage, i it clean energy tore loans to small businesses or manufacturing? could you elaborate what areas are benefiting possibly give us some examples of some successes that have leveraged these dollars and helped communities employ americans? >> absolutely. so in terms of areas, one of the striking things is there are these leverage provisions over a wide range of area afc

investment but the biggest ones are clean energy, building construction and economic development. just some examples, clean energy the 48 c advanced manufacturing it tax credit. that's one i mentioned in my testimony. that's where people who want to build a factor set up a company to make some of these new clean energy products, partner,get some seed money from the government and doll that. the president's going to be in holland michigan later this week to talk about an advanced battery manufacturing plant, which is getting a direct granted from the government being matched by private funds. in terms of economic development, that's a lot of that is the small business administration is putting it -- we have the loan guarantees that were passed in the recovery act, they upped some of those. that's partnering with a lot of small business, you know, loans to small businesses. creating, you know, businesses

throughout the country. and then building construction. we know the build america bonds that were included in the recovery act have been wildly popular with a lot of state and local governments and they're being used tonder everything from schools to communities have to other kinds of infrastructure and those are being very, very widely used and quite successful. >> thank you. my time has expired. senator brownback. >> i understand you're going to have a vote shortly. i'll pass to congressman. >> fine, that's a good idea. >> thank you, madame chairman. i feel like in the report, you've cherry pick aid lot of the economic studies and i think almost made up some of the comparative projections. but what's more disappointing is that your own bench marks aren't included. my question is, why don't you have them in there? it was in the first two quartly reports. you can't say that the economy was worse than imagined becse republicans said your

projections were rosy to begin with. so is the white house ducking accountability on the stimulus or simply hiding the test so that we can't match it against the poor performance? >> all right. so let me be very clear. first, on the numbers that we compare ourselves to, we are looking at the same range of estimates that we haveooked at in all of the four quarterly reports. so that we tie ourselves to the congressional budget office, highly respected forecasters. >> is there a reason yours are not in here? you were front and center on what the stimulus would do, as widely reported, members of congress debated on thehouse floor and in the senate, as well. but now they're missing. >> no, they're exactly there. the main goal the president gave was he thought this act would save or create 3.5 million jobs. that is absolutely the marker we are looking at and comparing ourselves to. >> just to be clear, the white house didn't say ever that are

unemployment would remain below 8%. that you would create 137 nonpharm payroll jobs by the end of the year or that 90% of the jobs would be created in the private sector. did you not -- in the act it was actually in the first two quarterly reports, shouldn't have been there? >> it was not in the first two quartly reports. that was in a report we put out during the transition. let me address it right now. the picture that you showed is one that has even showed up on jon stewart. so but let me explain what i think is going on. i think the most important thing to say it has nothing to do with the stimulus not workg. every study that comes out, every test that we do says that the stimulus is doing what we anticipated it would do. it's on track to save or create 3.5 million jobs. >> i disagree with that, but back to srt of hiding the bench

marks. why? >> no, no one is hiding a benchmark. the fundamental thing is about what i have control over, what you had control over in designing the act is what would the act do. what none of us have control over is what was happening in the economy, what was going to happen without the act and the fundamental thing -- >> actually, you did estimated originally what would happen without the act in comparing it against that, it is still a failure. >> okay so that. >> i guess, again, your benchmarks to me mean something because they're not replican or democrat. they come from the white house. they're no longer cited because obviously the performance has failed to meet them. >> no, i'm gng to disagree completely. our benchmark had always been how many jobs would this save or create, and that is what we are judging ourselves against. what's what we estimate in every way possible and contact private analysts on wall street. let me come backing to what

changed between when we made that prediction about what would happen to the unemployment rate is the economy, the track it was on, net of without the recovery act deteriorated. i think it's important to realize. >> but we were telling you that when you made that predikds. >> we were showing it you those were rosy assumptions. >> if you go back and look in chapter 2 because we show you what other forecasters, the blue chip consensus, 50 top forecasters in the country what they were predicting. you forget we were getting a tremendous amount of information that first coup of months and the economy was turning in a way. >> with all due respect, we haven't forget what your bench marks are. i don't know how really you can claim success when you failed op those three key features. plus, predictions you would jump start the economy didn't happen. that you would restore consumer confidence. it is low today. 90% of americans believe the

economy is in bad shape and three out of four don't believe it's getting better. how do you claim the stimulus woed when you've got businesses holding on to $2 trillion of cash that they're not rehiring people with, they're not hiring new workers with, they're not making that investment or expansion decision. that is proof positive that the stimulus has failed because those companies, eager to recover, simply face uncertainty, don't want to be punished, reluctant. how do you stimulate by causes people and businesses to hold on to their own cash? >> congressman i have to disagree fundamentally with your statement that it hadn't had an incredible impact on changing the trajectory of the economy. you can't look at the kind of pictures that the chair woman showed that showed we were on a trajectory of losing 750,000 jobs a month. >> last month, not a single industry in america statistically showed a significant increase in jobs.

last week, a half, little less than half a million people filed for unemployment and that was celebrated. how c these be signs of ccess after a stimulus of breath taking proportions? >> can we cite the number that we've added 600,000 private sector jobsince the beginning of this year. you're not going to get any argument with me. things are still. >> but y've lost 3.3 million jobs since the stimulus passed. it's gone the wrong direction. the federal government workers are the only ones so far that have it had safe pay chicks. >> i think you need to remember again how severe this recession has been and how it got dramatically worse before anyone passed any stimulus act. if you want to know about our forecast errors, almost all all of them came from the fourth quarter of 2008 and the first quarter of 2009 before the stimulus cou have done anything, the economy deteriorated rapidly. that's the main source of why

we're not meeting that benchmark. can i also poi out one mother thing, which is while you like to talk about how we've missed our unemployment forecast, it actually turns outhat our gdp forecast has turned out to be remarkably accurate and in terms of what we said the stimulus would do to gdp even taking into account baseline, because part of what's happened is a breakdown in the usual relationship between gdp and unemployment. >> the gentleman's time has expired. i would like to comment to my very good friend and colleague that i have great respect for, you say we haven't sen any evidence of a recovery that uncertainty is preventing businesses from hiring. and that the recovery act did not help get the economy back on track. of course, i disagree with him. but i was also very interested in reading the republican study committee document. this is from the republican ucus and their committee on

the budget. and i would just like to read a few sentences in there, and it seems to disagree with some of the statements are from my respected colleague. and i quote -- it's from the newest global financial risk area that they're writing about, and i quoted, "theess economy began to slowly recover in 2009 from the effects of a long and deep recession and a financial crisis. gdp growth turned positive in the latter half of this year. financial markets normalized and mar credit markets began to function smoothly after an extended period of pa ral sis and turmoil. for most of 2010, economists have said a moderate recovery was well under way. that's ju from the republican document, and i'd like to give it to my good friend and

colleague. >> do they cite the stimulus for that? because i specifically know it doesn't. it cites 1.3. >> the economy is imoving, according to republican caucus report. we've been called to votes. and i would now like to turn over to senator klobuchar and thank her very much for chairing this committee while we run to vote. thank you for your testimony and here is the republican document. which basically says the same thing you were saying, dr. romer. thank you for your hard work. >> representative cuings. >> thank you very much, madame chair. i told you, i told you that they would say the sky is falling. and that the progress that we have made, the president and your administration had nothing to do with it. i told you. you said something that really intrigued me. you talked about small business

lending and how significant that would be and i'm going back to some of the things mr. brady was talking about. we had the federal reserve in my district about three weeks ago and we had business people come in. one of the things they said is if we could just get access to capital, one lady stood up and said i've got opportunities at my fingertips. i just can't get the capital. and so could you comment on that briefly. and then i want to ask you about the whole idea, and this is the major question, dr. romer. a lot of people think that will democrat, some of us, are not concerned abt the deficit. and we are concerned about the deficit. and i want you to just -- you talked about how it's important that we also create jobs and do those things to spur on jobs. i need to you tell us about the balance, that is dealing with the deficit and also creating jobs because i've got people, and they're concerned about the

deficits but let me tell you something. they're going to try to figure out how they're going to be alive. although they're concerned about the deficit, they're worried about being alive to see the effect of the deficit going down. so can you answer those two questions for me? >> absolutely. so first on the small business capital, what you're hearing in your district is exactly what we're hearing, which is as many parts of the financial system have gotten more stable, it's easier for big foirms issue bonds and get capital. we're still hearing that it's hard for small firms. that idea that there are opportunities at our fingertips and she just can't get the loan to put them into practice. that was something that chairman bernanke also talked about in a recent speech. that's exactly why for several months we've had the proposal for a small business lending fund that takes a small business, a small amount of government money, lends it out to community banks that do most

of the and small banks that do most of the lending to small businesses at very favorable rates and encourages them. they get even more favorable rates if they do more small business lending. it's a very winning proposition. it's very cost effective. we think it will have a material impact on getting more loans to small businesses. >> now, talk about deficit vs. -- now, are you concerned about the defit? >> of couse. >> and you're a professional. you've been doing this for years. i just don't want people to think that democrats and this president is not concerned about the def silt. can you kind of tell us what you all are trying to do? i tell you you're trying to balance this thing out. >> absolutely. i can tell you how many times we have had meetings with the president. he is deeply concerned about the deficit. he's concerned about the fact it's been a problem we've known about for a good 20 years that keeps getting kicked down the road. that's why he set up the bipartisan commission. he was convinced it was such an

important problem. he also nose the only way we're going to solve it is if both parties come together and figure out a solution ta we can both live with. so you'll get no argument from me that it is an incredibly important problem. i do want to say i think the health reform legislatidggislat major step in the right direction for all that we can talk about quality, and efficiency and expanding coverage, that bill was also a major fiscal action. it was a consolidation that is truly going to help slow the growth rate costs and that is the main source of big budget deficits in the future. so that was an important first step we absolutely need to do more. >> if i say to you, don't say, for example, do unemployment benefits because i'm worried about you know, the deficit, i mean, what's your answer to something like that? i'm just curious. >> there are two things to say, one is our budget had a very

serious plan, which is we knew that the fiscal stimulus was going to be going off. right? we also in our budget had letting the tax cuts for the highest incomeerners expire as they're set to do at th end of this year. we mix that had with, you know, a group of targets akds like extending unemployment insurance to hav a sensible path, the glide path back down if a smaller deficit. so that was absolutely important, it's important to have a plan and we had that in our budget. and so it's important to realize, we are making foreign fiscal consolidation over this year and next year. but the other point that i made is we do need to worry, when unemployment stays high for an extended period of time, what you worry about is some of tho workers are permanently scarred. they drop out of the labor force. they lose their skills and so

are not as em employabl as they were before. one of the worst thing that could happen is some of this high unemployment becomes permanent or structural because that obviously is terrible for the people involved. it's terrible for e productivity of the country. but it's also terrible for the deficit. i think it is, in fact, short sighted to say we need to, you know, we can't do anything today to get unemployment rate down because of the deficit when by not taking those actions today, you could make the deficit worse in the future by causing unemployment to be permanently higher. >> thank you very much. i see my time has expired. >> representative burgess. >> thank you. thank you, senator, for yelding to me. the chairman romer, are you familiar the business roundtable and the business council ong june 21st sent to peter orszag a list of things, the letter that accompanied it says as a follow-up to your request, mr. orszag to, both the business

roundtable and business uncil, for examples of pending legislation and regulations tha could have a dampening effect on economic growth and job creation surveyed their members to get their views and a detailed description of what they see as deposited initiatives that will inhibit growth paraphrasing there a little bit. are you familiar with this document? >> i am. >> on page 10 in the detailed portion, about the middle of the page, there's a paragraph devoted to texas title five permitting and new source review. and this is a complicated subject. i know it's not really the subject of our discussion today, about let me use this as an example of some of the things that are happening at the level of administration that are having an inhibtory effect on investment certainly in my home state of texas. on march 31, the epa formerly disapproves of provisions to the

texas exemption rule that allowed facilities to use certain types of control equipment to mak cnges in their operations without going through permit review as long as these changes did not result in a net increase in emission. so we're not harming the development any more but we were asking, we d some flexibility in implementing new equipment coming online in some plants like refineries that make refined product for gasoline that people dend upon in this country and need to have a stable and price secure source. so it goes on to say continued epa objections could delay startup of certain projects already under constructi or extend the permitting process for major new projects. in general a flexible permit can provide a single emissions cap for part of an entire facility lieu of pmitting each individual unit built within the facility. here's the important part.

similar rules exist in other states and have not been allenged by the epa. is texas being singled out here or are other states that work under flexible permitting from the epa expect similar draconian policies toen enacted in other states that do refining? >> all right. let me i think i'm not going to try to get into the specifics of that particular rule. let me actually though, the general issue of regulation certainly as i said, we've been talk together business roundtable. i think probably the most important thing in that letter was the first sentence tt said as you requested, here's the wo that we've done. i think what you're seeing is there's been a lot of business outreach one of the things that i'm at lots of meetings are w are meetings with businesses to hear about -- >> i'm going to run out of time. this is a terbly important point back home. >> all right. >> and the economy of texas

actually haon a little bit better than some other state economies. we're not a basket case yet, but we could be with this type of federal burden coming down on the state permitting process. we want cleaair in our state. there's no doubt about that. this does not increase the pollution burd in the state. we're asking for flexibility. right now governor perry is in a pitched battle with the epa over this and it does no one any good to do that and doing nothing to foster job growth. this is down in the houston, beaumont area but it's certainly going to affect the economy of our state. talk about the health care bill. you don't really believe that that health care bill that was passed is going to lower the cost of health care in this country. >> i absolutely believe it is going to lower the cost. >> it is a fantasy that needs to be stamped out and rejected. we're through with the bill. the president got what he

wanted. let's admit we've driven costs through the roof. if you're really honest aut what happened in that bill, we didn't include the dock fix in that bill because it was 300 to $500 billion. when that bill comes due, do you really believe that the health care law that is now the law of the land is actually going to reduce the cost of anything for anyone in regards to health care in this country? we turn tons, tons of regulation over to the federal agencies. no one has any idea what those rules are going to look like. your business roundtable is concerned about the effect on jobs and job creation of the result of those rules. and if those rules become too onerous, employer sponsored insurance will indeed become a thing of the past. if you like what you have, you can keep it will become a hollow promise and the federal government will have the burden of all those costs that the private sector is now unloading. it will be cheaper to pay the fine than it will be to keep up

the rules and regulations. >> congressman, i just have to recommend that you read three wonderful studies done by the council of economic advisers where we went through the provisions of the bill and our analysis, based on outside studies is that it will slow the growthate of costs by 1 percentage point per year. the other thing i think we lose sight of the fact the reason it was as hard as it was to pass was because it included very you hard things that will help to control the cost s independence payment advisory board is thing we think can. >> scares everyone to death. >> we think it can help to slow the growth. >> my name is up. i have to say richard foster, the actory came up with the figure that was available for the figure before we voted on the bill that said the cost of

this thing was going to be much greater than what was being advertises. i have sent letters to secretary belius. let us see the notes and e-mails what went on between the actory and the head at hhs. before we voted on this bill. why was congress denied accurate cost information on this bill? i have not gotten an answer from the administration yet. >> can i say you did get an answer from the conditioningal budget office which is one of theources of high quality information and what they said and what we based a lot of our analysisn is that it would save $1 trillion over 20 year >> to prayer phrase, they said oops, we goofed. >> thank you very much, dr. romer and thank you for being here today. i'm someone, i ud to be a prosecutor. so i believe in facts and i've been hearing a lot of accusations that aren't i believe are not fact-based. you seem to be someone who's pretty straight straightrward.

just to get one fact completely straight. is it true that we lost 3 million jobs in the last six months of the bush administration? >> yes. >> and then is it true that so far, this year, private sector employment has increase by nearly 600,000 jobs? >> yes. >> okay. well, i think i'd rather be on this trend even though i will admit it's not exactly where we want to be yet than where we were back before we passed the recovery act, before we starred doing a number of transportatio projects in my state that i know were long overdue i guess this question of predictions. at the beginning of the year, i assume you had a counterpart under the bush administration that headed up the council of economic advisers. did they predict that year that the administration was going to lose 3 million jobs. >> no. >> did they predict that they would gain jobs actually? >> i believe they did. >> i think that's interesting because people seem to be making a lot of hay out of things. when i look back at the time

when we were basically on the edge i've financial cliff, i remember the country came together at that moment, good or bad, with president bush and with john mccain and barack obama and made a decision that we needed to shore up the financiasystem. >> absolutely. >> i will believe we then continued with unemployment losses under the bush administration, president obama tookver. my memory of the facts is in the first month when he took over, while bush was still president, we lost more jobs in this country in the month of january than the state of vermont has people. we then passed the stimulus package. we evened things out and are now in what i consider a recovery that is taking too long. i'd like it to go quicker like everyone else. i will say in my state the unemployment rate is in the low 7%. but as senator schumer pointed out when people are hurting in a household, if in their household no 00 has a job it's 100% unemployment. the things have i found helpful in our state is the jump start

of the stimulus but then the belief in the private sector economy and,ing with small businesses. that's why i so badly want to get the small business bill passed as well as belief in innovation and american jobs and america making things again and exporting them to the world. i would like to see some sht in focus. i actually spoke with people in the white house about this today. continue, this is a continuous of what the people talked about in the state of the union, doubling the exports in five years, a major focus on math and science, nation building in our own nation is what minnesota native and "new york times" columnist tom friedman calls it. so i'd like to you shift a little bit and talk some about where you see this going in terms of some of the other initiatives outside of stimulus that the administration is working on that you think will be helpful, starting with the export initiative. >> i'd be delighted to because that is, you know, one of the issues that you knowwe've

talked a lot about is you know the world is different before the recession, we know that we were saving very little as you know, consumers had very low savings rates. we were building a tremendous number of houses, right? so that we had an overbuilding in housing. when we think about what the economy is going to look like as we come through, we don'tthink consumers will go back to saving zero and we anticipate that construction will be a smaller fraction at least for a while. the question will be where is the demand going to come from for all of our goods and services so we keep people empled. one of the things we've identified for the president is an obvious place where we can expand is exports. that creates demand for american products and keeps us employed here at home. so weep are doing a range of things. a lot of them are simple no brainers. what we learn from the theoretical economics literature is often it's ju small fixed

costs that make it hard for a firm to get over that first hump of starting to export. and so just things like providing information through the sba for small businesses or some more credit through the import, export bank can make a big difference in getting firms that first export experience and getting them used to exporting. so we're taking a major initiative there. secretary lock is working with a tremendous amount of additional commercial diplomacy taking people around the world trying to showcase american products. the state department is taking a lot of the personnel we already have abroad and saying, can you get better at helping, you know, helping our firms sell their products, get used to exporting. we absolutely think this goal of doubling exports isompletely reasonable and something that will be very good for the american economy. >> senator lemieux and i have a bill that will actually, which we're trying to get with the small business package. 80s bipartisan bill.

he's a republican from florida. went through commerce unanimously to try to beef up some of the work the department does with small, medium sized businesses because i've seen a huge success i our state along those lines. i did have one question that senator schumer was going to ask and then he had to leave early. and he is introducing a bill to extend the hire act for six months. it includes a tax credit for businesses that hire unemployed workers. 179 expensing that allow businesses to deduct expenses in the year they are purchased. that's something i heard a lot about out there with our small businesses and build america bonds. is that something you think will will be helpful? >> in the fall, it the council did a lot of research on a jobs credit like the schumer hatch after. and we were very enthusiastic and thought it could have very good employment effects.

as senator schumer mentioned, there is some evidence coming in how many workers are eligible for it and suggeing it could be quite effective. i think it's an issue we need to study to figure out, but what i can tell su we are very enthu yas tick as always to work with congress on measures that will help to put people back to work. >> one last clarification of a fact question bere i turn it over to senator brownback or representative pur jess was asking you about health care expenses and you i thought made the good case that over the long-ter this bill took on the difficult task of bringing down health care costs which have been going up and up and up at the expense particularly of the self-employed and small businesses in this country. the cbo scored this by nonpartisan cbo whh i know is relied on my by colleagues during the bush administration to get accurate numbers. is it true that the cbo scored this bill as saving $138 billion

over ten years? >> yes, it. >> for the health care bill over 20 years, the score was it would save $1.2 trillion. are those the numbers you're talking about? >> those are exactly the numbers i'm talking about. >> again, i believe in facts. thank you very much, i turn it over to my colleague, senator brownback. >> and i believe the taxes kk in in year one and the benefits not till year four, chair? >> the important thing is i believe at the end of the ten-year window, it is still positive. so i think that's actually -- that's not what's getting you that good number. >> when you have ten years of spending and ten years of taxes on that. >> thas when it saves a trillion dollars or $1.1 trillion. >> good lord, i hope you're right. >> i hope the congressional budget office is right. >> well, i want to talk about the uncertainty factor that's out there because surely you're hearing that. i know the president called a number of business leaders and

they cited to him the series of uncertainties why they're not employing and looking forward, which hopefully, are you, i'm sure you're looking forward saying look, how do we get these guys to put money in the game, men and women that are investing, creating jobs. tryi to create an atmosphere for growth. one of the things that people staerl at as saying it's going to drive up cost is the cap and trade proposed legislation. to pass the house, chapter of the economic report, the president supports cap and trade, carbon emissions, transform the energy sector. cbo questions the premises for cap and trade, how policies reduce greenhouse gas emissions could affect employment in a may 5th report, they say emission policies would decrease employment in energy intensive industries.

"eventually the country would return to full employment, average wages would be lower than would otherwise prevail because the higher cost of energy would reduce the cost of productivity of the country. that's a direct quote of the cbo report. give the uncertainty and the difficulty we're having in the economy, would the administration now say it is not time to pass cap and trade legislation? >> let me first talk abo the uncertainty because it is something that we will hear a lot from business. i think the important thing to realize is what will have been the major sources of certainty over the last 18 months? it's been the financial crisis. it's been the terrible recession. that's the number one thing we have worked with the congress to try to turn around with the federal reserve has been working on, what secretary geithner worked on with the financial stability plan. i think that has been incredibly important. also, on the regulatory side, i think as was made, an the

statement madeery well. >> i'm going to really run out of time. do you have cap and trade -- i was asking you directly about cap and trade and its uncertainty factor. >> the president has said he actually thinks getting a sensible energy legislation like many other changes we make can helpo resolve uncertainty because people understand what the framework is and what we do know is that we have a problem, we have our dependent on foreign oil. >> even though cbo says this is going to drive employment and wages down, you're for cap and trade at this point in time in our economy? >> we are for a comprehensive program that will counteracts many of those things by investing in clean energy, by trying to jump start the clean energy economy. we think a lot of -- that can have very positive employment. >> do you believe emission reduction policies would decreases employment in energy intensive industries? >> i a it's going to ached different industries in different ways.

>> what about that industry. >> renewable energy for example. >> what about in an energy intensive industry? >> we'll have to develop it very well. that's something the bills are being very careful to try to make sure we minimize any costs on some centers. >> you're an economist. you're an excellent economist. you know this is going to drive down employment in energy intensive industry? >> what it's going tooing is to change the nature of what we produce. we think that's something we to. >> will it drive down employment in energy intensive industry? >> it's going to depend on how we design it. that's going to be the basic thing that has to happen. >> so you honestly believe it might not drive down flot an energy intensive industry? it's what the cbo has said, what every economist i've read. >> we're certainly going to need to think moral about the evidence, i think the other thing is, right, the whole thing that the president is trying to

do is to invest in new energy too longs, clean energy technologies. that's the way you're going to counteract, if you're making carbon fuels more expensive, the way you can counteract that is coming up with alternative energy. >> will this make carbon fuels more expensive? >> so certainly what a cap and ade system is designed to do is to put a price on carb. >> and it will make carbon intensive fuels more expensive. >> the most likely and then eventual to think how do you deal with those consequences. you have to remember why we're doing this. >> i understand why we're doing this. >> no one would do this if there weren't a problem. >> i watch europe backing away from some of these policies now because their economy is in such difficulty. i'm thinking why shouldn't we be watching what's taking place there if that's the same sort of track that we're looking at going down. if they've already pursued that aggressively and now saying wait

a minute, look at what it's costing us and look how difficult this is, maybe we ought to take a moment and say, well, let's watch what happens here. and let's look at this for a little while and see that we don't hurt ourselves in the process in an already soft economy which i think with all you've been saying today, i believe you think this is still a soft economy. i'm not quite sure, but i believe that's what you think. >> it is still a soft economy. it is a economy that is recovering and as miss klobuchar described, we want to it to be recovering faster. >> the president has a very positive policy which let's be growing the ternate energy. >> i'm all for growing the positive end of it. just don't tax and kill all the other end of it in the press. that's why i always think you do these things by investment and innovation, not by taxes and regulation so you grow it and push it. you've got a hydrogen fuel cell comotive bee we built in toe

peakka, kansas. but it's an investment in and i novation. it isn't us telling the railroads you've got to go to this type of technology and that's how you move through these. on the deficit reduction because i know you've got to be concerned about the deficit. you've said you're concerned about the deficit. it's being added to at $55,000 a second under the obama administration. just had the budget director leave office, financial times reports june 27th that he resigned "frustration over his atlantic success in per swagd the administration to tackle the fiscal deficit more aggressively." and we're looking at nearly a trillion dollar deficit throughout the next zmakd i really hope you can tell us how we're going to start getting away from this borrowing 40 cents of every dollar we're spending right now and move in a positive direction we need to.

>> all right. i think we should very much separate the current deficit, which to a very large degree is being kausds by the terrible recession that we have been through and our long-run fiscal problem which i absolutely agree is a serious problem and something that we need to be dealing with. i think if you talk to director orszag and you talk to the president what you will hear is they a both in complete agreement about how important it is to deal with our deficit over time. that's why our budget charts a path to get the deficit down to 4% of gdp by 2015 and then sets up the fiscal commission encouraging it to then have a goal of getting it down to 3% of gdp or even further. so that is a very carefully woed out plan and something that absolutely is important and it's going to take people from both sides of the aisle. that's why the fiscal commission is there. this is going to be a hard problem. no one side can solve it

themselves. we absolutely need to reach that consensus. >> thank you, mada chairman. if you have a second round, i'd like to have another sest questions. >> wonderful. we will do that bip want to go back here along with my theme of getting to the facts. senator brownback was just asking about the debt commission wit president, as you know had, to basically set up his own bipartisan debt commission with the former republican senator simpson, democraters kins boles of north carolina and he had to do that because we were unable to get 11 of the republicans in the senate who were on the bill to support the statuary debt commission. i was one of the democrats that held out my vote till we made sure we got that commission, held up my vote on the budget. i think it's incredibly important. my question on this is what was the debt going in that the president inherited from president bush? >> well, certainly the numbers are that before we ever walked in the door, i believe the deficit was going to be over $1

trillion. that was what we inherited. and obviously, the debt accumulated. >> as the president has reported, decisions were made to shore up the economy when it was teetering on the financial cliff and how much was added to that then for the deficit? >> in the short are up, obviously, we spent the money that we spent on the recovery act. i think an iportant fact we have on the economic report of the president, when you look at our long-run deficit, all of the actions we take are about a quarter of 1% that have long-run deficit number that is as you know, enormous. and so that they are a tiny, tiny fraction. and that makes sense. it's a one-time expenditure take inn emergency than does not add to your long-run deficit. the kind of things that add to your long-run deficit are rising health care costs we grow over time as r population ages. >> very good. i'm very much looking forward to the suggestions of this commission. i thinkt's incredibly

important as many of us do to do something on this long-term debt. it's very important we get the facts straight about the debt that the president inherited when he got in. another fact clearification, you we asked about the benefits and the costs associate with the health care bill. you and i went over the long-term cost savings with the health care bill. but just to clarify what the benefits are, if you're a senior, there was a question are there benefits. i think someone had said you won't get the benefits for four years. i that i it was very important to clarify therecord. in 2010 if you're a senior, are there reductions in the costs of brand name represcription drugs and help with dloegs the doe dutd hole? >> absolutely. >> is it true that the insurance companies will be barred from him limiting the total benefits americans can use over the course of their lifetime and affordable insurance coverage options will be made available

through a high risk pool for americans and that these are short-term goals of this -- short term provisions that will take effect immediately. >> yes, i'd love to also actually add the credits for small businesses are something that kicked in very quickly to help them cover the cost of health insurance for their workers. >> that's right. because right now small businesses are paying 20% for heldcrit care costs. finally that parents are able to keep their kids on their insurance till they're 26 years old. is that correcting? >> that is correct. >> we were talking about some of the long-term solutions here and things that will be helpful to the economy. up with of the things that i've been very focused on is how we need to jump started and focus on our university research. used to be we had the bell labs

and at&t labs and thosekind of things that would generate ideas and new products and they would go right into the stream of ce mertz. we have gotten away from that obviously. but what i'm concerned about, i always think about those the beijing olympics with the 2,000 perfectly synchronized drummers in the opening ceremony. i thought when i saw that we're in trouble. those drums are getting lour and louder. while they're building high speed rail in shanghai, we're still debating transportation policy and unfortunately, not coming together as we need as a country and while brazil is producing more and more engineers and scientists, we are falling behind. so that is my major focus here. one of the parts of this is how we generated more commercially focused university research and i mean that in the best of ways. sothat that is also focused on jobs. and that we use our universities and great learning institutions as incubators for new ideas that will become the next google or

the next medtronic in minnesota. could you comment on that and how we can doing that and maybe improve the requirements of the america competes act? >> i want to first agree with you completely of how important their innovative research is. when you talk to businesses, the thing that they say still gives us an edge in international competition is precisely because the new ideas are tremendously developed here. and so keeping that i think is incredibly important. if you go back to a speech the president gave early where he challenged both the government and the brilliant sector to make research and development 3% of our gdp to reach a number we haven't seen in decades, i think that is an important challenge. it's one that we starred to meet through the recovery act. and it's something that the president is dedicated to continuing through our funding of things like the national institutes of health, the national scientist foundation and i think your point about as

much as possiblen you know, a natural role for the government is, of course, in doing what the private sector won't naturally do like the basic scientific research. but as much as we can help to make the innovations that we develop here then turn into industries her is incredibly important. onof the things that it's not, you know, particularly exciting to many people is reform of the patent office. just making the way that we protect intellectual property when we cover discover these things is something that we can think can help to make this process better and that's something we've been working on and i think it's an important thing for news congress to work on together. >> very good. maybe someone asked you about this before. as you know, we've been struggling to pass the extension of unemployment benefits here. i did a bunch of events back in mind for the week. everywhere from brainard, minnesota to, lanesboro, minnesota. and i was actually struck by th

number of people that just came up to me. even though we have a lower unemployment rate if ey didn't care about that, maybe they had a neighbor that did. how important it is to make sure we have a safety net for those people who no fall of the their own have lost their jobs >> absolely. the numbers that i gave in my testimony that by the end of this month, 3.2 milli people will have exhausted their benefits because the program wasn't extended. and that is 3.2 million people whose live will be devastated. but it's also a dg on the economy. that is when people have unemployment insurance, they spend it. and that is good for local businesses. it's helping to support their communities and help to put other people back to work. it is incredibly important both the congressional budget office, private analysts like mark zandy identify unemployment insurance as one of the stimulus things you can do that has the highest bang for the buck.

that is incredibly important for us to keep in mind. >> one last question before i go back to senator brownback. one of the things i've noticed in our state that, there are businesses looking for workers and they don't always match-up with the location of where the workers are. i just want to make a pitch for three business iz just visited in the last few weeks. one nest last few months, digi key was hiring over 100 people. they make innards for computers. new french bakery in st. paul, mind, needed people for their nightshift. they don't have the enough people to produce the bread. monogram breads in chandler, minnesota, that i visite just a few weeks ago, was also looking for new employees. so i end with that. my last question will be how do you deal with that wn there are places looking for workers but it's not whe the rkers are. to end with the positive note there clear little are some signs of recovery across this

country. >> i think you're absolutely right that there are signs of recovery everywhere. and i think that is so important for to us keep in mind. but as we've said many times, it needs to be stronger. and i think that is certainly what we are focused on. on the mismatch, we've heard some, there have been some stories about mismatch in skills. you were describing people aren't where the jobs are. you know, one of the great strengths of the american economy is its flexibility of its workforce. and i would anticipate that when you tell people there are jobs in this areas, i can imagine many people are anxious to get there. in terms of skills. >> that's why i tried to do it for the benefit of the c-span viewers. >> excellent. >> like beef jerky. >> but there's also, there is, within the recovery act and certainly there's a other legislation improving our educational system and our job training, making sure that the skills that our children and our existing workers are developing

are the skills that are going to be necessary in the 21st country is a never-ending challenge. it's what every economy needs to do. eneed to constantly be growing and changing. again, working with congress to make sure we're spending that me as effectively as possible. >> thank you very much. senator brownback. >> thanks, madame chairman. to start off with a softball for you, i'm very pleased that the president set the november time frame to address outstanding issuesn the u.s./south korea free trade agreement. i think that's where we can have a broad base of agreement. this is a positive for the economy. there are issued outstanding still related to autos and beef. it's my hope that those can be resolved. you can submit and aggressively push that before congress. i would hope as well you would push the trade agreements, colombia and panama as job creators as well and that you

would push those aggressive wlae t with the congress. >> the president mentioned those and he's singled out korea at the g-20. but i think you pointed out an important point which is as we want to increase exports, opening up world markets through trade agreements is an important way to do that. that's ultimately good for america and for our workers. >> i think you can get some broad base of support. chairman, you're a votednoted ecomist. is this a good time to pass cap and trade legislation? >> you know, with the -- the president has said tt he thinks this is an issue that we need to face. that is absolutely correct, right? so what is true is -- >> so this is a good time to pass cap and trade legislation? >> we need to deal with our energy situation. we have -- we are dependent on foreign oil. we have a problem of climate change. and there's the opportunities in

alternative energy. now is a great time to make sure that we -- >> and it will drive energy cost up? kansas city, kansas, board of publ public utilities projects it's going to drive up their energy costs 25% to their customers. over a near-term basis. that's over the next three years. is that a good thing? >> okay. so let's go back to say, though, the legislation that wasassed by the house, the waxman/marquee legislation, the idea of making it a package is that you deal with any sxweconsequences in te of industries and consumers by -- >> fiair enough. how is kansas city, kansas, going to benefit from this? >> every american is going to benefit by jump starting clean energy, by breaking our dependence on foreign oil and by not warming the planet to the point of catastrophe. all of those are things that need to be dealt with. >> and utility bills go up 25%,

their cost of gasoline in their car goesp to them on a near-term basis and maybe some of them see a job opportunity. so by and large, they're going to benefit from this and near-term and a soft economy. >> so the key thing has been how do you protect consumers? we had a rebate to the energy -- you know, to the service providers to insulate consumers. we can have long discussions on how you design this thing to minimize impact on consumers, to get the benefits through clean energy, you know, preventing climate change, breaking our dependence on foreign oil and deal with consequences. i would love to talk with you in detail about how do youesign that in the best way possible? the president said that we need to do it. >> i would prefer you would talk to the american citizens that looking at prices going up about this. that's where -- i mean, and my point to you is that you talk

about uncertainty, talking about why we're not creating the jobs that we need to at this point in time. there's a positive we can look at trade issues. there's a positive we can look at chinese currency issues. i think that would be a helpful thing if the administration would really push on china to float its currency. and with senator schumer on that, i believe the administration is supportive of that policy. i think those are good bipartisan things. cap and trade, this is a bad time even if you support the idea. this is a bad time. and that's where you know, i look at it and i -- that's when you get people keeping their investment on the sideline or you get people saying i'm not sure about whether or not to move this on forward. and it would be wiser, i would submit to you, let's invest in renewables. let's do more ethanol. let's do things that support wind energy. but not cap and trade that drives up your cost at a time

when you have such a weak economy. i would really -- i'm not going to convince you to do that. >> you have convinced me that we should talk more. >> i'll be happy to talk with you. i'm going to run out of time. your -- you talk about using the best data available. >> uh-huh. >> you've created this term jobs saved. jobs created a saved. >> uh-huh. >> now, that's -- you've got well-respected economists that believe this is a non-measurable number. i'm sure you're familiar th this. >> uh-huh. >> harvard university professor greg manky said it's an act of political genius. you can measurehow many jobs are created, but there's no way to measure how many jobs are

ved. another professor recently says the council of economic advisers shamefully vetted a number called jobs saved that has never been seen before and has no agreed meaning a no academic standing. now, i'm certain you're familiar with academic standing on numbers in terms -- and, you know, i don't reall want to dispute with you about the nature of the state of the economy. but i think we should be on measurables that have been generally agreed to by the profession and this one is not. >> actually, i disagree fundamentally. actually both those distinguished economists i'm sure actually uerstand the fundamental notion that any policy has to be judged relative to what otherwise would have happened. allen meltzer is a distinguished historian. everything we do is about

counterfactuals. in terms of how do you measure it, that's exactly what our report is about. we go throh pages and pages of saying how do we identify what would have happened otherwise? and, therefore, how do we say what we think the contribution of the recovery act is? it's hard. it's not an easy thing to do. that's why we spend weeks writing these reports. that's why the cbo spends weeks it's why the federal reserve looks at this. everybody being -- it is a well-defined concept it's just hard. and that doesn't mean that you don't do it. somebody has to say what's the effect of this policy? and it's just simply not possible to say, well, look at this point, look at that point. this is what the policy did. you need to know -- you need to have some way of estiming what would have happened in the absence. it's the fundamental issue in y economic analysis of a policy measure. >> of jobs saved. but let me ask you quickly on the g-20 recently, it was strongly focused on government

deficit spending. and appeared to be saying that, you know, we're all concerned about it but it didn appear that the obama administration was. of what game out of that meeting. they are saying we need to get deficits under control. i would hope the administration would look at that push by european governments particularly as they face this recent debt crisis th for most americans, they saw that as a shot of -- a warning shot to us on the track that we are on. and that you'd put more emphasis -- i understand your concern about deficit, but a lot more emphasis. we just recently pushed -- let's do a freeze on spending for this next year. in the republican appropriations and trying to get the rest of our colleagues to go along with that as a way to get focused on this deficit. i would hope the administration -- >> will the gentleman sum up?

he's way over time. >> we did aut ten minutes while you were gone. >> okay, okay, okay. all right. >> okay. and i'll sum up here. but my point being that the g-20 is deeply concerned. they've confronted this debt crisis that is a -- is a crisis of confidence as much as anything. and we cannot let that come to the united states. that crisis of confidencin the fiscal house in the united states. and i would really hope that if you were more aggressive on dealing with that, we wouldn't confront that crisis of confidence moving on forward. i'm afraid it could come this way. >> all right. so let me first respond by saying, you know, in our budget we talked about non-security spending freeze because the president agrees that he thought that was a sensible strategy. on the g-20, there is no disagreement on the notion that our budget deficit needs to be

brought down over time. we agree comptely with the other countries of the world. that is an issue that we all face. i have said before, i think one of the great, you know, lessons from this crisis is don't, you know, get your fiscal house in order in good times because you never know when you may need the ability to take care of an economy that iin trouble. but i think a fundamental issue that came up at the g-20 is the rate of exit because we do know that fiscal stimulus is having an important effect on the economy. and those distinguished economists that you mentioned, i can tell you from their textbooks, for example, he believes that government spending and tax cuts have an effect on the economy. and if you take away all of that too quickly, what you run the risk of is pushing the world economy back down into recession. and so very much what secretary geithner and the president were talking about is as we move

toward fiscal consolidation, take into account what's happening in our own countries and the -- what's the appropriate rate of moving in that direction. that was the only level on which there was any discussion. the overarching goal of getting our deficit under control, i am exactly with you, the president is with you, secretary geithner, we are unified in the importance of getting that under control. that's why we strongly supported the bipartisan commission. >> thank you very much. congressman snyder. >> thank y very much for your patient today. one quick question, if i might. mr. brady is not here, but i'm reading from his opening statement when he was talking about things that he considered bad things that president obama and congressional democrats, of which i am one, have done he states the top tax rate on capital gains will increase 15% this year to 23.8% in 2013 while the top tax rate will skyrocket from 15% this year to 33.4% in

2013. and i don recall you recommending to president obama that he sign that bill. that was president bush's april 2001 economic plan that was adopted by the republican congress and signed into law by president bush. isn't at correct? >> that is correct. >> which mr. brady voted for. so when he talks about the skyrketing tax increase, it is a plan they voted for. one of the great weaknesses of that plan was that the numbers were gained so that the ten-ar and 20-year numbers would look better because it came to an abrupt end. they didn't have the nerve to carry it out. that's a plan they voted for. they voted for skyrocketing tax rates in 2013, not congressional democrats, certainly not signed by president obama and not recommended by dr. christina romer. >> absolutely. and by structuring it the way we

did, we didn't -- it allowed them -- the debt, you know -- to hide the impact that it was going to have on the defic over time. >> that was the big reason for it. >> yeah. >> frankly fooled the american people. i want to get into this -- we use this word stimulus. we've kind of ignored the word countercyclical, but i'm a te h teacher. if this was the consumption of -- by state government before the recession, jobs drop off, that's what they're -- if this was the consumption by local government before the recession and this glass is what they're -- a drop-off. if this is the consumption by private corporations, small business firms, and this is it after th recession begins. if this is consumption by individuals in the economy like

myself is about to borrow some money, this is our consumption after the recession began. this ilgreats the problem, i think, which is economy is about demand for product. and all those components of the economy, demand has dropped. i can add on another one, which is -- is international buyers. the same thing has happened there. at'semand for u.s. products before. that has dropped off. now, the only one we have tried to maintain or even do a little better is the federal government. to try to -- to be a counterweight to all this drop-off. i want to make one point and then one question. my point is i don't understand what is wrong in the times of a downturn economy, why it has become so bad to talk about orredor ed advocate for something countercyclical to be a counterweight to this. my friends on the other side,

they were fine to do a military runway in iraq in afghanistan, but somehow that money that goes to little rock air force base, that's bad and not a good investment. or, you know, $50 million for clean water projects in arkansas under the stimulus bill is bad, but the deficit spent for clean water projects in iraq or afghanistan is good. i don't get it when you've got this kind of a situation. but here's my question. and somehow i got -- i got put on a goldman sachs mailer years ago and i'm afraid to mention it because they'll pull me off. but is there something inherently different now about these components that's making them difficult -- making it more difficult or by choice they are not buying more product to get that up -- back to the normal level? it's taking them longer. are they making decisions, a deliberate dision, we're going to work on keeping our debt load

lower this time around because we've got some uncertainty out there. so we're not coming back as fast, whether you're local government, state government, a corporate entity, big or small, or an individual. and international. is there something inherently different about this recovery using my bottle analogy? >> you're doing very well at your teaching. >> i'm getting behind bottles. >> you make a couple of excellent points. one is just what's the notion of countercyclical policy? it's precisely what the president always said. at a time when the private sectorsn't buying things, the government has a very legitate essential role in counteracting some of that. that's exactly what the recovery act was designed to do. the one thing i'dsay, though, is that one of the key ways it was designed to do it is not all just the government spending, right? we gave very large tax cuts to consumers so they would go out and buy. we gave unemployment insurance out to consumers so they would

buy. we gave the 48-c tax credits to businesses so they do more investments. so a whole bunch of that is not in that cup. it's in all of your -- it's in all of your bottles. the other thing that you were pointing out is something i was mentioning when you were gone. the world is different coming out of this. we have a lot of consumers that are overindebted. and so they may not -- we probably don't think they should go back to the high-spending ways from before the crisis. if consumers are never going to be all the way up to the bottle, you have to ask what's going to make sure that demand equals? that's why we talked about exports. that's another source of demand. i've talked in the economic report about investment, right? if we can get firms to do more investment, that's going to be something that holds up demand but it's good for our long-run productivity. that's why things like the small business lending fund, the bonus deprecation, zero capital gains for small businesses, that's going to encourage them to invest and be a source of demand

for the economy. so you're absolutely right. we need to get demand up to the level of all those bottles, but i think the composition may be different as we come out of this crisis and we need to be adjusting policies to try to support that very healthy what we call in the economic report a rebalancing. >> thank you, madam chair. >> thank you very much. dr. roammerromer, the long-term unemployment rate during this recession is at a historic high. and in your report, you mentioned that the historical relationship between unemployment rate creases and output declines did not hold during this recession and that the unemployment rate rose much more than expectediven the decline in output. do you still believe that this rule of thumb is holding? >> that's an excellent question. it does go back to how did some

of our forecasts not come to be. part of it was what we discussed at length with mr. brady about the deteriorion in the economy, just ch faster than we or any private-sector forecasters were calling for. but the other piece of that was an unusually bad behavior of unemployment. that given what's happened to gdp, the unemployment rate has risen more than would have been expected. and the economic report, we say it's probably abo bout bout a pa point and a half higher than you would expect. i can'telp but note that law is named after the previous chair of the council of economic advisers, arthur oaken. that is certainly part of why the unemployment rate is so high and higher than people expected is the breakdown in that relationship. the question is what's going to happen on the other side? what we've been seeing is gdp has started to grow again.

the unemployment rate has come down. i think that relationship is pretty much following the usual oaken's law relationship. i think the one thing we, of courseall hope for is anything sort of the -- the bad residual that we got in the recession at some point do we see firms suddenly hiring more bringing the unemployment rate down more quick lly for a given behavior gdp? that's hard to know, but that's a hope that we can have, that wh this thing gets going strongly, do you get that oaken's law residual back in the recovery phase? >> well, many people have noted that during this great recession, we've been very fortunate to have you and ben bernanke, two noted depression scholars, working in the government and advising us. and i would like you to really express -- this is actualla hearing that we talked about that would be interesting, a hearinwith you and ben rnanke on the great -- on the great depression and the lessons

that you learned from them and some of my colleagues are arguing that we should look to greece as a cautionary tale of sovereign overspending. others are arguing that given low inflation rates, we are much more likely to end up with a lost decade such as japan faced. or do we look at the tight monetary policies put into place during the great depression, which many believe prolonged the misery by preventing the flow of credit. what i the most appropriate lesson for us now? is monetary policy too tight? what are the lessons that you feel we should be studying and listening to the most? >> well, certainly i think, you know, many of the lessons from the great depression are actually things that we've put into practice in this -- in is recession. i think it is no accident that chairman bernanke and the federal reserve took such extrao extraordinary actions, were very creative in thinng about how do we deal with the freezing up of our credit markets

because chairman bernanke had studied how devastating the evaporation of credit in the 1930s was. likewise, what we learned in the 1930s is that a collapse of aggregate demand does cause the economy to go into a tailspin. exactly what we've tried to cou counteract is that. it's where the motivation for the expansionary monetary policies have come from. i think if i would take one lesson, it's actually a short note that i wrote last year, is actually from later in the great depression, from the experience of 1937. i think what we saw then is the economy was recovering. it was on track. and there was a -- a desire to have both monetary and fiscal contraction, to basically get back to normal fast ase can on the policy side. exactly what we saw is another terrible recession in the middle of the great depression in 1938.

so i think one of the things that we do need to be cautious of, it goes back to what we were talking about about the g-20. everyone agrees policy has to go back to normal. we need to get our deficit under control. it's a question about when can the economy manage that? what's the right trajectory? do you have a glide path or do you have a -- a very quick adjustment? i think that's a lesson that i'm certainly very aware of and thinking about as we go forward. >> actually, the senator and i had a personal conversation once that this would be a fascinating hearing. i would welcome him to have a little discussion about this, since we won't be having a hearing about it. this was one of your requests for a hearing. >> yes, thank you. you've been very kind to accommodate some of those. there's another school of thought that thinks that a lot of the requirements put in by the administration during the great depression also added to

the uncertainty of the environment during that period of time. and that's what i keep harkening back to. that's what i'm hearing people say. now, i don't base that -- i don't have a poll number to base that on. i don't ve something else, but that -- that you create that uncertainty out there. that's why i've ben harping at you on cap and trade at this point in time. why you would push for something like that. that's one of the other lessons. now, i would appreciate your thoughts about when you read economists writing about that point within the great depressionwhat -- you must not think that was a particular problem during that era. >> i feel very strongly that the main thing that went on in the great depression was a collapse in aggregate demand and that is what caused the high unemployment. and the arguments that the regulatory regime was important, i think, are greatly overblown and actually not a very big part of the story at all. let me come back -- i mean, the

issues of uncertainty, you act as though not dealing with climate change and with our dependence on foreign oil somehow resolv uncertainty. in fact, those are problems that we have to face. many times, by dealing with the problems you actually resolve the uncertainty. i'll give the example of our car rule. there was a lot of question about how were we going to enforce emission standards, california doing one thing, it was actually the industry that said can you just come together? we're happy to have a rule, but we need the certainty of that rule. after we passed it, you found the -- the truck manufacturers came and said, we want one of those, too. so oftentimes getting the legislation, getting things, you know, actually setting down the rules of the road can help to resolve uncertainty. that's the same with a company hen -- comprehensive energy plan. >> if you put cap and trade in, you're going to get a big fight

here. you're going to get a big fight in the country anyway. and you're n going to get the investment that you could on renewables if you don't put c and trade in. i'll give you an easy one. raise the ethanol level up to e-15 instead of 10% ethanol. domestic produced, looks like it works pretty well. you open up to a renewable industry. you get bipartisan support for it. why not pick those pieces like that that you can look at and sa you know, we could do mething like that. >> but what the president has described is one of the ways -- again, let me comeack to -- >> you're not going to go with 15% ethanol? >>e're always happy to discuss things. i'm sure secretary vilsack would be delighted to talk to you as well. >> i'd like for you to look at it. >> we will certainly do that. i do think the -- the -- putting out what everyone knows,

which -- it's an unsustainable path in terms of our consumption of foreign oil. we need to deal with it. by dealing with it we get rtainty. by putting a price on carbon, then people know how to make their investment. that can actually be very good for investment because people know what they need to do. it's, in fact, if you're woied about uncertainty, actually dealing with this, dealing with this problem that is not going to go away can very much help to deal with that. >> i would say that finally acting on finaial regulatory reform in many ways is making the economy more stable and people -- i'd likeo ask the question that i hear from my constituents, a lack of access to credit, lack of access to capital. we did pass a $30 billion loan pool that the administration supported, which i think is important. but wee're also reading that

banks are holding on to excess reserves. why are banking holding on to these excess reserveand not lending? why do you think that's happening? and is that what happened during the great depression? what happened after they recovered somewhat? >> this is fun. this is -- so one of the things that happened actually in 1937 was there were a lot of excess reserves and what the federal reserve did was to change the reserve requirements and just declared that those were now required reserves. what we discovered was banks said, no, no, no, we wanted to hold excess reserves. we've just been through the great depression. they were very nervous and we saw them gathering more excess reserves above the new, higher limit. we have to be careful about figuring what is driving bank behavior. chairman bernanke was talking about what regulators were doing on the ground and how the fed was trying to talk to them

about, you know, making creditworthy loans when they were, you know -- when they were -- whethere were possibilities to do so. so i do think that, you know, we do need to be careful as we go forward, but there is a certain amount of remembering what a terrible crisis we've been through and how it was a searing experience, not just for american citizens but often for some of these small banks. that was a very frightening time for them as well. you can imagine some of their behavior. i think what we're trying to do through the small business lending fund is exactly to make the banks have access to capital provided by the government at a good price. if they're willing to do lending as a way of making them feel more confident about doing lending. we think that's a very sensible -- >> that's a strong argument for that. we could use help in passing that bill in the senate. i hope you'll take a good look at it. >> i've taken a lot of good looks at that bill. the numbers i'm seeing is it's

going to drive down employment and drive up cost. but i understand we have a difference of perspective on that. i just want to thank the chair for being here. i do hope you get a lot more aggressive on looking at this deficit. i don't want to see this crisis of confidence come to these shores. and your stance and your view on that would be vy helpful, to be aggressive on that so we don't see that. chair, thank you for having such an open hearing. i appreciate that. i appreciate your willingness to discussion. >> and i'm just going to keep talking about the great -- lessons from the great depression if it's all right with you, senator. do you think the fed is favoring its mandate of keeping prices stable over full employment? >> so at this point, madam chair, i think it's very important to remember that the federal reserve is an independent agency and i think one of the rules that we in the administration follow is to not

comment on federal reserve policy. >> okay. well, letme ask it in a different way. isn't the inflation well below the targeted level? >> i think we can have a very interesting discussion on inflation. because what is certainly true is, you know, the usual relationship is that when the economy ha high unemployment, the inflation rate comes down. we have been seeing that happen in this recession and certainly in the last few months, bo the level ofinflation and expectations about inflation are continuing to come down and are getting to quite low levels. >> is deflation a risk? >> it is certainly -- you know, as the unemployment rate stays high, that puts continued pressure on inflation. yes, it is a risk. >> since the fed can't lower the targeted federal funds rate, they've already lowered it to between 0 and 25 basis points, to influence short-term interest rates, what other tools do they have in their arsenal to spur

employment? >> well, here i would mainly -- again, i think the most appropriate thing would be for you to bring chairman bernanke in. i think there certainly -- there have been reports in the press of various things that other countries ha done. for example, we hear about quantitative easing, which is things like the -- the fed did last year when they bought a lot of mortgage-backed securities and pushed down mortgage interest rates so that's something that other countries have certainly been doing. that's an obvious additional tool that the president -- that the fed has certainly used in the past. >> and senator schumer asked me to ask this question. he's introducing a bill that we passed in the house and in the senate called the higher act that gave tax credits to employers to hire unemployed people. do you believe this has had a positive impact on employing

unemoyed americans? and do you believe the administration might support such an endeavor? >> the same question was already asked. certainly the answer that i had given then is that we were very big fans of the schumer hatch, the hire act, and that we thought the -- a jobs tax credit was something with very good job bang for the bucks that are on the line. and so it's something that we're going to be monitoring. the treasury just did a study on the number of workers that are eligible. i think it's something that we certainly are anxious to talk to senator schumer about and see what he has in mind. and to pull together the evidence. >> many of my constituents ask me and others about whether or not we might be seeing a double-dip recession. and what is your forecast for the economy? will growth and employment gains in the second half of 2010 be better or worse than the first

half? i get asked this question all the time. i'm re you are, too. >> the first thing to say is important. i do not foresee a double dip. >> great. >> i think the -- what most of the private forecasters are saying is we have gone through a period of turbulence. the troubles in greece that we talked about, slower growth in europe has unnerved financial markets and caused some certainly lower growth abroad. i think what most people are thinking is that we're going to -- like the blue chip consensus, lower their forecast just a very small amount. but it's still basicallysteady. i should say that the administration twice a year does an official forecast that comes out first with the budget and then with the midsession review that's going to be coming out certainly before the end of this month. i would rather not get ahead of the administration's forecast, but we will be coming out with what, you know, our updated

forecast is. >> thank you. and i would say that i'm hearing in my district -- i believe probably senator brownback is hearing the struggles of small businesses' access to capital. i'm astounding at how many respected firms that have been in business for many, many years have always paid theirills and been outstanding businesses tell me they can't find or get access to capital to hire and move forward. and it's a huge challenge. i'm hearing it in the democratic caucus. believe it's a problem across the country. could you tell us what the administration is doing to ease that? could you commentfurther on the small business loan guarantee program and any other initiat e initiatives or actions that we could take to help small businesses have greater liquidity so they could move into the future with more confidence? >> so, i hear exactly the same things that you are hearing.

again, chairman bernanke gave a speech this week talking about what they were seeing in their data. yes, small businesses are having trouble getting credit and that is something that is impeding their growth in job creation. it's absolutely one of the head winds that we face and should be dealing with. you know, when we did a very compa comprehensive review of this, what we thought was the best way forward was the small business len lending fund that is in the legislation. we thought cutting small business taxes by having zero capital gain, we think that's a very sensible strategy. we proposed some small changes to the small business administration loan program so that they could have bigger loan amou amounts. all of those, we think, are things that are likely to work. they are what we thought was the best shot we could take at dealing with this problem. we want to get it through the congress because we think it would be very helpful. >> another area of concern and

if you could comment on the economics of the unemployment benefits, many economists have testified before us that all of this money is plowed back into the economy. it's not only the humanection to take care of unemployed workers, but it also has the effect of keeping them working, looking for a job instead of going on welfare and social security disability, which is very costly to the country and certainly it's better for us to have them working to get employed and every one of these dollars goes back into the economy. i believe we have 15 million unemployed americans at this point. we have passed it in the house. we are hopeful that the senate will pass it. if you could please comment the economics of the unemployment benefits. this committee did a study that showed -- because some of my colleagues on the other side of the isle were saying that giving the one employment benefits would dicourage workers from

looking for a job. they very much want a job and they are frantic to find a job. so your comments on the importance of extending unemployment insurance. >> absolutely. i think what your report found is very much what the economics literature finds, that -- especially to the degree that there are incentive -- or disincentive effects from high unemployment insurance benefits, those are issues that apply in normal times when the unemployment rate is much lower. at a time where there is a -- a lack of jobs, the main effect that it has is keeping people attached to the labor force. i can't think of anything we want more, exactly what we're worried about is workers becoming discouraged, dropping off, losing their skills and not -- and not looking for work. the other point that you made about its stimulus impact is, again, very much supported by the economics literature. i cited a study by the

congressional budget office that said this was a very cost-effective form of stimulus. it's athe very top of the list in terms of what has the best bang for the buck. that's an important point to keep in mind. it is a program that is humane to the people involved but good for the overall economy, good for the people in the community that get the jobs producing the things that unemployed workers buy with their unemployment insurance. >> my collyialollyinalolleague concern about the deficit and the debt. to put it in perspective, how much of this deficit problem is related to the recession? >> so i think an important thing is in, you kno the short-run deficit, a very large fraction. or probably about half is due to the recession. and half to the policies that we inherited from the past. and it makes sense. when you have a terrible recession, tax revenues go down, your expenditures for things

like unemployment insurance go up and that naturally tends to swell the deficit. in terms of our long-run deficit, however, it's a very small part of the long-run problem. the one-time actions that we take to deal with this emergency add just a tiny bit to your deficit over time. the muchigger determinate are things like health care cost, the aging of the population, things like that. >> because the unemployment insurance issue has come up here so much, wouldn't it be best if that were paid for? >> no. that is the simple answer. >> it's not best if it was paid for by the federal government? >> what i would certainly say, the way we set up our pay-go rules d the whole idea -- we had our long dscussion of countercyclical policy. i think if anything counts as an emergency, it is unemployment of 9.5%. you will get no argument from me, we should pay for many

things. we should deal with our deficit over time. i would not get held up over paying for a temporary one-time extension of unemployment insurance. >> what if that is what's holding it up from passing? what i it would pass but for being paid for? would you then still argue it should not be paid for? >> i think the important thing is figuring out how it's paid for. because if -- so the -- if you cut expenditure that would be aiding the recovery at the same time that you're doing the expenditures, in terms of the -- you may help the particular people that are getting the funds but in terms of the overall health of the economy you wouldn't have accomplished very much. >> so you would prefer it not pass if you have to pay for it? is that -- that's the whole -- if i could, chairman, that's the whole issue in the senate. we did the doc f aft it was paid for. we did the home buyer tax credit

after it was paid for. those passed with unanimous consent. that means everybody agreed to it. this sitsthere ready to go if it's paid for. and you would argue it would be better not to pay for it and -- >> there are certainly -- >> than for -- >> there are ways to pay for it. in our budget, we had listed various things that could be used to pay for various priorities. and i think, you know -- so obviously i think the important thing is we -- you know, we need to work to do this because we all agree this absolutely has to be done. and figuring out what we can do that will get this necessary insurance in a way that is good for the economy. i think that's something we can work on. >> so you do support paying for it? >> i support passing it. and that is certainly important and i would love to work wh you and talk with you about what's the best way to do that. >> i never seem to get a straight answer out of you.

you're not opposeded to not paying for it? can i put it that way? that's accurate? >> so you're putting words in my mouth. we're having a very sensible discussion. >> she wants it passed and she thinks it's enomically important. >> i agree with that. >> if you want a way to pay for it, go find it. >> and you supporthat if we can find to pay for it? >> so -- at this point i don't know what we're saying. what i do know, we absolutely need this extension. >> i agree with that. >> we absolutely, you know, the -- i think, you know, there are many things that absotely, you know, need to be paid for. an emergcy extension of unemployment insurance is typically not paid for. that's the whole point, that it's anmergency and that you actually need the stimulus that it provides. and if you wish to pay for it and you think that's important, let's think about what's the best way to do that in a way that is economically sensible and doesn't counteract any of

the way in which it is helping the economy. and that is what i stand for and would love toalk with you more >> another important part of the economy is the -- is the housing. housing is always a large part. some say it's as much as 25%. do you think that the bound in the housing was due to the new -- the homeowners tax credit? do you believe that the homeowners tax credit was responsible for the movement that we saw in our economy in that area? >> so what we certainly -- i mean, let me -- what the homeowners tax credit is, it's like the cash for clunkers program. it gives you an incentive to do the activity while it's in place. and what we found with cash for clunkers is what that did is to bring demand for new cars. not just from a few months in the future but it seems to be probably from very far in the futu because we've seen car sales continue at a higher level than they were before the program. i think we don' know yet about

the first-time home buyers credit. we do so that people hurried up and bought their homes before it expired. i think what we don't know is from how far in the future they brought it forward. the big drop-off in may says maybe it didn't move it all that much from the -- from the future. so i think that's going to be the issue. it's a hard one. >> and also the issue that we're facing with the local and state governments with the f. map that many of us a supporting. the budgetary ortfalls for our state and local governments will result in additional lay-offs and service cuts at a time when our economy is very, very fragile. was aid to the states a cost-faeblthicost cost-effective and efficient storm of stimulus? i'd like an overall statement. >> you will absolutely get one from me. i think it is one -- frankly, we

hadn't had a lot of experience with that form of stimulus. and so we didn't have a lot of evidence to go on when we passed it. but certainly the -- the conditions were dire. it was worth a try. i think all of the evidence since then has been it has been particularly effective. and i will actually cite our first quarterly report on the recovery act. we highlighted the state fiscal relief and actually did a very innovative study trying to really try to pin down causation and what the results of that showed us that it was very effective. and looking state by state, you saw a very big impact. >> how does it compare to other components that were in the recovery act such as tax cuts? what was more stimulus? what was more effective than getting the economy churning again? >> i think we would put the state fiscal relief as one of the highest ones. i think when you look at conventional macroeconomic models, typically tax cuts have less stimulative impact than direct government expenditures

and we'd put state fiscal relief closer to the government expenditures. >> do you think that additional state aid is warranted now in our financial recovery? >> i do, indeed. the numbers that you get from various sources will tell you that state and local governments have a -- still have a budget deficit of about 1% of gdp. if they deal with that by cutting spending, raising taxes, that's going to be a contractionary force on the economy. that's something that we can very sensibly -- it would be money very well spent. it would keep our teachers in the classroom and our policemen on the beat. >> we've passed a stimulus for teachers in a supplemental budget in the house and we hope the senate will act on that, too. one of the good news that you had in your report was manufacturing where we're gaining jobs. and what do we need to do to sustain the current gain in manufacturing -- the current manufacturing trend that's very

positive? what do we need to do to keep this going? >> no, you are exactly right that manufacturing is one of the areas that we have seen coming back in th recovery. i think the numbers are -- we've added 126,000 jobs in manufacturing. industrial production is up something like 8.2% in the last 11 months. and that is certainly a trend that we're very encouraged by and want to see continuing. you know, what is one of the things that the president has talked about is how important it is to -- to make sure that we -- that our manufacturing continued to grow and evolve. and he has identified clean energy technologies as an xwrae of the future and one that we know china is working very hard on, korea, many other countries. germany. and he doesn't want to get left out. that's part of what is so innovative about the recovery act. in our second quarterly repo, we talked about how $90 billion

of the overall act went into the area of clean energy broadly defined. that was a lot of that was designed to jump start this, to make our transition to clean energy work better. i think that is going to be something that's very important. those public/private partnerships that we've been talkg about in our report, that the president will be highlighting later this week in michigan, are, i think, an important step towards helping that sector come back, you know, very strongly. >> i want to -- i couldlisten to you all day, but i have -- i'm supposed to be voting in another committee. i'm sure th senator has other demands. it was really fascinating. it's always really wonderful to -- to hear your report. we're honored that you discussed the economic outlook and had your fourth cea report on the recovery act before our committ committee. we're deeply gratel. i look forward to your future reports on the leveraging between the public/private

sector, job creation projects. i found that very interesting and certainly support your desire to move forward with special reports on how they're affecting the various states. and it's very clear that we need to expand every tax dollar we have and have it go farther and farther to spur jobs and the fact you've beenble to document that is very, very good news. and i just -- i feel -- i just thank you for the documenting that the recovery act is trending, moving this country in the right direction and -- and i'd like to continue working hard in congress to try to help move these proposals, to have access to credit and help create jobs in our country. and, believe me, i don't think either one of us will stop until every american who wants a job haa jo and that our economy is strong enough to support their desires. iant to thank my colleague and good riend, senator brownback,

for being here today and all the colleagues. thank you, chairman romer, for your outstanding report today, and for your public service. thank you so much for being here. we look forward to the next time. we hope we hear again from you soon. maybe you can come back when you have your states reports and tell us what states have innovative ideas that are really working and helping us employee americans. thank you so much. this meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] cracks or a snapshot of washington and the 111th congress, the c-span congressional record, or

reference guide to every member of the house and senate, supreme court justices and state governors, allah to fingertips. order online and c- span.org/store. >> in a few moments, hearing on the future of individual tax rates and whether or not we share a tax cut should be extended. in a little more than 2.5 hours, today's pentagon briefing. after that, we will we are the joint economic committee hearing on the economy and jobs. on "washington journal" tomorrow morning, we will talk about politics with the vice chairman of the democratic caucus. and south carolina it bought -- south carolina representative bob inglis. also, a discussion of the national flood insurance program. "washington journal" is live on c-span every day at 7:00 a.m. eastern.

>> the senate judiciary committee has postponed their vote on the nomination of elena kagan as supreme court justice until next tuesday. watch led -- watch live coverage on c-span3 and learn more about the nation's highest court in c- span latest book, the supreme court, providing unique insight about the court. available in hardcover and now as and ebook. >> now a senate hearing on individual federal tax rates. the obama administration says it favors extending bush era tax cuts for individuals making less than $200,000 a year. those scheduled to expire at the end of the year. this is a little less than three hours.

>> now we face a problem. these tax cuts are not permanent. they expire at the end of the year. the big question is whether we should make some of these tax cut permanent and, if so, which once. there is another element in the room. that is the budget deficit. that elephant is growing. last year's deficit was the largest since world war ii. the congressional budget office expects the deficit to exceed $1 trillion by 2010. they also project the deficit will remain high for the rest of the decade.

when we passed the 2001 tax cuts, economists projected big budgets for years to come. today's budget pitcher is in no longer clear. we cannot afford tax cuts for the most well-to-do. we will discuss the effects of these tax cuts and the distribution of income. we will consider whether these tax cuts should be made permanent and for whom. let us begin the work of addressing the 2001-2003 tax cuts. let's keep our eye on the budget picture and to endeavor to

allow the working public to keep their money. congress is in washington, dc. we find at the same metaphor applying to today's discussion. today's topic boils down to the discussion of the merits of extending taxation. the discussion is framed solely from the perspective of an old phrase, "tax cuts or not 3." i am not defending it this notion. take a look at the pamphlet prepared by the non-partisan

official scorer for taxes, the joint committee on taxation, for today's hearing. examine pages 42 and 43. they detail the multiple trillion of revenue at stake over the 10-year budget window. in that sense, tax cuts or not free. in the fantasy world of this town, the roughly true jens locked up in extending entitlements is all of the table. it is not really accounted for. the same goes for appropriated spending. it is ignored over the long term even though there is austrians of dollars in new spending in the case. it is not really accounted for. the last time i checked, a $= $1 of bond revenue. this double standard does not

make sense. it seems like physical fantasy to scrutinize to the nth degree the revenue lost and at the same time to avoid sure yens of dollars of increased spending. right now, i want to display another difference between tax relief and new spending. i am now holding up the tax relief law, called the act of 2001 and 2003, that tax bill is the total of 130 pages of legislating taxes. it is not something you take on a vacation to read, but certainly not an insurmountable task. now, i hold up the legislative text of the american recovery reinvestment act of 2009.

you can hold out the health-care reform act passed in march. these are the bills through which helped reform were enacted. these three massive spending bills all from the 111th congress represent a total of 1314 pages of legislative text. if you try to take them on a vacation to read, you would probably be charged an extra baggage feet. the problem with these two tax bills was very straightforward. cut rates for everyone, enhanced the child tax credit, provide the marriage penalty relief, enhance the tax incentives for education. when we leave this island to venture back to our homes all across america, we find that tax

increases that are -- that our constituents will pay our, up from their point of view, certainly not free. outside of this town, the people paying the 10% tax increase tell us is not free. tax cuts are not free. tax increases are not free. someone pace that additional tax whether it is a hardworking american family, a small- business owner, a senior citizen who is relying on dividends and capital gains from their retirement savings. keep in mind, taxpayers or literally the folks afflicting the bill. they will respond to across the board tax increases. today, we will look at some of those consequences. we will look at them in the short term and the long-term. on both sides of the aisle, we

recognize the importance of this topic today, namely, the topic of what to do about the looming expiration of tax relief adopted back in 2001 and 2003. let me remind everybody that these are not bush tax cuts. of course, under the constitution, only congress has taxing power. indeed, the 2001 tax relief was bipartisan. my friend, the chairman, and i were partners. it was shaped by the bipartisan efforts of members of this committee. the report was supported by 25% of the democratic caucus. that bipartisan glue is why we are here today to discuss the growth and family tax relief. it is a major -- a major theme of today's hearing is growth. to address this topic, i would like to discuss the marginal tax

rates, their impact, and the big issue of uncertainty. that issue of uncertainty was brought up to the president by all of the c e o's that he brought in last week. they listed 18 reasons why we are not increasing jobs. most of those things are on the president's agenda. if you want to increase jobs, do away with the uncertainty. in 2009, i want to refer to john. this john i am referring to is a real taxpayer and eight real name. in 2009, john had a six-figure salary. in 2010, john accurately calculated his taxable income. john to see that he was in the official -- the official

marginal tax rate bracket of 29%. john would be $75 a weaker -- $75 richer. it may or may not be the case that john being $75 richer -- richard would not be worth $100 worth of effort. to only be $75 richer, he may decide that it is better to engage in some other, non taxable activity. thus, there could be a loss of production activity from this a 25% official marginal tax rate backer -- tax rate bracket. at the end of 2010, however, the 25% tax bracket will become

under current law 28%. the incentive from earning that additional $100 of income will be somewhat greater, but it is actually worse than that. although john was in the official tax bracket of 25%, there was a hidden tax rate of an additional 5%. this is because some of the tax benefits began to phase out at the 5% -- -- at a 85% rate. john was that a tax rate of 30%. for john to perform an additional $100 worth of effort what actually only make john 70% richer, not 75% as his tax rate bracket would suggest. since 2011, the tax rate of 25%

will become 28%, john would be in the 73% tax bracket. the incentive to productive activity will be getting greater. there are enormous quantities of phaseouts of various tax benefits. one of our witnesses will discuss that in a more in-depth away. the best known of these phaseouts, the personal exemption phase-out or the limitation on itemized deductions, are well known. there are several harmful effects from these phaseouts. the first is that they increase the marginal effective tax rate by increasing the disincentive to perform productive activity. the second is that they significantly restrict complexity.

they decrease transparency -- a decrease transparency. -- they decrease transparency. fourth, these problems have the cumulative effect of increasing the tax gap. that is a concern to all of us, particularly the chairman. numerous other phaseouts still exists. in 2011, the effects will be there. in my mind, i can already hear the objections. those objecting vacancy that all of these problems i just mentioned are real, but may say that those problems are worked it so that we can get john to pay higher taxes to help the nation confront the significant

deficit problems. that tradeoff is worth it all, so the argument goes. here is my response to that potential objection. i never said that john paid any taxes. i told you that for 2009 she was in a tax rate bracket of 30%, which in 2011 will be 33%. features of the matter is, in 2009 john lawfully it did not pay any federal income tax. in fact, not only did he get all of the entire tax his employer withheld from his paycheck back in refined, but he actually got more -- additional money in his rebuttal check from the irs. this was made possible because of the expansion of tax credits in the recent years. the tax code has created the worst of all possible worlds in the case of john.

it has significant disincentive from productive activity as well as complex as the -- as well as complexity problems. it does not raise one dime of revenue for the federal government. you would at least hope that it there are high marginal tax rates that there would be high amounts of tax paid to the government. in case you are wondering, how did john have been in that tax bracket but actually have negative tax, actually receive a check from the irs, and not pay any tax. that is possible because john had an additional -- had john made an additional $100 of income, the amount that he would have received from the irs would have gone down $30. john still only get $70 of net benefit from the $100 of

productive activity. while john's situation is more extreme than most, his situation does illustrate a number of problems with the tax code. again, these problems will only get significantly worse under the current lot of 2011. in one very significant way, john's situation is less extreme than the problems faced by many, namely taxpayers with more and, then john. the upper-middle and come taxpayers will place it even more incentives than john does. finally, i want to discuss uncertainty. there is a lot of uncertainty caused by the expiration of 2001-2003 tax relief. to the extent that taxpayers anticipate higher tax rates,

this will create a densest -- this will create a disincentive to productive activity when people are planning their tax affairs. to the extent that tax relief is ultimately adopted, the nation will experience a higher disincentives to productive activity and lower tax receipts to the federal government. if you talk about extending some or all of the 2001-2003 tax relief on a temporary basis, you still have the problem of uncertainty. the uncertainty is particularly relative to small businesses. it creates 70% of new jobs. as folks say it, this issue is all about jobs, jobs, jobs. small business expansion is the key to getting our unemployed constituents back to work.

we all agree that we should not do anything to appear the health and vitality of small business. where we disagree is on the effect of substantial tax increases on the health and vitality of small business. many of my colleagues on the other side do not believe that marginal rate increases of 17% will matter to small businesses. on my side, we hear small business people loud and clear. they say that they know their taxes are going up. they do not know how high their rates will go. they are reluctant to commit to expanding their business because of the hostile and uncertain environment related to a 17% marginal tax increase. since the significant increase is set to kick in in a few months, a small-business owners are clearly anxious. maybe in the fantasy world of washington, d.c., taxes are not

bad for business. the reality is, in the business world, businesses must adjust. the costs must be made up somehow. that is the problem for creating jobs. thank you, mr. chairman. >> thank you, senator. you've got kind of worked up there. [laughter] thank you very much for your statement. our first witness is carol markham. she is a certified public accountant. the next witness is dated march all who is the president of the -- the next witness is david marzahl. the next witness is a doctor marron. he previously served as a

member of the president's council of economic advisers. he is in acted -- is an active director of the congressional budget office. the next witness is dr. holtz- eakin. he is the former director. finally, we have dr. len berman. he is at the maxwell school. he previously served at the deputy assistant secretary for tax analysis. as our regular practice, we would like you to summarize your statements. we will put them in the record. we encourage you to summarize your statements in five minutes. >> good morning. i am a tax preparer. >> we are having a hard time

hearing you, ms. markham. >> good morning. senator baucus, members of the committee, i am a tax preparer for a living. i also serve as the president of cda practitioners. -- -- i also serve as the practitioners.p a our opposite consist only of cp a's in public practice. we estimate that our members serve more than one half a million -- more than half a million in the united states. my topic is on the phaseouts of itemized deductions and personal exemptions.

some rules will come back if congress acts to change the laws. the current situation for tax preparers do not know if congress will act or what people will be in 2011. it creates uncertainty and makes tax planning difficult. until the act of 1986, any deduction in the code was avail equally to almost any taxpayer without regard to their gross income. the rates were changed from 15 brackets to two. this was the beginning of phase ends and phaseouts of exemptions, deductions, and credits. since 1986, the race had increased to a maximum of 35%. phaseouts have proliferated. that has raised the marginal tax rates beyond the current stated rates. as the benefits have been

introduced, the public's perception is that the tax code gives benefits and credits with one hand and takes them away with another. there are many things in this code based on filing status. others are different. someplace else have kept pace with inflation. others did not. some say that range is 10,000, up 15,000, 20,000, or more. it can be as much as $183,000. business tax is the ultimate in phaseouts. this tax first became effective in 1970. it was intended to target the rich, specifically 155 individuals with incomes of two moderate thousand dollars to

claimed that they did -- who claimed that they owed no tax. the rates have inched up every few years. the annual adjustments and exemptions -- not knowing if congress will act -- is another source of uncertainty and eggs at -- and anxiety for taxpayers, tax professionals, and even the irs. i served on the advisory council and we talked about it there. it is our position that it should be repealed. it is too complex and imposes a large burden and still it does not tax the people for whom it was intended. the people who should pay this are the ones to structured their lives to not pay taxes.

one problem tax professionals have in dealing with phaseouts is that even a very seasoned professional cannot sit down with the taxpayer and prepare a projection using only a pencil, paper, and a calculator if their income is above a nominal amount. these days outset different ranges, did for beginning and ending points. it is impossible to prepare an estimate without being armed with a series of work sheets, schedules, and charts. some phaseouts change annually. others do not. prepare is never sure of the application at the phase-out. the phaseouts have a corrosive effect on tax compliance and taxpayer confidence. tax practitioners are forced to

tell clients that many other tax saving provisions do not apply to them. they are struggling to make ends meet, living in ordinary life style. my colleagues and i believe it would be more prudent to allow tax players to use the deductions and credits in the tax law before progressing of lower tax rates. the elimination of the phase-out will simplify the law and make it more equitable. they should be uniform phaseouts for most divisions. they should be adjusted annually to reflect inflation. thank you so much for your attention. >> thank you, miss markham. >> thank you, chairman bacchus. i am david mars all. we represent reality. we are no island.

our organizations help hard- working families by providing them with free, high-quality tax preparation and financial services. we operate bollinger driven tax sites in -- we operate volunteer driven tax sites in allen boyd. i am pleased to offer the educe of organizations throughout the country's. we are comprised of over 1700 members. our local partners help working partners to claim tax credits they might otherwise overlook. for many, their refund gives them an opportunity to pay down debt and help build assets. together, our members are the fourth largest providers of tax preparation services. we complete an estimated 3

million tax returns for free. we think the committee for their efforts in passing the 2009 recovery act provisions. the recovery act, despite its complexity, achieve many of the reforms that we support. it ensures that most parents have access to the child tax credits. we are concerned on the impacts of the taxpayers we served if congress fails to extend the provisions. the following provisions will have a direct impact. the 10% tax bracket, the 45% credit for families with three or more children, the child-tax credit -- the maximum credit will fall from $1,000 per child to $500 per child and the credit will no longer be refundable for a majority of tax filers.

the american opportunity tax credit and the making work pay credit -- respectively as the committee to consider the following. permanent expansion of by a tax credits -- we believe that families that work full-time should be able to support their family and keep their children from living in poverty. the recovery act tax provisions and need to be made permanent to create sustainable economic growth and to ensure a more equitable tax code. these provisions help to build economic security through the expansion of the eitc, the child tax credit -- 2.9 million more children in low-income families were able to access the refundable portion of the credit. nearly 1% of the $14.80 billion

goes to families making under $38,000 per year. the equal opportunity tax cut it makes college more -- equal opportunity tax credit makes college more affordable. under the expanded child tax credit, a very low income can -- and got families are given an incentive to work full-time to support their families. a parent or two children that were just an hour per week at a minimum wage job received less. at the center for economic progress, the average the child tax credit this year was $1,300. that reflects this dynamic.

other sites and community programs throughout the country have witnessed this. a organization in pennsylvania that work with a family of four, to parents and two children, and getting by on an income of $15,000. the father works as a cashier at a gas station and the mother stays at home. their child tax credit was the maximum $2,000. under prior law, it would have been $540. that is a $59 difference. the tax credit also provides access to the financial mainstream. it is now becoming easier for clients to save a portion of their refund. many of our programs offer year- round to buy natural coaching. a couple of highlighted remarks

here to close out, the typical taxpayer has two or three w2's. that means they have worked several jobs throughout the year. in this tough economy, many of our clients still benefit from taking part time or lower paying jobs because they qualified for the partial or the full child tax credit. as more of our class return to work and as the economy recovers, they will have an incentive to stay employed and increase their salary. a few final points, i want to stress the importance of the simplification and the complexity of the tax code causes many of our filers to pay hundreds of dollars just to settle their tax bill with the federal government.

the more tax credits that people claim, the more that they will pay to viral their tax forms. timely decision making, when the things that put forward to this committee is to encourage you to move as quickly as possible and not wait until the end of the year to make tax law changes. this delays and issuance of publications, problems with software, volunteers to work with our organization struggling to be trained, and taxpayers are not fully understanding the tax code because they do not have the information in a timely fashion. i look forward to working with you so that all working families have the opportunity to use these resources to sustain their financial security. thank you. >> thank you, chairman baucus and members of the committee. it is a pleasure to be here

today to discuss the 2001-2003 tax cuts. our nation faces difficult economic challenges. almost 50 million workers are unemployed. at the same time, a budget deficits have rocketed to 60 year highs. those deficits should -- or long-term fiscal outlook remains a dark. spending will be pushed out of a significantly faster than revenues over the next 25 years. that will put us deeper into debt. i would like to make six points. first, tax revenues are remarkably low today relative to the size of the economy. they are the lowest since 1915. they are scheduled to increase sharply over the next few years.

that is not just because of the extent of the economic rebound and the expiration of the 2001- 2003 tax cuts. other factors include the expansion of the alternative minimum tax, democratic changes, -- demographic changes, and the new help for reform law. individual income taxes will still rise to 9.2% of gdp by 2020. that will be well below the level that would be defined by current law. full extension of the tax cuts would provide a larger tax reduction of the higher a come taxpayers. we have a model that tries to model all of the taxpayers. it suggests that if you extend all of the tax cuts that the

folks in the top of the and come distribution will see their income declined by 3%. in the middle 20%, you have two percentage points. the folks in the bottom would be about 15%. some of the tax cuts have been characterized as rate reductions, a marriage penalty relief, and expanded credits. those provide significant tax reductions, not just for what you may think of, but actually reach up and -- but actually reach up to higher income folks. they said are offered and the thought of as high income tax cuts -- as you hear from my colleagues on the panel in a moment, there

is some disagreement about the potential economic reflects -- economic effects of the tax cuts. i would like to emphasize that whatever path you ultimately choose, the economic benefits are going to be the largest if congress chooses to pay for this tax cuts -- not immediately because we have a weak economy. that would ban dissents from the stimulus point of view. the best economic outcome would be to reduce unproductive spending or raise taxes in a way that it does not undermine growth. regardless of what happens with the expiring tax cuts, i recommend you look for opportunities to do fundamental tax reform. there are opportunities to improve economic performance and raise more revenues. given the federal spending or try to hit, income tax rates can

be lower if you limit special credits and deductions. you can move to a more efficient tax system even while raising more revenue. thank you. >> thank you, dr. holtz-eakin. >> it is a privilege to be here today. the impending sunset at the 2001-2003 tax cuts are very important moments in the terms of tax policy. i discussed for as i said that. macro economic impacts, budgetary impasse, and backs on distribution, and it implications for tax reform -- i wanted to say a few words about all of those areas. first, on the macro and pacs, i encourage the committee to frame

the questions correctly. the economy is now growing and has been. it is growing painfully slowly. many people looking for jobs and of this. we are no longer in a position where we had a falling economy. we should think about this as a situation where we need a roofless attention to improve those policies. what is on the table? the recognition that if you are going to get economic growth, governments are in a worse position. that raised by process of elimination, somewhere else or you can make a difference.

this is not a hearing about the corporate taxes. the ability to extend fully and permanently eliminate uncertainty are an important aspect of business tax policy. we teamed with the decision to economics to do some as simulations. we looked at not extending it to

those to make more than two dozen dollars. not only is the -- it has better short-run economic impact. it is clear that you get faster gdp growth, more employment, households save and work on their balance sheets -- these are the elements of transitioning out of this week economic. -- transitioning out of this economic period. you cannot afford this. yet to think about his father -- yet to think about this budget barely.

if you want to fix budget problems, you have to fix the growth and spending. that is simply the reality. i am concerned about two things. partial appeal is in the president's budget. if you look at that budget, we are still running on a deficit. i do not want people to get tricked into that. suppose we raised taxes a little bit and we get some relief, given the space -- given the pace of spending growth, our taxes will be very high. the top priority in the budget has to be to control the spending. the last two pieces are what happens to the tax increases.

there are a couple things to remember about this. i understand that this is a political football, but these issues happen on both sides of the budget. think about the spending and the tax side. who really pays? poussin's in the check? if you do the analysis, it looks different because of the shifting from businesses to workers. corporations do not pay taxes. the charts in my testimony take that into account. the effective tax rate at the top went down by something that is typical of the variations we have seen since 1979. the effective as we felt by the

lowest since 1979. finally, on tax reform, you'll get a tremendous concurrence on this table that we germanic we need tax reform. the tax code is not up to the needs to raise readied and promote economic growth. you should think about how the tax reform gets effective. my preference would be for a consumption-based, but the kind of extensions we are hearing -- raising marginal rates, i think you should avoid that error. thank you. >> thank you very much. you are the final witness. >> chairman baucus, members of the committee, thank you very much for inviting me to talk about extending the 2001-2003

tax cuts. when the law was enacted in 2001, a lot of people, including me, were a little bit skeptical. we thought it may have been a cynical budget gimmick. in retrospect, i think it turned out to be brilliant. it gives us an opportunity to reexamine the policy. we are in a very different environment that we were in 2001. in 2001, we were looking at a projection of $5.60 trillion in surplus for the next decade. now, we are looking at $10 trillion in deficit for the next decade. this has put unprecedented pressures of the budget. spending is going to increase. the current policy shows that the current spending and taxes are low. when you account for that is a

macro economic responsibility cut from the rising national debt, gdp would be at one under 88% of gdp by 2007. that would be a disaster. my colleague has said that lower taxes are pro-growth, but let taxes under continuing policies are not progress. it could lead to a disk -- it could lead to a catastrophe. nobody would see that to happen. -- nobody wants that to happen. you can talk about how cutting spending is the solution, but the kind of spending cuts you would need while keeping tax revenue at less than 20% of gdp would be draconian. the income-tax is a mess.

everybody on this panel agrees that we need tax reform. it is complex, unfair, and efficient. of what would we want to carve that into stone? finally, we think that we cut taxes in 2001 and 2003. my view is that taxes were not cut at all. they were just deferred. they added to the debt over the last decade because spending was not cut to offset them. that has to be paid back with interest. all economists will agree that keeping tax rates stable would be better than cutting them temporarily and then raising them in the future. the higher the tax rate goes, the higher the economic cost is. going from 40% to 45% -- we are obviously also in a recession. a big tax increase now would be

a mistake. some senators have been leaders in the tax reform effort. i would encourage them to come up with a plan that would raise enough revenue to pay for government. what we have been tried to do over the past decade is that if we cut back, spending will follow. that did not work. what happened instead is that the deficits seem to be fine. we're paying for a new prescription drug benefit under medicare. it stimulated huge growth in government. i think the better thing to do would be to reform the tax system and then taken steps to control spending.

dr. holtz-eakin is absolutely right. spending cannot go on as it is projected by the congressional budget office. in my view, the solution will be a combination of more taxes and lower spending. that is what we need to work on. why not just extent everything? first of all, we cannot afford it. also, by only extending the middle-class tax cuts, the idea of tax reform is a low rate, a broad base. the people who benefit from that they it is a fall in the system. i want to bring those people to the table and say that if you want to lower rates, you have to participate in tax reform debate. this is the issue of the higher rates paid for the recovery. i would answer a note for a couple of reasons. higher income people do not

spend more when you cut their taxes. they are not going to spend less if you raise their taxes. the spent about a third of their income. there is an issue about small businesses. i am sympathetic to the concern of the committee to not do and things to discourage small businesses from offer partnership. -- discourage small businesses from entrepreneurship. when you are making decisions about things like hiring, hiring an additional worker is profitable when you get to keep 65% of the profits. the congressional budget office has concluded that raising marginal tax rates would not have any effect on small businesses in the short term. a higher income-tax rate actually encourages of

entrepreneurship. they take deductions that other people do not take. i am not arguing are high rates, generally. one is very valuable thing that is small businesses have is the option that it there businesses turned out to be profitable they can incorporate. there is a risk to seeing the government and businesses. i would be happy to talk more about this in the question and answer session. the current system but could not be farther from that idea. i think reform is necessary. by extending the tax cuts permanently could -- i look over

to your questions. >> senator baucus was called out. i will go ahead with the first question. i am could direct this to everybody in the panel, but that would take too long. i would like to have mr. holtz- eakin on one hand. on page 10 of the template -- pamphlet, 50% of the approximately $10 a share in business will be reported. 50% of flow-through business and, will get hit with president obama's taxes says they have proposed to raise the top two tax rates.

this is a bad for small businesses because they operate on a flow through and come. republicans and democrats agree that small businesses create 70% of new jobs. is it a good idea to raise taxes on half of the flow-through business and tom? we will start with you mr. holtz-eakin. >> i think this is a bad idea. i think there are a couple of important points. it is the economic activity that matters, not the number of tax returns and get filed. if you look at the corporate tax, there are many corporations paying taxes. there are a few they get infected deeply. we know the corporate tax has a big impact on growth.

it has very significant effects. if you raise the top rate from 35% to 42%, you will lower the possibility of a small business having about 18%. payrolls will go out by% slower. the tax has to come from somewhere. it will show up as less hiring and lower wages for workers. that way get shifted onto them. >> mr. berman. >> it is true that you want to look at the economic activity. a lot of that income does not represent what we think of as small businesses. lawyers, doctors, bond traders and members of corporate boards show up on the tax data, but they are unlikely to be affected

by the increase in the tax rate. what would the effect of hiring be in the short term? if somebody -- if a new hire is probable that a 35% tax rate, it would also be profitable at a 40% tax rate. higher tax rates offered lots of incentives for people to choose to become small businesses. one thing the committee does not want to talk about, but is true, is that small businesses have a 57% error rate to what the actual income is. a lot of people use small businesses as a tax shelter. when the tax shelter goes up, the rate goes up. >> mr. berman, i want to challenge you on one of your -- on some of your testimony.

in your testimony regarding the top two tax rates, he said an employer would hire a new worker if they a expects the workload to exceed what he or she is paid. he went on to state that it does not matter if the employer gets to keep 60% or 65% of the additional profit. my question is, if that does not matter if the employee keeps 60% or 65% of the additional product, does it also not matter if the employer gets to keep him% of that additional profit? would it distort employment decisions if we had a 90% tax rate? >> as a practical matter, the profit in the next higher would be taxed at a 90% rate, it would still be profitable after tax.

i came to washington to work on the tax reform act of 1986. luke tax rates or a good idea. the problem is, we have a very poor tax system. there are a lot of loopholes and deductions built into the tax. those become more profitable at a higher rate. those allow for all sorts of tax sheltering opportunities. the solution is to enact tax reform to broaden the base and to cut the rates in a way that raises enough revenue to pay for the government, but does not create all sorts of tax shelter opportunities. >> i regret that i was unable to hear the early discussions. i want to take on one of these subjects. that is the idea that -- that is

assertion. it is true that 50% of business and come is paid by taxpayers at the top two race. we are not talking about small business, we're talking about the top two race. that is big business. it is a large law forms, accounting firms, and over 70% of the so-called 50% is a big business. 70 -- 7% is small business that are not in the top two rates. it is true that 50% of business income is in the top to tears. that is, by and large, big

business. it is not a corporate big business, it is individual big business. they organize themselves that way so that they can avoid corporate income taxes. a lot of hedge funds have gone public. they are publicly traded. they are in effect corporations. i just want to ask everyone if i am accurate over my business assertions. is what i said basically true? >> it is definitely true. >> i would agree. there is a lot the past through income. some of it is from big businesses. there is some of from businesses he would not recognize its businesses. >>