colleagues, people are pained, losing their sons, daughters, this is very, very difficult for our members of congress to go home. and then when they hear stories of the corruption, the lack of accountability is very difficult to continue to be supportive and i think you are aware of that. the war in afghanistan was allowed to languish without suv strategy or resources for far too long. so i do commend the president for refocusi our efforts and our strategy. however, none of us should be under any illusion that all of the problems are behind u and in the weeks ahead i look forward to working with you ambassador holebrook and dr. shaw to put in pla safeguards to ensure that the funds we

appropriate for programs in afghanistan with the civilian components of the administration strategy are integral to the success of the military and the strabability of the region. we want to make sure that these funds are being used for their intended purposes, reach the intended recipients, i know you are committed to it. this committee is committed to it. we know we have a lot more work to do. thank you for coming today and we look forward to continuing to reach our goal, thank you very much. the committee is ajournded. >> how ironic that you hold this committee today the day after you ted for the $37 blion for the war. it put 95% of our funding into war at the same time. we also need to rebuilt america.

so if we stop funding the war, we can give jobs to people in afghan and in this country. >> tomorrow morning, a congressional panel investigating mismanagement of arlington national cemetery. according to a recent army report, hundreds of graves had been improperly marked. coverage begins at 10:00 a.m. eastern live on c-span3. >> with charles rangel in the news because of an ethics announcement, go to the c-span video library to watch this story. it is all on line and 3,

washington your way. >> we will continue our look at afghanistan tonight. coming up later, british secretary liam fox talking about british military in afghanistan. then we will hear from peter or sad. up next, intelligence subcommittee chair jane harman on afghanistan. she joined us on "washington journal" for 45 minutes. to welcome democratic congresswoman jane harman, the subcommittee chair of intelligence and terrorism. thank you for being with us. guest: thank you, steve. host: two members of congress share these sentiments as they talk about the situation in afghanistan we continue to approve funding, $59 billion in the u.s. house.

>> military experts tell us that it could take up to 10 more years to achieve an acceptable outcome in afghanistan. we have already been there for nine years. i believe that it is too high of a price to take -- toay. for those that say we must pay it because we are going after al qaeda, afghanistan is where al qaeda used to beat off. today there are fewer than 100 al qaeda in afghanistan, which was confirmed last night -- last month by the cia chief. they have relocated to other countries and regions. i yield myself an addional minute. i have the utmost respect for our troops, who have done everything asked of them. but they are being let down by the inability of the government of afghanistan and in some instances, pakistan, to do their part. i would be willing to support additional war funding provided that congress would vote, up or down, explicitly on whether or not to continue this policy

after a new national intelligence estimate is produced. absent that discipline, i cannot but my constituentsin the eye to say that this operation will hurt our enemies more than their hurts us -- more than it hurts us. >> i am confident that they will be able to complete their mission in afghanistan. the president did remind us why we are in afghanistan. it was the eicenter of where al qaeda planned the 9/11 attacks against innocent americans. the timeline for success in afghanistan cannot be dictated by arbitrary political plots in washington. that must be driven by what is going on in the afghan countryside. we hope and pray that this can be accomplished by july, 201, but conditions on the ground

must set the pace. the democratic readership is trying to advance their agenda on the backs of our forces, committing one anti-war measure after another on the house floor. this is cynical and wrong. a vote on the troop funding bill is long overdue . we should have accomplished this work months ago. we must send this to the president without further delay. and host: joining us again this morning, congressman jane harman. thank you. is this a war worth fighting? guest: the mission to prevent al qaeda and other terror groups from birth that -- from attacking our country is again, absolutely essential. that mission has to take us to afghanistan but also to many other countries. i have argued that spending $100

billion or more in afghanistan only for the maintenance of u.s. troops is not sustainable. my view is that we need a new mission to achieve the objective, which is to prevent al qaeda fr being too rigid being able to attack our country. host: much of the debate in this country is about the jy 2011 deadline, if nothing else viewed as a visit -- transitional point in the war. what about july 2012? what will the afghanistan look like? what will the operation be like? guest: i think that before the end of this year we will hear from the obama administration about a change in our strategy in that region. i do not know if it will be minor or major, but i think that the vote yesterday, which was much closer than some people predicted -- i voted for the

funding because i know that some of our individual troops are moving into harm's way, but i think that the vote sent an unmistakable signal to the obama administration that many people are concerned that the strategy is not sustainable. i do not know what july, 2011 will look like, but i am hoping it will look like a new strategy for the region. they have to want peace more than we wanted, and at the moment that is questionable. ethnic rivalry and disarray amongst the afghans. caller: -- host: we will get your calls in a moment. here is the president on efforts in afghanistan.

>> i am concerned about the disclosure of sensitive information from the battlefield that could potentially jeopardize individuals or operations. the fact is that these documents and do not reveal issues that ha not already informed the public debate on afghanistan, pointing to the same challenges that led me to conduct an extensive review of the policy last fall. let me underscore what i have said many times. for several years we failed t implement a strategy adequate to the challenge in this region. the region from which the 9/11 attacks were waged. that is why we substantially increased our commitment there, insisting and greater accountability from our partners in afghanistan and pakistan, developing a new strategy that could work, putting in place a new team including a fine as

general hours to execute that plan. host: there are two points that i would like you to react to. at the end of the comment he referred to general david petraeus, not a new strategy but new players. will she change the dynamics in afghanistan? . . and host: the president were referring to the wikileaks document leak. did this endanger national security? guest: the art two bings.

it is our afghanistan strategy going well? no, they give some more information to something we already knew. and that material is only up to january of last year. this is not analysis but raw intelligence. the second part is that are leaks acceptable? and my answer to that is no. there are names of state department officers, u.s. military personnel, and afghans and the towns they live in in that material. that's just a new target list or enemies list for the taliba they compromised sources in essence, and here we compromised some our sources. and i think that's hugely dangerous. people die when that happens. i do agree that a lot of information is overclassified, and one of the things this is pointing out is that some

material, some basic reporting probably should never have been classified, leaving out names, and we're learning from that. a bill that i authored in the house homeland committee is moving through the senate right now. so hopefully we will have a federal law sn that helps the government or prevents the government from overclassifying information about security. host: we've been reading reaction here in this country to the leaks. what kind of reaction is this getting in afghanistan, pakistan, and elsewhere? guest: from reading public sources, the karzai government apparently thinks there's nothing new here, so they're not upset, d it gives them the opportunity to blame t pakistanis, because one of the allegations in some of this law intelligence is that the pakistani intelligence service continues to collaborate with the taliban against u. interests and pakistan afghanis in afghanistan. that part is causing us problems in pakistan. i think the most damaging aspect of all this is that it is strange our relations with

pakistan. i'm not defending everything that pakistan does, and i know historically the pakistani intelligence service has played both sides with us. they've helped us and hurt us at the same time. but i believe that in this current chapter with them, where a very capable peon named ahmad is head of their intelligence service, a man i have melt, that they are really taking huge risks to work with us against the taliban target in pakistan and to create estrangement now is a very dangerous thing. remember, al qaeda lives in afghanistan, and they have 60 to hundred nukes. host: do you trust the pakistani government? guest: i -- i -- i think the pakistani government is making a good-faith effort to work with us. do i trust every single person? i don't know every single person, so no. but i believe tt the

trajectory is very positive, and we need their cooperation to achie our goals in the region, our goals are a stage region, and to block the ability of al qaeda and related groups from attacking us, let's understand. that's the u.s. objective. host: jamie on our twitter page has the sentiment that many liberal democrats have been espousing for many years. congressman harman, please stop using 9/11 as an excuse for an endless war. there is no meaningful victory, so we should leave. est: well, i am not for endless war. i never was for endless war. i am not for calling this the war on terror, because terror is a tactic. what i am for is a strategy that stabilizes a region where terror groups, want just were, but are training people to attack america and western interests. and that's what i want to do. i don't think we do it with military force. i've said very clearly that i'm skeptical of the surge in

afghanistan. i don't think expanding our military footprint achieves our objective. but i am certainly for surge, diplomacy, and development in the region. i think it's in our economy interest as well. pakistan, for example, could become a large trading partner of the united states. afghanistan, we have just learned, holds lots of mineral ores and was historically a breadbasket. so there are lots of opportunities for good things to hpen. guest: i want back to afghanistan and pakistan, but put iraq on the table as well. there's a story inside the "new york times." admiral mike mull an, who is in baghdad this week, and the word that he pieces, in the piece, iraq has a sense of a country adrift. the elections were held in march, and still no formal government in place. what's going on? guest: well, i think that's devastating. i do. i'm glad that admiral mullen just went there to talk about this. i was recently at a conference. there was a major u.s.

industrialist there who said, gee, i really want to build a hotel in baghdad, and i'm going to do it as soon as there's a government. i mean, iq's failure to close on that election is preventing good things from happening. but here's the point. we had a drastically flawed strategy in iraq. everybody understands that, i feel very strongly about it, and we had a massive intelligence failure, which led to the actions that were taken in the first place. but putting that aside or moving on from that, finally there's an election and no conclusion. and this shows how hard it is to transfer a country to its own governance, even when counterintelligence succeeds. this is why i'm so skeptical of the strategy in afghanistan. if it doesn't work or isn't working yet in iq, how is it going to work in afghanistan

where the government pblems are even bigger? host: added to that is a piece in the "philadelphia inquirer," an audit, the pentagon cannot account for $8.7 billion in a fund that has been used or earmarked to try to help rebuild the country. guest: well, we've done a lot of things wrong, and the taxpayers are noticing. a lot of money intended for good use, clearly that was, has magically disappeared we have to do better, especial at a time of high unemployment in our country. people are right to demand, one, transparency in how our dollars go overeast, but two, a sustainable approach to what we do abroad. and that's why i think we are going to change our strategy in afghanistan and come up with a broader regional or global strategy against terrorism, a counterterrorism strategy closer to what vice president biden was arguing.

host: so that's the way going forward. but in hindsight, looking back, if there's one thingn afghanistan you could have changed based on what you know now, what would that be? guest: in afghanistan? host: in afghanistan. guest: well, i think we should have kept our eye on the ball following our action in 2003. instead we invaded iraq, and most of our brain cells and resources moved on to iraq. in hindsight, senator bob graham, who opposed the action in iraq, was right. he said this will distract attention from afghanistan, which is our real target. and to the caller who said, why don't we ever get over 9/11? i don't think we're ever going to get over 9/11. i'd like us to learn the correct lesson, which is not that we should have a military footprint around the world forever, but which are that we live in a world where there are a lot of people who can be taught not to like us, and we have to project our values and win the argument with these people to prove that we are a good global citizen and that we

care about human rights development of the world. host: representative harman is the subcommittee chair of homeland security intelligence and terrorism, as we talk about afghanistan and the situation in iraq. we'll get to your calls. ed joining us from texas, democrats line. good morning ching caller: good morning. it pains me to sayhis, but i believe the bush administration got it just right in afghanistan with the level of effort they had there, they reduced the number of al qaeda operatives in the country to fewer than 100. remember, the al qaeda that we were fighting, not the taliban, we punished the taliban forgiving them safe haven, and we did that verwell by removing the from power. the al qaeda hijackers were not trained in afghanistan. they were trained in the united states.

we got it just right in the bush administration, and we're putting way too much money and killing too many u.s. troops in afghanistan right now fighting the taliban. guest: well, let me say, ed, agree with much of what you said, except a couple of things. one, afghanistan was a training ground, but so was germany and so is other places -- so are other places in the world, like yemen now, training ground for terror attacks. so let's understand we can't forever -- and again, an earlier caller got it right -- just hang everything on the hijackers had something to do with afghanistan and that's why that's our target. the whole world is a potential training ground, so let's start with that. you are right that basically in pakistan and number of can a and iraq and other places. that's correct. but if the fear is the taliban

takes over afghanistan or at least part of afghanistan, it will invite al qaeda back. i don't buy -- this doesn't persuade me to think we should surge everything into afghanistan. as i said, i think there are more immediate targets to u.s. security in pakistan, yemen, somalia, and elsewhere. so again, i agree with part of what you said, and i certainly agree our strategy is not sustainable. host: front page of the "l.a. times," this headline, "the pakistan taliban ties may be key to u.s. afghan goals." and one of the points from the story from l.a.'s alex rodriguez is the pakistan government denying again, as you said earlier, any ties or assistance to the taliban, but the story continues to surface. guest: well, yes. the story hasn't died, and i don't think -- you asked me if i know there is no pakistani collaboration with the taliban. no, i don't know that, and i think at some level, somewhere

in pakistan, there is, and it has taken a huge effort, led by our very capable ambassador to persuade the pakistanis to invest more resources, their military and police resources, and going after the taliban in pakistan. but they are doing it, and there's a loss of life there for doing it, but they have reclaimed some areas of their own country, like the swat valley. i visited there with ann patterson recently, from the taliban. let me just mention something i department mention, steve, which is, why is this? why are we having so much trouble there? do they hate afghanistan? no. they are worried about india, and they believe that if we lee afghanistan, which they think we will do in the near term, at least leave militarily, that the indians will come in and take over afghanistan. and that will surround them and pose a huge security risk to

them. i think it their fears of india are overblown, and i also think we could work harder, we the united states, in terms of achieving our interest in the region to tamp down pakistani, the intentions. we did that. we probably cld get farther with our argument that pakistan should not help the taliban in paktan at all. host: so what exactly is the mission right now in afghanistan? guest: well, i think president obama would answer that by saying his mission is to succeed with a counterintelligence strategy, a coined strategy which protects the afghan population and per said them to lead the fight. my answer is the odds of that working are so steep and the u.s. resources that we would have to commit and the time period is so long that our

objective should be some stability there so that the chances of al qaeda coming back are minimal. but then our focus has to be much more defuse across the world to prevent al qaeda and other like-minded terror groups from attacking our country. host: jeff joining from us minneapolis, independent line. you're on with representative jane harman. caller: yes, good morning w. all due respect, ms. harman, i'm calling to say that, what is it the democrats don't understand about that the american people do not want our troops there anymore in iraq and afghanistan? we could be there for 40 years to try and get pakistan and that tribal area cleaned out, an still, once we leave, they're going to be back there anyway. and besides, i'd rather have ourroops home here protecting us from the al qaeda that live in this country right now,

because i know they're here. so therefore, the money suld be spent -- americans don't want money spent over there anymore. we've got a huge deficit. we're bankrupting our country. and we want our troop home. we're tired of them being slaughtered down in the valley and everywhere else. guest: well, that message is out there, and i appreciate hearing from you, and many of the comments i've made so far this morning i think are sympathetic to points you raised. i do not agree, if this is one of the things you said, that we should have no dashte u.s. should not project our presence abroad. i think we should. i think we should project our values. i think we should promote development and opportunity for all the people in the world. i think we should aggressively oppose human rights abuses. and i think from time to time, as necessary as partner of nato and other collective groups and when we think our interests are threatened, we

should project forth. but i do agree with you that a mission in afghanistan particularly, where we keep 100,000 troops there for any long period of time is not sustainable and not in our long-term interest. host: dale, good morning. republican line, richmond, virginia, you're next. caller: good morning. thanks for taking my call. i've always for the troops and i'm so grateful for my freedom and prosperity. but e thing is, i believe that this is not a war. this is just a conflict that will go on forever between free people and people who want to subjugate people. and we have our own government in our own country trying to subjugate us. they won't sece or border. they won't give money to the police, but they've money to spend all over the world to do all these things. and meanwhile, we're just increasing our debt substantially and out of control, and we need to come home and take care of our own

and protect our borders and spend our money wisely and stop spending it all over the world. the middle east is like the wild, wild west times 100, and you will never tame those people and you will never change them. guest: well, let me say a couple of things. first, caller, i'm glad you mentioned our troops. i should have said this much earlier. all of us -- i'm sure this is true, every caller and anyone listening to this and watching the show agrees that our young men and women servingn afghanistan deserve our highest praise. they are enormously courageous. they are very capable. they are doing things there at the developmental level, the lowest level, to rebuild schools and on or about things that i think everybody would think and applaud. you are right we have a merging defit. i voted for the supplemental yesterday. did i that, because as i mentioned earlier, i actually know some of tse young people who are in harm's way right now

as pt of the surge, and i could not send a message to them that i'm not going to fund, fully fund their protection. however, when i did tt, i said that this is the last war supplemental i ever expect to vote for. the obama administration has changed the practice, which i applaud. i applaud the change, not the practice -- of funding wars as part of so-called emergency spending. that means not on our budget. i want us to fund any wars we're in, and i hope there will be a limited number of wars in our future, only those absolutely necessary. i want us to fund them on budget. that means that we see the cost of those wars and get to compare it against other spending, which we're not doing, for example, to maintain teachers as the caller pointed out in our public schools and the costgainst the debt and defici so i think we'll be able to make much more responsible decisions as a country, and that includes the people who live in the country, not just

the elected leaders, if we see war costs against other costs as part of our regular budget. host: by the way, the "houston chronicle" has a look at soldiers from the texas national guard, nine months in iraq, four days to get back home. the dateline is texas, a look at tir journey as they return home. the headline is not home just yet. congressman harman, there's also this from washington, d.c. she says, al qaeda and th taliban know that the u.s. is fighting this war on a credit card. that knowledge is more encouraging to them than any anti-war red rick anywhere in the world. if this war isital to u.s. security, then we need to get our heads screwed on right and pay for it. guest: i agree. that's exactly wt i just said. host: thomas from tolo, ohio, good morning. caller: good morning. you mentioned the $1 billion missing from the pentagon. i'd like to remind people tt the day before 9/11, rucksfels got on tv and mentioned the

$2.3 thrillion were missing. nobody's ever explained where that money went. so that's pretty significant. host: than for the call, thomas. guest: i don't recall that statement of secretary rumsfeld, but i don't think anyone will claim that the pentagon has had a tight eugh rein over its budget. i applaud the call by bob gates to put some spending cuts on the table. and i say that as someone who represents the los angeles area and who relies a great deal on defense spending. nonetheless, we can do this better, and if we are going to bring our hemorrhaging debt and defici into some reasonable bound, we have to put everything on the table. and i've been one who's been saying this for a long time,

and that certainly included putting defense spending on the table as a place that needso cut waste and also a place where we need to monitor much more closely the places like afghanistan and iraq. host: the focus is on homeland security, terrorism, and intelligence. what worries you t most, what keeps you awake at night? guest: well, i worry about attacks here. i've made that very clear. and i think that -- host: what type of attacks? guest: well, i think the most likely type of attack is a conventional attack. some very capable, sadly, u.s.-yemeni people, one of them is anwar al-alaqi that everyone has heard about, was an imam in united states and is now in yemen. another one is a fellow who's very good at designing, you know, materials, propaganda materials, are now living in

yemen. and the other fellow has produced an online magazine recently called "inspire," written in english, which includes how to make a bomb, how to encrypt messages, and just t right selection of encouragement from a variety of radical sources. and things like this are having an impact on what we call home-grown radicals. radical beliefs are protected by our constitution, but violent behavior isn't. some people, not all of them, you know, from -- not all of them born are picking up these propaganda tools, and i think the chance of their attacking using conventional weapons, i.e.d.'s and suicide bombs, are increasing. and what we just saw in the arrest in times square and the arrest of the fellow who was purchased peroxide of bombs for the denver area are evidence

that this is happening. some of these people train overeast. we had a huge number of intellence successes, so let me praise local law enforcement in our intelligence community, but let me also say that we have to be right 100%. we have to be right once, the bad guys, that is. and the odds are not, you know, overwhelmingly in our favor. so i worry about a home-grown attack. i also worry about a few pple getting into our country abroad. and so conventional attacks are my biggest fear. i wrote an op-ed in "the wall street journal" last week with senato susan collins that a radiological bomb, a drty bomb using materials that are available in the united states in our hospitals, and radiology machines -- i don't want to explain this too carefully because i don't know anyone to get new ideas here, but they could create the components for a drty bomb and radiological

materials won't kill a lot of peoplenstantly, but they can contamina huge, large areas of our city. and that's an enormous problem. i stay up late at night worrying about these things. host: how often are you briefed on these matters? guest: quite frequently. i have access to materials when i need them, but i have in-depth briefing at least once a month by very senior intelligence officials with others in congress. in a classified room in the ep, and i take those briefings very seriously, and i protect the information that i'm given, and we have some excellent people advicing our country, and again, i want to not only commend our soldiers in harm's way, but our intelligence community, many of whomre also in harm's way, living in so-called unaccompanied posts where their families can't be and doing jobs that their families don't

even know about. host: we're talking with representative jane harman from california's 34th congressional district. dan is joining us, annapolis, good morning, republican line. caller: yeah, good morning. i just wanted to make one comment to the representative there and really to the nation. i served as a naval officer for 23 years, and i'm currently in the intelligence community. my son is a u.s. navy seal officer who served three tours now over in that area. he's currently sitting on the border right in between afghanistan and pakistan. and my opinion is that what we're doing is playing politics with this war once again. we haven't learned from wars in the past. we're making tremendous mistakes, as was just said. my vote is pull the young men out of there. i don't believe we ought to be playing politics with our lives. i think this is leading to failure. and i don't respect what our leadership is doing. thank you very much.

guest: well, dan, thank you for your as much as thank you for your son's service. i get it how dangerous this service is. d i don't think we should be playing politics with this. i am a democrat. you haven't missed this. i'm stepping up to urge my administration, which i strongly support, to change the strategy and to come up with something that protects our country better. but i do this, as i say, our kids, your kids in particular, and people i actually know are in harm's way now, and that is why i voted to nd this mission because i will not send a signal to them that i'm turning my back on them. host: victor from gulfport, mississippi, thanks for joining us. caller: good morning. thank you very much for the call. you just had a man, a loont commander his son in afghanistan with the seals, i'm a little surprised he would say something like that.

i've been in the military myself. i'm 79 years old. and i've been in the korean war myself. what if we were to bring all these troops home? where would you put them for themerican people? as a comment for you, representative harman. where would you do it in the event of what's happening all over the country, all over the world? guest: well, first of all, thank you for your service. many people, certainly including my husband, have served honorably in our wars, and i value that. our country values that. thank you very much for fighting for freedom. i'm not talking about bringing, you know, every soldier home. i hope i made that career. i'm not talking about every single soldier leaving afghanistan. i support -- i probably support, as we are doing in

iraq, leaving a number of people in place in the right circumstances to make sure that we can protect our interest in those countries and in the region. i'm talking about a much smaller military footprint, and i'm stillalking about forward bases around the world. but i think the way we protect our interest is to reduce our milita footprint in afghanistan and obviously we have been doing that in iraq, and to consider on a global basis the right strategy to protect our country from teorism and to contribute to economic development around the globe and to the projection of american values that are positive so that yng kids growing up pick any place in yemen think it is much more appealing to go get an education and be a productive

citizen of that country than to become a suicide bomber. host: paul from houston, texas, you're next. good morning. caller: representative harman, with all due respect, i just believe you've got a choice here. do we want to be feared or loved? and, you know, all you're doing is creating more enemies. you know, it's all hearts and minds. that's the only way you can win in this ideological battle. i don't deny that there are people out there whoant to kill us, and i hope that you would try everything in your power to prevent that. but we're just not, i believe, in the muslim world's eyes, we're not an honest broker. wee not an honest broker in israel. the palestinians really have no representational advocates in congress. you kill -- you kill 10

civilians for every terrorist, and where does that get you? it just gets you, you know, hatred and death begets death. host: among those lines, there's this from chris in alabama saying, that i agree with you, remit active harman, however, i suggest reducing our footprint in afghanistan. guest: yeah, i'm agreeing on reducing our footprint in afghanistan. on the feared versus loved, it's a macavellian choice, he's saying feared is better. i think what we want is to be respected because we res

to grow economically successful according to their tenants, so that is where i am coming from. how do we get there? a dear friend of mine who teaches at harvard's kennedy school and coined the phrase soft power -- that is the projection of u.s. power other than military force. he recently talked about smart power. he gives me some credit for that. guest: smart power is a good way going forward. that does include military force, but much more important, it includes diplomacy and development and getting all of those thing it includes diplomacy and development. unterintelligence strategy

that we're trying to do in afghanistan is just, in my view, out of whack here, and the expansion of the military footprint is unsustainable, and it won't lied to what we're trying to achieve. host: our last caller is from myrtle beach. caller: thank you very much. ms. harman, we're not trying to impose our will on people? we invaded two countries, and you're saying we're not trying to impose our will or views on these people? i mean, come on, please. guest: well -- caller: and please, before you -- could you talk a little bit about how you were willing to sell your vote so the israeli lobby could get you a cabinet post? tell us a little bit about that. guest: ok. we're -- our formal policies are that we're not trying to impose our will. they are that we are trying to help societies develop democrat

with governance and stability, which, in the end, protects us. i do get it that a lot of people think we're trying to pose our will, and i think our strategy is not succeeding as we had hoped. that's what i've been saying for half an hour on this show. as far as the other comment, i'm sorry the caller believes what was a ridiculous smear campaign. but that is over. i hope you know that, caller. and my view about israel and the palestinians, by the way, which did come up in a prior call, and i did not hava chance to say this, is i strongly support a two-state solution with the state of israel and the sta of palestine living side by side in peace and with the whole arab region, 22 countries, and israel, part of an economic market which could be fabulously successful and lead to the development of everybody living in that region, and i surely am sympathetic to the plight of many palestinians who

live with no hope, and i would hope that they would get back to direct negotiations and include a proper deal where a jewish state of israel lives next to a palestinian state which represents the interest of palestinians. host: do you think we'll see that? guest: i hope so. from briefings i have been receiving from the administration, they are encouraged. i think progress is extremely slow, and we've missed many -- not me, they, the parties who have to come to the table, have missed many opportunities to move forward, and i think it is a strategy. i travel to that region all the time, including to the west bank, and i've actually visited gaza, and i visit regularly with palestinian leaders, as well as israeli leaders, and every time i encourage them to move faster. host: let me put two issues on the table. we're going to talk about the bush tax cuts. you've been speaking out on this issue as well. we do have a $13 trillion debt

in this country. do tax cuts spur economic growth or do they increase the deficit? guest: depends what tax cuts. we now know first that tax cuts cost money. they're not free. that means we forgo the revenue that the taxes would yield so. if we cut -- pick any tax, if we eliminate the estate tax, which is zero for most people, but only applies to the top 3% or maybe even smaller number of people, if we eliminate the estate tax,hich is the current law for this calendar year, we are forgoing billions of dollars of revenue. so let me make that point. in terms of our tax cuts stimulative, they are if the people who pay the lower taxes are going to spend the money. i think what evidence sho is that tax cuts for the middle class are stimulative, and i support maintaining the bush

tax cuts for people earning under, i forget whether it's $250,000 or $240,000. i do not maintain supporting the bush tax cuts, and my family is in that end, and i am against those tax cuts. i voted against them when ty were first proposed by presint bush. host: a question in the election coming up, what will the democratic majority, if there is a majority, loo like next year? guest: well, i'm sure you're not missing it, steve. if you go anywhere for dinner in this town,hat's all anybody is talking about. i don't have a magic ball. but the one part of the answer that i think i know, which is hugely depressing, is that regardless of the outcome -- and i predict, but i can't assure this, that the democrats will maintain control and margins will be much smaller and the partisanship will continue. i think th will be true even if the republicans -- which win the majority in the house, which i don't think they will, but the toxic partisanship will

continue, and i am -- i'm just heartbroken by this. i belve in bipartisanship. i represent a very bipartisan district, in my first three terms in congress, it was a lean republican district. it no longer is. but i think that the best policy is made on a bipartisan basis, and we are missing huge opportunities to solve the biggest problems, which include finding the right formula or the right stimulus, doesn't have to be money necessarily, to build new jobs in this country. incompetence governance at many levels, making our government as competent as it can be, projecting our values, and protecting the security of the american people. and those a the things that i care about, and m constituents care about, and they'll find me every day trying to promote bipartisan solutions to those problems. host: representative jane harman, democra

>> after that, phil gingrey on his decision to join the health caucus. later, paul singer to talk about ethics charges on charles rangel. each morning and 7:00 a.m. eastern, here on c-span. the british defense secretary testified last week before the defense committee in afghanistan. he visited walter reed hospital on a recent trip to the u.s. and

talk about mental health issues facing soldiers returning home from the war. this is about 30 minutes. >> we have about 20 minutes left, but i think we ought to move on to afghanistan. it was covered by the foreign secretary. >> what do you expect to see in the next six months? >> we are talking specifically. >> in terms of the security as well, i have already announced to the house we are going to be seeing british troops leaving,

and i would like to make the first point that what we will be seeing is proper equalization, because the potential you would have, but with similar sides trying to look after this portion of the population. i think the agreement we reached with the americans is good in terms with how we deal with helmand, and i think it is good to the united kingdom's contribution. i think it gives a chance to fully take the advantage of our own standing with a population and the political environment, so i see it as conservative, and i see it pushing forward in terms of the counterinsurgency strategy.

i hope we will continue to see more districts so that we are in the process we want to be in in transitioning. i have made the point that we are not a force of occupation, and we're right to insure we get the government of afghanistan, by the people of afghanistan, for the people of afghanistan as soon as we can do so, and that requires they are able to maintain security. it is a long term requirement. >> the american surge will

continue to around 18,000, and that will allow the laydown. i will stress that i hope operations will continue. if we are to build on the momentum delivered earlier in the year, and the progress is now being made -- then we need to keep the pressure on the insurgency, on the taliban and look to deliver confidence to the people that we are there and that we are going to deliver the security that will convince them we are the good guys and the taliban is the bad debts. >> as you know, the counter insurgency program is about moving forward.

it is about allowing the other lines to gain traction. to allow the government to come in and be aware of the district's the opening of roads, the opening of schools. all of this is to convince them there is a better way than intimidation. it is vital that work continues, even if it does come with casualties on the british side, the american side, and with the afghan national security forces and afghan police. >> can i add to that that in a counter insurgency, there are

security and bandages to our own forces in this approach, because every time -- there are security and benches -- security advantages to our force in this approach, because every time we do that, people have the confidence to talk to us, to tell us who may be planting them, where the sources are coming from, and if we are lucky, it is permitted, but not without considerable cost, because the restraints which is part of strategy does require some risk in achieving it. >> any issues on long-term changes?

>> in terms of world strategy, i would not expected to. i think that is a matter of some urgency. we are going to seize some, so my own view is if we are able to show respect to the public, that we are getting some transitions to give remand them -- to give momentum and progress. there appears in some ways to be a lack of progress, diminishing public support that ultimately diminishes our resilience. another issue that needs to be

dealt with is how you transition to the end state, and there will be a number of countries who might be in the less conflict- torn parts who might believe that the transition and get their jobs done, and they can leave. the most difficult part would be something the conference would have to do in terms of how ave make it as long as possible. >> you just said it is your own view that some transition could be helpful in agreeing to progress for your own population.

in your own view, is it the british government for your own personal view? >> it is something i will be looking at as we move towards the conference's. that would be a sensible way forward. i do think it will happen anyway. i think other countries will begin to transition, and i think the policy will change, but i think we should be encouraging that particular change in policy. >> you see many of your predecessors come here, and i remember he did not expect it to

be fired in anger. what is the actual strength of the taliban? u.s. discovered you have killed more taliban then your predecessors. they rejuvenate themselves pretty quickly. then we will have to negotiate with the taliban. they believe we should be negotiating. >> i think it is their history that insurgencies tends to

finish with some element of politics and not simply a military victory. the question is when and with whom. i think we need to understand the nature of afghanistan. it is a homogeneous country -- to view it as a homogeneous country, and if you compare iraq to afghanistan where 70% of the country are urban, only 20% are urban. that is hugely different. afghanistan has 28% literacy rate. i think the key element is to

determine who in the taliban are reconcilable to the afghan government and to remain irreconcilable. .

>> [inaudible conversations] >> well good morning. thank you very much for being here. erskine and bayh thank you as you deserve an august recess i

think. all of you have been most generous with your time and talent and you are a very special band of warriors, for it is a thankless task and marvelously under criminal to [inaudible] i found that wandering through the village in coach, not all the time of course, paying the spread. and so we are all contributing to this cause and i know many members, all members are paying their own way in many ways and some instances. well, martyrdom has never been my dad. but i must say sometimes the slings and arrows of outrageous fortune to rain down on my whole dome. at one for my friend and i were asked why would you do this and

we've responded 13 reasons. seven randchildren for erskine and six for me, and that is my driving engine of, and with our great space experience what would be like 30, 40 or 50 years this beloved country? because if the present course cannot be altered, if this great state cannot respond to a new heading, if, quote, we will do with leader, is the craven call of the selfish souls then dig in for a hell of along of the rough ride. we all know the figures. we all know the daft, we know the vivid trajectory of debt, deficit and interest, no tricks. a good slogan might be the

status quo is no way to go. clever little ditty. i thought that up last night. as i've said before, many persons and groups hope that we will fail. flash words are flout about, as what are these guys up to? cutting were gutting of social security is a nice mantra. when all we are trying to do is store solvency from 75 to 100 years out. but cutting and cutting the mantra inflicting the vat tax which could only come about as some overhaul of reform of the income tax system, hurting the most vulnerable in society the children, the infirm, bailing out the rich, caring more about deficits than we do for our fellow human beings, crippling

the economy by draconian recommendations, he the new tax burdens on the population, killing production at innovation and on and on and on. many are not simply at for serious. i always loved adversaries in my work. they are just plain enemies. there is a difference between an enemy and an adversar they are sharpening their nine abs for the knockout punch of this big happy band and they are damned good at it because they recruit a lot of members. smart and gullible. through their height and hysteria and they make a little money on the side doing that. and our fine country remains stuck in the mock over the years over several administrations and

shows their enviable skills. it works. and it's not just the fiscal common sense. but stopping progress on reducing the tax expenditures we are ignoring unfunded liabilities of tens of trillions of dollars, which is what we are doing is peanuts compared to the unfunded liabilities but i think we are 62 trillion correcting the pension guarant system come protecting the gse, a government sponsored entities, fannie mae, freddie c, sallie mae, fanny farmer, i don't know hothat got in there but it seems good. anyway, saving them all from tranarency. guarding subidies, placing the class warfare card, we have versus them, the race card and

on and on and on. the fun and games is over. the smile of the purveyors cynicism which is we areonly doing god's work. we will be a little less invoked. so, the staff will work with your staff during the august recess and be renewed and refreshed from the return in september. what's all stay in the room, no anger or bitterness. it isn't going our way we must come and that this for me -- we must trust each other, listen to each other, challenge each other, respect each other and continue to know each other. we care deeply about our own issues as it should be. but this fine country is bigger and more imortant than any of my personal issues or yours.

so as we struggle to educate our fellow americans as to the vivid realy of where we are and when our myriad detractors unite in saying, quote, when things get better than we will deal with all of this my report is very simple. it is if we deal with this now or have an honest plan to do so things will get better and i deeply believe that and i believe most thoughtful common sense fellow citizens feel same. thank you very much. ..

>> but not only his humor, he has reminded me that knowledge is not necessarily wisdom and that i know a lot of facts, but you have got to think through those facts and think about the real impact it has on people. and this guy cares. he cares deeply about what we are doing and he is doing it for those six grandkids and i admire him a lot. i want to thank each of you for how hard and how smart you have worked together. at the focus you have had on the

mission the president assigned us. i wish the american people could see the hours you are working and the fact that you have been working in a completely nonpartisan manner to rid this country of this cancer, this debt which i truly believe will destroy our country over tie from within. a few weeks ago, allen, i chaired an eight hour public listening session, eight hours. we hea testimony from nearly 100 groups and individuals. we had young folks come in here and tell us they were worried that they were going to get stuck with the bill of this debt and this deficit and the compound interest that would be built up upon it. we had older citizens comment and tell us to please don't destroy social security and as alan said that is the last thing

on anybody's mind. we want to ensure the solvency of social security for the next 75 years and do all we can to protect the truly disadvantaged. in two weeks we will have the 75th anniversary of social security, when the president signed the law into being. i am reminded that he did that and really troubling economic times, and he did it with the support of the congress that showed a lot of foresight because it turned out to be one of the most important policy matters ever come forward in this country. it is done so much to transform the lives of the elderly and disabled the disabd and the disadvantaged. i also think that when we think about that we also have to think about the eenspan commission and what of those leaders did to tweak social security. great people like bob dole who i think alan and i both consided to be a great friend and a great leader, but what they did in various ways to make social security stronger.

this commission wants to strengthen social security and we want to do it as i said by ensuring bad it is solvent for at least the next 75 years. but, again make no mistake, to keep social security strong we have to act. we can't leave it on automatic pilot. steve goss, the social security actuary came in here and testified to us a week or so ago that the system will come up about 25% short in 2037 and we simply can't allow that to happen. on the overall budget, i think we have had lots of od ideas comein. one man sent us a 10.plan recently, which i liked. it talked about a federal government that is leaner and more efficient. his recommendations were that we have to sel surplus property, freeze hiring, streamline the

appropriations process and sunset programs after 10 years. another woman called for a federal freeze on civilian and military pay, just like we have had for state employees in my state of north carolina and lots of other states in the nation. still another citizen suggested that we get rid of tax expenditures, calling them spending by another name and i think that is exactly right. think, and i want the people who are watching this to know that we are grateful for all the recommendations we have received. we are reviewing them. and for those who are watching on c-span or on line, please send us your ideas as to how we can reduce the deficit or address our long-term fiscal prlems. all you have to do is go to our web site which is www.fiscal commission.gov and click on to be linked to submit ideas, and we will get your message in. we need your help.

on friday, the administration released its midsession review. its fiscal review, and it was not a prey picture by any means. a couple of things seem clear to me. we have to be smart. we have to do all they can to protect what is a ve fragile economic recovery, but again since i recommendations don't take place until 2012, this recovery that we a in now has a good chance to be in a very solid position by the end of. if it is not and we can phase in our recommendations or trigger them and based on levels of economic growth or unemployment. secondly it is deeply clear to me that if this commission can agree across party lines on how to address our long-term and intermediate term fiscal problems, we can provide a real boost of confidence that we'll do our economy and a world of good in both the law and-- long

and short-term. in a few minutes we are going to hear reports from our three working groups, discretiary and mandatory and revenue reform on the progress we have made and i think we can be proud of the progress we are making. but first we are going to get a chance to hear presentations from to nonpartisan outside experts. i will tell you a little bit about both their backgrounds now and then we will hear first from someone. maya is president of the commtee for responsible federal government are cauchy is also director of fiscal policy of the new america foundation. she has served on to deficit reduction committees, the pew peterson committee and the bipartisan debt reduction task force which is headed y our own alice rivlin and by former senator pete domenici who i worked with so closely in balancing the budget in they late 1990s. barry anderson who will follow her is one of those worlds leading experts on global debt

reduction. for the last five years barry has been headed budgetinfor the oec in this role he has been an adviser to the imf on what various country should do to bring down their debt. he s also worked at both omb and deputy director and acting director of cbo. we welcome you both and we will begin with with you, maya. >> chairman bowls, members of the commission thank you very much for having me here today. i know how hard all of youhave been working as you are scouring all the different parts of the budget looking for ways to change the fiscal path we are on. and thank you were the work. it is incredibly important. today i've bee asked to discuss a number of the outside initiatives that are underway to help you with their nation's fiscal future and these are groups that i'll really do want to succeed so no these groups are here also. i know you hear from groups that mafeel like they don't but they are a number of groups

counting on this commission to come up with goals. if we don't make changes in our bt trajectory, we will pay a heavy price for proastinating. less growth potential, less flexible budget and a loss of leadership in the world. just yesterday cbo released a report on federal debt in the risk of financial crisis. the document not only warns that debt levels are already quite high compared to previous levels but the dataset to grow faster than the economy forever. due to debt growth will be driven by government spending causing by the health care costs in the biggest waste in the budget, spiraling interest payments, something-- and revenues that even though they will be higher than the historical moms willot be high enough to cover the cost of our spending. cbo focuses on the growth of the rest, the growing risk of a fiscal crisis if we don't change course and the crisis could take form of a gradual rise in interest rates, but as we have

also seen in other nations that could the startlingly abrupt as investor concern grown suddenly about the risks of the u.s. default or trying to inflate our way out of debt and the money that suddenly becomes concerned about using, parking itself in an in the a safe hide then tries to get out as quickly as possible. no onenows what the tipping point would look like or when wh exactly it could happen but we are receiving more and more warnings that we may be getting closer. the main points i want to make today other than saying we really should want to find out what that fiscal crisis would look or feel like are that we need fiscal goals both the medium and long-term, that we have to be cognizant of the sluggish economy ase proceed, that we should focus on policies that promote roe fanned out along with the important work of the fiscal commission there are many outside groups trying to develop ideas that will he lay the groundwork for an dovetail with whatever you come up with. i focus on the work of the pearson pew, national academy of

public administration study choosing our nation's fiscal future and the still in progress domenici rivlin debt reduction task force. by way of background the pearson is members are those of the committee for responsible federal budget who are all former directors of cbo in many former directors of omb the budget committees and the fed. last december the commission released a six step plan and it proposed to stabilize the dead and what it proposes is number one committing immediately to stabilizing the debt. number two developing a specific and credible package as quickly as possible. number three beginning those changes gradually to allow economic recovery to take hold. number four, reviewing progress annually and implementing an enforcement regime to stay on track. number five stabilizing the debt by 2018 and number six continuing to reduce the debt as

a share of economy over the longer-term. the national academy of sciences and national economy of public administration study funded by the mcarthur foundation and john palmer of syracuse university and former cbo director now with dearborn institute. it was tasso showing different comprehensive policy packages reflecting different values which would all return to a sustainable path and i will talk about more about those policies in a moment. finally the domenici rivlin debt reduction task force is hosted by the bipartisan policy center and it is still at work. i do not know what we will conclude that i will share some of the ideas of where i think we are headed. the google group is cochaired by pete domenici and alice rivlin and i can say the group is split equally between democrats and republicans and i know independents are also involved. it is focusing on debt reduction and stabilization. it started with a very clear

agreement that everything must be on the table. there ae also many important outside groups working on outside encasement efforts including the concord coalition and dave walker's fiscal wake-up tour where they travel around the country doing meetings with the heritage foundation and brookings institution and the multicity town hall hook u convened by america speaks that what i've been been asked to do is to focus on the policy and groups that are out there. in terms of the fiscal goals that is actually quite remarkable how regularly we proceed to make budgets without a fiscal goal. the budget process doesn't require it but it has many advantages. certainly helping policymakers say no to things, whether somebody wants a siny new spending program or bury a lowering targeting tax break. that stands in the way of achieving the goal it is easier to say now. it also allows us to make fair comparisons so there there is a part politician with a specific plan and other people don't like

it instead of shooting the plan down they can put out other proposals to say how they also would meet that fiscal goal. the commission has specific goals which focuses on the short-term target of 2015 and a more big longer-term target making progress in the long-term. pearson a mercian recommended a goal of stabilizing the dead at 60% by 2018 and well recognized international standard which i think is very important given the emphasis we must put on reassuring global credit markets. the nrc commission also chose that goal with 20202 as the target year. the domenici rivlin commission has not settled on a specific goal and nothing is decided until everything is decided that a medium-term debt stabilization target remains immediate as well. the imf came out and reported that they were focused on getting the debt back down to pre-crisis levels rather than allowing it to hover post-crisis that it makes a big difference

for returning to fiscal flexibility we need to have when future cris arrive. but it will not be enough to do medium term target to strengthen the economy. a longer-term plan will have to be adopted to control federal spending and clo the gap between spending and revenue and to alleviate the uncertainty about what is down the road when we note the road we are on is currently unsustainable. over the longer term the pearson commission strongly adcates further gradually reducing the debt closer to its historical averages of below 40% of gdp after 2018. i think it is likely what we will look at is doing that with an aspirational goal of etting the budget into balance over the business cycle to allow the flexibility you need for changes in the economy. the fiscal futures committee recommended changes to ensure low revenues and spending are closely aligned come again getting back to balance of flexibility for changes in the economy in the world. the primary reason other than

economic again is to make sure we have that fiscal flexibility we need and are certain to need in the future. both medium and long-term fiscal targets are critical. they may require different policies with a medium-term change is relying more on saving discretionary programs including both defense and domestic discretionary and revenue changes including everything from cutting tax expenditures to fundamental tax reform and the plan is one good place to start looking for ideas. both groups point out in the longer-term the bulk of their form will have to come from programs related to the driver per spending growth, e aging of populations soaring health care costs. simply put without changes to these areas have a budget that at cannot be stabilized. these policy conclusions are borne out in the types of policies in the fiscal fiscal future committee report contained in the report as well as the illustrative budget blueprint. they reflect the general desire by policymaker to make charges

more gradually to entitlement programs to allow people time to adjust as well as the reality that this area of the budget for the long-term problems lie. this is particularly relevant to the task of this commission whose mission is to balance the deficit by 015 which it is assumed while stabilize e debt once the economy recovers. that will only be true if you address the unsustainable driver for budget deficit. otherwise the budget will fall out of balance quickly. i would emphasize both long-term and medium-term fiscal terms are needed that show we have the ability to change course and avoid fiscal calamity we are otherwise headed for. so we are well aware of the political polarization that exists. i think whether this commission comes up with something modest or better yet something significant, this will be a huge, huge factor in reassuring financial markets we can make the necessary changes and staving off any type of crisis. i believe it is the hope of the

out the commission they will help to pave the way i offering the specific ideas and approaches. at the same time there are legitimate concerns enacting a fiscal consolidation plan prematurely kid derail the economic recovery. it is my belief economy still faces many challenges and well crafted stimulus measures and i emphasize that come are absolutely in order so i should state my board of directors has mixed views about that. however we are now experiencing loss of flexibility and instead of just borrowing for stimulus we should add stimulus as necessary and offset the cost over a longer period of times of the funds whether for unemployment insurance, state and local government or business tax incentives do not lead to more debt in a longer-term. there isn't room for some tax increases or spending reductions more quickly. if they affect areas that are not particularly stimulative so allowing the tax cuts for the well-off to expire for example or cutting wasteful and

ineffective programs out of the budget are unlikely to harm the recovery while cutting unemployment aid to states or raising payroll taxes probably would. removing tt non-stimulus programs is more likely to aid their recovery by showing markets we are indeed serious about making changes. also enacting merely enacting a crible plan even if the policies are nothased in for years and help their recovery move along. the so-called announcement effect reassures creditors and helps keep intest rates from rising where they otherwise might do to all the but debt when the economy starts to recover. we have seen is experienced in other countries around the world. for these reasons again both peterson pew and fiscal futures committee recommend committing changes quickly as possible but saving implementation until 2012 for continuing to look at where the economy is in seeing if that makes sense. we talked before about what indicators one has to look like and i think we look at a host of indicators to see when the time is right looking at our growth potential as well as mployment

and other factors such as those that the mbr looks at. there is a question of what would constitute a credible commitment and no offense, but politicians promise they can do something in the future might not be enough so for a plan to be credible and for creditors to buy it will have to be statutorn and transparent to the public. they should be put them on immediately with the policy slated in gradually, specific pocy plans need to be developed quickly no with magic asterix. it has to be bipartisan because the changes will be difficult for either party to do this alone and undo them as quick as their path that will not be credible for markets. the public has to understand e plan and be on board and help pull policymakers accountable. if you look at the debt chart, i am sure you have seen the debt chart over and over but all you have to do is look at the levels we face in the current interest rate could change on a dime and

while stimulus might not-- it is cutting taxes and raisg spending. the harder part is bringing these lines down so we have to be foced on the fiscal consolidation peace now, not in the future even if policies can be implemented gradually. there were specifics in the mcarthur proposal that i will touch on. they put forward to illustrative pass it would achieve the goal of debt sustainability. they have a low spending-- i think it is a couple of slides i will summarize but they have a low spending and revenue plan which would maintain revenues at the traditional level and produce

they met with various policy mixes focusing on investments prada they are showing their different ways and ideas that can be used to achieve this goal. it is still a work in progress. i think they commission will recommend a specific set of returns to help convince the

solvents, rein in health-care costs, rain in -- reign in programs, and look at possible freezes in spending, and dramatically simplify the tax code. ornamental tax reform will be desirable, more so if tax revenues go up. they also analysis that we have to deal with the black holes of the budget, the policies that are different in the budget than reality. they will plan on dealing with

tax offenders. it'll hold itself to that standard indenture glue is part of the fiscal challenge. we should not be assuming the new policy. the budget challenge cannot be viewed as an exercise in get in the numbers to add up. we also have to think about national priorities. yet to pay attention to economic effects and policy challenges. overemphasizing consumption and under emphasizing investment. we tax things we want more of and not enough that of things we want less of like solutions. there's plenty of room for im the crew se its report this fall. i can say with certainty it will be chock-full of specific policies that reflect the kind

of tough choices we have to make to get this country on a better path. peterson pew is now working on a companion proposal that will be released this fall as well and ll focus on a number of budget process changes including instituting fial targets that both the white house and congress should agree to, along with annual targets to provide a glide path for a it that they were single, will recommend long-term targets that will bring the debt down even farther get enough to accommodate the economy. the commission is leaning toward an enhanced use of automatic budgetary triggers which would keep, which would be used to key policymakers on track and coming with budgets meeting fiscal goals and staying on track once they are in place and finally the report will include a number of improvements to the budget process to make it more transparent, reducing short-term budgeting, higighting budget trade up and improving fiscal outcome we hope. so i will end by saying their infinite number of ways to

achieve the fiscal goals that any of us choose is the right ones. the committee for responsible federal budget developed a debt stimulator is part of this debt which allows people to take their policies they would use to get there. i meant to bring you each her own individual copy of this simulator and i forgot but i will give them to you because who knew people would actually enjoy playing a game that allows them to try to stabilize the debt which i think 80,000 people having done this. what is remarkable is how many people get their and their long list of policies that are enjoyed bipartisan support everything from retirement age dierent tax increases spending cuts. there is a willingness to tackle these choices and somebody is spending their weekends trying to stabilize the debt stabilizer. the point is requisite changes are large and tough at the public is willing to make them as we and other groups traveling run the country talking to people find out quite readily so while the test before this commission is incredibly hard in

ironing out the different values and priorities to members is a true challenge voters appear ready to sign on and without question whawe have, this is what we have to do for the future economic well-being of the country. thank you so much. >> thank you. why don't we hear from barry anderson and then we can have some discussion. >> thank you mr. chairman. i'm sure that the other people that testified in front of this commission always begin with that they are glad to be here. i wish i could say that too, but i can't. let me give you a background on that. when i left omb, my staff as a gift gave me a t-shirt. the front of the t-shirt had the cover of the president's budget on it and the back of that said, i balanced the u.s. federal budget and all iot was this lousy t-shirt. it is one of my proudest possessions and i went overseas and have been dealing with international budget with that

kind of background. looking at what other countries have done for the last seven or eight years i saw them from a different perspective how much the u. was a leader. almost everything that is not just budget ross s. in concepts but even in terms of policies. sometimes that wasn't so good. for example tax expenditures we are basically created at the u.s. and have now been adopted widely throughout. a number of other gimmicks and games, some of which i am guilty of creating, had been followed up by other countries but in any sense that was that background of looking at the u.s. as a leader that i must confess my disappointment. i had hoped that the u.s. would be a leader now in terms of the rationalization and consolidation and more of a debt sustainability position but i'm afraid it is not. instead, much of the rest of the

world is actually taking a first step. so, i am sorry to be here but i also recognize that i'm happy to see many of the people who i have dealt with in the past and i am happy that you were doing what you are doing. it certainly needs to be done. i'm going to cover justa couple of subjects in my presentati this morning. something about the characteristics of budget systems, talking about a better fiscal rule, covering some examples of fiscal rules in switzerland and sweden and then some final observations. i certainly can talk a lot more about switzerland and sweden but i was going to concentrate on them for a specific reason which i will get to you. thank you for your introduction. there was only one more thing about my background that i would like to mention. when i've been traveling overseas, again and the rest of the world knows about our process, and also knows our political system and i'm frequently asked what party am i

a member of. and i say in the u.s. we refer to the republicans as they are mac's and the democrats is that the mac's ani am not in our mac or a d am, i am in sop. that is one of the reasons i was so successful in my many years of budgeting. the first thing i want to talk about his characteristics of budget systems. with respect to characteristics i have traveled around the world not just for the 31 oecd countries but extensively around the world and interestingly enough, there is not a big difference in budget systems between developed and developing countries. they basically have much of the same systems. sometimes the capacity and quality of their staff is not up to the more devoped countries but in terms of systems and what they are trying to do it is about the same. i cited example that happened to me in china a few years ago. china you may figure would be totally different in the u.s.

system but actually they were very interested in the u.s. system or one very big reason. china is more of a federal system. they hae their autonomous regions and what they were most interested to me was how does the irs managed to collect all the money it does basically without sending people to jail? i mean the compliance issues we have in the irs are relatively small compared to what they have in china. by the way they also have the death penalty in china, so it is a severe estimate, but the characteristics of budget systems are remarkably similar when you travel around the world and therefore you can talk about the ones that are listed on this chart and compare countries over and over. the two characteristics that are predetermined by countries overall political framework are is a presidential or parliamentary or is it federal or unitary and there are a variety of characteristics that

are determined by political choice. again the u.s. has been a leader here. we have looked at a number of thesthen change them. for example 20 years ago we had 100% cash accounting. now we have modified cash with credit reform and other aspects in it. there are a number of items down there that i could talk about what i am only going to concentrate on the last one which i believe is by far the most important one and that one characteristic of a budget system that is very important is the fiscal rules. the next slide talks about work that joe may have testified in front of this commission and i did a few years ago while i was at oecd, where we looked over a large series of countries and took a look at their fiscal rules. we divided them basically into two categories, fiscal rules that are trying to control the deficit or deaths directly.

in the u.s. since that is the old gramm-rudman rule and fiscal rules that are designed to have an impact on deficits or debt, but indirectly through controlling spending. let me highlight one i say spending, i mean not only mandatory discretionary but also tax expenditures so spending is a word to encompass all those. we look at the charts at a number of different countries that have rules based those different systems. then we looked at the success. we looked at success t just in terms of the success of the rule itself, but rather also as the success in terms of creating the conditions for economic growth because after all we in budgeting are only meant to facilitate that, not to get to a situation of a balanced budget or lower debt in and of itself but rather to spur economic

growth. we looked at a number of different rules and we came out with some clear conclusions of why we believe a spending rule is better. first and foremost a deficit rule is inherently procyclical. we learned that quite well here in the late 1980s with the gramm-rudman rule. and, where spending rules, including tax expenditures, are inherently if designed right, counter-cyclical. second, the ability to successfully adjust a deficit base rule for the business cycle is unproven and at best can only mitigate the procyclical bias of the rule. i've been going to brussels now for the better part of seven or eight years. brussels is the head of the european union and the european monetary union, which has the euro, and they have as you know a debt and deficit base rule but

primarila deficit base rule. i have been arguing with them and trying to portray how they could have a spending rule that was tter, even though they were dealing with i believe it is now 17 sovereign nations. i explained it to them. they all praise the spending row. they'll said it was absolutely necessary but they couldn't see how they could adjust the european monetary union rules to make them consistent among the 17 different nations even though i explained them. all that was for the better part of last year, the last eight years. they have been invited me back in the last year when they have seen the absolute failure of the european monetarunion rule deficit base rules, and what has happened with grease and what it is meant to the other members of the european monetary rule. i know cyclical adjustments keep many many economists in brussels and at the imf and elsewhere

employed and i certainly wouldn't want to abandon the efforts to look for where we are in the cycle. our point is if ou are doing budgeting and you have to make concrete hard decisions about the future, the n. in exactitude, the uncertainty about where you are in the cycle can't be used realistically to make budget estimates. the next point is that, and this is perhaps the most surprising but i think it is sometng that we learned in the 1990s here in the u.s.. spending rules are best because they work in the good times. deficit base rules don't find in the good times and are nearly impossible to support when times are bad. europe has learned this emphatically when times were good and the earlier decade, even the leading countries germany, france and the number of others abandon the constraints and saw the 3%

deficit rule and spent right up to it. by spent i meant increased spending or cut taxes. when times got bad they were as bad off as others. lastly violations of the spending rule are much more transparent and were noncompliant with deficit rules can be hidden. in some spending rules are much more redible and understandable. now there are a couple of different elements on the spending rule. one is a target. i am not saying we shouldn't, you shouldn't have a deficit or database target. maya talked about the deficit-based targets with a number of the others. of course that should be a target. she is also mentioned how wide the differences in the targets have been so far and just what the commissions in various different groupsave thought and that is understandable because the reality is that a target is largely mo of a political choice in an economic one.

yes there reinhardt and rogoff article gave you ideas of using historical experience that a 60% that target would probably be a good one and anything above 90% is very very bad but still it is basically a political decision. the spending rules should be emphasized to try and reach the target but the importance of the spending rule is to control spending, again to include tax expenditures and have that be the operative mechanism to reach a target once you decide on it. economic assumptions must be independent, one of the things i've enjoyed most in the past eight years having served at both omb and cbo. i've been going around the world basically telling advantage of an independent objective, nonpartisan cbo like institution and i'm very happy to tellou that a number of countries, even parliamentary countries, are doing that. either new parliamentary budget

office or through fiscal consoles which are very similar to that. but iependent and economic assumptions are a major part of it. by a party mentioned a couple of times tax expenditures. i will mention sweden who had a very good system that i think is worth looking at but didn't include tax expenditures and unfortunately began to export some of our ideas. the timeframe, many countries i have talked to are basically still on one year or or three-year budgeting and when you talk about five years, or 10, or heaven forbid if you go out to 25 or 75 years, their eyes glaze over. i am not suggesting spending rule that goes out 75 years. i'm suggesting and i'm proud to be a member ofthe peterson pew commission, that there may be a need to look at both the medium term, that is the next 10 years, and the impacts on the longer-term. i believe the congress already

does that with some of the social security legislation, looking at five, 10 and 75 year estimates. enforcement. here is again where the u.s. has been a leader worldwide, where we have had sequesters. in fact onof the european commissioners for compliance came to washington a number of years ago when i was at cbo and talk to me and the number of other people but he specifically wanted to talk to me because in my job at omb i actually implemented some of those sequesters. they were small. they really didn't have much of an impact, but the fact that they existed in the fact that we use them was the important part and that i something we are doing with the peterson pew commission, looking at sequesters or triggers. not that they be implemented but they be so bad if you well and so broad-based that they provide a very good encouraging and for there to be serious political

policy decisions to avoid the sequesters. lastly, the last major element to the spending rule is flexibility. it is important. it wasn't as important here in the u.s., although we did build it when we werdoing the budget enforcement act and a certain sense. that is, when i was working at the omb for president clinton, we would take the discretionary amounts and we wou distribute them. well, not quite, almost all of them. we would always hold back a little cushion for the president done that was done implicitly here at omb. it is done much more explicitly around the world. it can be a good thing as are the safety valves for war receion, natural disasters, that type of thing. i would like to move now to talk about first of all the swiss debt break and then the swedish medium term budget framework.

the point of the swiss debt rake which is summarize very briefly on this slide is that it is very much a one year at a time level. it takes into account and adjusted level of revenues and says, given this level of revenues you can't spend more than this. in that sense, it is quite good. i like the idea and i think it has been successful for this limit on spending. however, my complaint about it are there are a variety of different adjustments for the cycle to what the spending is. the limits on spending were not put in law, although they are changing that now. 2010 they may put those limits into law. the ability of the economics profession again to make these adjustments of where we are in the cycle and thereby build then

a better limit for spending i think are very questionable. i ask you, the members of the commission, where's the u.s. and the cycle today? you can't open the per and have a number of people saying, we are headed towards a double dip and other people saying we are doing just fine. other people saying look at corporate profits. with the profits of those levels we should be growing quite rapidly. the fact of the matter is we really don't know where we we are and given that uncertainty in order to do budgeting which is what we are required to do you need much more certainty than that. it is short-term base, a function of difficult estimates and there isn't one way to enforce. now they have something we in the u.s. do not. they have much stronger political agreement on what to do.

there is the situation in switzerland and in sweden. it is much more like we had for the first 100 or 50 years in the u.s. where we had a very strong view that thou shalt not run deficits, except for war, major economic downturns and once you do you pay down the debt. if you look at our u.s. history that is where we were for our first 150 years or so. we are not there now. sweden and switzerland are still there. i would like to now turn to the swedish medium term budget framework which i think may be a better example. one of the things that those sweden and switzerland do, which i want to do explicitly highlight for this commission though is, they cap entitlement spending. not only do they cap discretionary spending but they cap entitlement spending. the cap at the swedish did has been in place since about 1997. they had an economic situation

before that that wasuch the some more similar to what the u.s. exists. to now, a major economic downturn, problems with the banks, fluctuating currency, a very difficult position with their debt and deficits and they constructed this process about 13 years ago. it has worked remarkably well. one area it hasn't worked is they didn't include tax expenditures in there and sure enough after a number of years, the swedes look to the u.s., so what we did and basically began more spending programs using tax expenditures. i don't know whether they are going to do that in the future. with respect to their focus though it was on a longer-term fiscal sustainability. it looked at intergenerational equity. it was much more i think of the goals this commission has been talking about, and it also had a

very strong top-down centrally controlled process. there was not explicit enforcement aspects, but because of the strong top-down and because of the very strong political commitment, they haven't had to use the enforcemenprocess so much. so, from a larger good, i think that the swiss, the swedish system may be even more applicable to look at than the u.s. one. i would like to close with some final observations. one is that i really do hope this commission and that the u.s. can, and alesce around a larger sense of political commitment. i have not seen succesul programs in other countries without it. second, they spending rule i the deficit rule can coexist, but it is better to have just one with a deficit odebt target or the spending rule

enforcement. i have had a long relationship with the people in the netherlands. they are part of the european motary union. if you go to hell and he will use the euro. they are bound by the deficit rule of 3% of gdp. but what the dutch have done for the last 10 years is take the rule and put it aside. instead they have constructed a spending rule that if it would lead to a deficit of 1.5% of gdp, and it is that spending rule that has been bean-- enforcement mechanism. the dutch have had much better success both physically and economically than the other emu countries in part because of my point here, you can have both but really only one control and theydecided to have the spending rule be the controlling one. i do believe the spending rule should be based on realistic deficit or debt targets. perhaps when we look back at

what we did and gramm-rudman in the late 1980s our targets were not really so realistic virgo a spending rule can and should cover all spending and by all i am glad to hear your commites are discretionary, mandatory and tax expenditures. you have to have a rule be all inclusive. no rule can be forever, but i do believe the longer the rule and the longer the commitment the better. a five-year rule like we did in the budget enforcement act, fine. a 10 year one, yes i think we could do that too. let close with the emphasis on transparency and simplicity. one of the problems i have had with many of the rules i have looked at in europe and elsewhere was the colications that are involved. you will have to sell whatever you do to them. that is that we learned in a number of cases in this country, taking a system whether it be

health care or something else and making it so complex that people can understand it does not do well at promotg what we wanted to . complexity is inherent in budgeting. but i would strongly suggest that you resist the efforts to make it more complex, have more outs and instead make it is simple and as transparent as possible. thanyou very much. >> thank you are. questions? >> mr. ryan? >> thanks chairman. dairy i wanted to ask you about this document that my was involved in. it is one of the most bipartisan budget process reform consensus documents i have seen in a long time, taking back our fiscal future. i'm not sure you are familiar with us. it is sort of right down the middle. people from brookings, people from heritage and they basically

came up with three recommendations that i think are something that are very much worthy of our consideration and my is one of the authors of it. basically three recommendations. to set limits on automatic spending required review for every five years, two the rules for the five-year review must include a trigger for aion enforcing devices that requires explicit decisions from projecting to projected spending exceeds budget amount and number three long-term cost of these programs should be visible in the budget at all times and considered when decisions are made. do those three recommendations, what those kinds of timetables i think you have more or less answer this question but have you reviewed this and do you think that fits within your recommendations on the spending control? >> absolutely, yes. again, looking at this from an international perspective and where a lot of other countries

are and where we are in the u.s., one of the problems we have had in this country is really looking at capping entitlement or mandatory programs. we basically write the law and then not only can the money leave the treasury, given whatever the characteristics for qualifications but there is no subsequent review of it too. and so what we have difficulty with is moving from no cap, no review to one whre there is. the other countries have a much easier time because again they have been doing it for longer and they habits. i think that what it says there is a very good first step towards that. i think we need to do it. i think we need to change the mentality here of saying we do not have the ability anymore, if we ever did, to have totally uncapped programs. that is not to say that we don't

have the ability to help those people we want to help most. whether they be those social security recipients who depend enrely on social security. whether they be those people who need health care that are critically important. ether they be-- i have criticized tax expenditures which i enjoy, but i understand there are tax expenditures that accomplish a good public purpose goal and that we contain them. but what we need to do and i'm glad you cited that and i a entirely enthusiastic and in support of it is take these first steps to try and get some overall control and rationality particularly to these big drivers. >> thank you are come mr. chairman, i will circulate this or buddy can see it but again if we are seeking consensus here we have to have a very good document from people from the parties joined together to come up with some breaks and triggers and some actual caps

and that would focus us to target our assistance where it is needed most and so thanks. >> kent conrad. >> dairy, but like to and my eye would be interested in your comment as well. we talk about triggers, poteial sequesters as enforcement mechanisms. i personally believe in them. i think it provides a way of imposing a discipline that otherwise is lacking but we all know the weaknesses and we have seen in the past what happens if they are not triggered in a way that is effective so gramm-rudman-hollings i always thought had a major defect and that it was based on projectionw what happens. people would pony up the projections around here in order to avoid the bad result. so, what is your recommendation if we are to go in that direction of potential

sequesters and triggers to avoid the ability to game it, because one thing i have learned as the creative ability in this town t game the system is really extraordinary. so dairy, you were involved in actually implementi sequesters what did you learn from that experience that would be important for us to know? >> senator, first of all let me confess my sins right now. if you are talking about people who have game systems, one of the reasons for my success at omb was that i was a master at it. in fact, it wasn't just me but there is a current congressional rule concerning rescissions that said the president can't withhold money for more th 45 days. in other words can't empower money. many years ago we figured out that we wanted todo a

rescission in addition to one that had aready been done. so, it wasn't just me that did a supplemental resciion so we could withhold the money for longer than 45 days. i think i got an award for omb for that creativity so i must confess first of all that my view was you can't make a rule to bind me. now i say that not just for myself but also i undersnd your question with respect to gaming and i think it is a good one. my view is that, although again i don't think you can do it enough. there are other creative people like me but the more simple you make these trigger mechanisms and the broader you make it, the better. if you make it simple then the gaming becomes more transparent and if you make it harder, then it is much harder to do. again things i've done the past, and that a shift monies from one category that was subject to a

sequester to another category th wasn't. so, i am proud to say i've been working on the commission with maya and particularly with rudy penner and jeans turley who have been with and at the trigger not only they were the leaderon this but the entire commission has had this view. make it bad, and make it unpleasant but make it as broad as you can and try to make it simple. now i will say we have multiple triggers. hopefully they will be multiple simple triggers but that would be my advice to try to minimize the gain. >> maya. >> my first would be, having buried here, you go to the person who knows how to break all the rules. on the triggers i think you designed triggers differently for the medium term and medium-term and long-term. obviously you design your trigger for what it is you are trying to accomplish.

if you are thinking about the medium-term you probably want a trigger that is going to keep you on track and force you to get on track to achieve your medium-term target whatever it is an basically what we came up with was a group much like this, a lot of former members, sitting round the table trying to think about what it is that would make their colleagues act and they looked at the pastor gerson said one of the problems we have had is that too many pieces of the budget were exempted. everything has to be part of of the trigger and it has to be a trigger you do not want to see happen, so we ended up with an agreement, i referred to it as the-- where they both came forward and said it has t be 50/50, tax increases in spending cuts because my guys aren't going to take the tax increases, my guys aren't going to take the spending cuts and it has to hit every single program and that means that trigger has to work. in the long term they decided it looks like we are on track, you want to triggers to be different and that is where you look more towards the spending kind of

controls because you cannot say in the long term you would go to 50/50 adjustments in case you did have to. what you rlly want to do is have triggers that are attached to the program which are going faster than economy so you build them in a programmatic trigger. you also probably cannot use a trigger in the long term to four section. you can't say if he failed to come up with a plan to balance long-term policy in the country this trigger is going to go in place but you can say what you put a plan in place a trigger is there to enforce it so i would look at a medium-term trigger is something that could enforce section and a longer-term trigger is something that would and force action. you also the question of whether you want to apply the actual and you may want to only apply the trigger when you have the numbers you are looking at, so look backs rather than the projection which is where the gaming comes in. finally the bottom line that always exists on anything with budget process that will only work if you wanted to work. it will never be able to fix this problem. budget process cannot do the heavy lift what it can really help just like commissions can

help when people want to do the right thing and they are politilly different, help them give the extra nudge to do so was so we are looking at a whole lot of tailor-made triggers to help with the different challenges involved. >> mike crapo. >> thank you very much mr. chairman. my of this question is for you but very i would also like you to weigh in on. in your presentation you indicated it fleeced in the short term that we should be focusing on balancing economic recovery as well as focusing on fiscal reform and consolidation. if i understood your testimony correctly indicated and by the way i'm not trying to get into the stimulus debate we are having here in congress. i would lik to give advice on some of the parameters that you indicated it was your personal opinion that some economic stimulus continued at this point although there was disagreement on your board with regard to that. in your making that comment though you also said it needed to be the right kind of simulus could you share with us what you

coider to be, if stimulus is justified at this point on a continued basis, what you consider to be the kind of stimulus that is the proper kind of stimulus to utilize? >> you really are putting me in the middle of some interesting discussions. that is one of the great things about running and working with a bipartisan board of economic economists economist and expert thomas because we have a very rich discussion about how you figure this out so i will share a lot of the wisdom of i've gotten from the discussions th our board, but the key with stimulus is that it has to have high bang for the buck and it has to be credible. one of the problems we have had in the political arena and this is understandable as stimulus regularly gets designed for political reasons as much as economic reasons. you take your favor program that you wanted to have anyhow and we label it stimulus. ..

the payroll tax cut is something that has hiding for the buck. things that have slow worse than those like -- >> crafted package because as soon as it becomes politicized it hurts the ability to get it done. but again i just have to stress

much of this wi work if we keep ourselves on this on sustainable trajectory because markets will push up interest rates sooner or later. the warnings are coming quickly you cannot afford to ignore them that is going to undermine everything we could possibly do with any stimulus measures and the only way to keep the situation from happening -- corrine is reassure them unef by committing and developing the plan immediately and phase it in to be partnered with whatever stimulus measures barry anderson? >> because of my experience in europe, i was just invited back by the germans to be a speaker at a conference i think the title of the conference was the end of the euro? one. because i know them this was just before the june 20 meeting

in toronto and they were busy at the german bank and treasury preparing for that and there was quite a bit of discussion on the stimulus and in particular the last point made for the last five years i've been paid in your nose but in doars i ask leave to watch it virtually every day and six months ago at a dollar 50 or something the was a nice place to be. now, the greek situation actually occurred in october. but nothing happened from the germans and the germans are the one to watch until maybe january or february when they finally began to come in after the year note dropped to a dollar 25 then they figured now exports, airbus, everything else is much more competitive now will take

action to rectify what the greek situation is. but they are very sensitive to the timing of the stimulus for the end the stimulus even though the european economy isn't performing nearly as well as by u.s. one. my point is to highlight what the germans are doing and echo what was said. the important thing for this commission i think isn't 2010, is in 2011, perhaps isn't even 2012 but what the germans were saying and i think it's critically important is to put the u.s. on a path of debt sustainability. there are legitimate issues whether the u.s. needs an extra gold of stimulus. there are legitimate issues as maya said what to spend the money on the there are incredibly even more legitimate important issues getting the u.s. on a path toward debt

sustainably. and to do that consistently with the stimulus. >> thank you. >> first let me thank both of you. i think you brought a lot of valuable knowledge and counsel to the table and we appreciate it greatly. i have a multi-party question i don't like to answer but i don't mind asking. barry, you spoke and mabey maya you did as well, on the relative merit of having spending targets and how they are more desirable from your perspective and deficit targets. with respect to the spending targets i would be interested in your perspective, your view of history. spending targets tied to what? >> i think you also spoken clearly you have a lot of the color of knowledge how to gain the system since you did it

yourself hat gaming prospective members i assume would be far more challengi than gaining retrospective numbers. specifically, for example, speak to the historic example as he studied and speak example what if you set up the spending target that was tied to a five-year, ten years rolling average of gdp? and how would you view that? the seco part of the question as you talked about ow important, both of you, the enforcement regime is if we truly believe around this table this nation is facing a cisis why do we speak in terms of a statutory enforcement regime as opposed to a constitutional regime? and if you have opinions clearly none of the challenges of putting forth a constitutional amendment.

but is the crisis not worthy of the effort? last question specifically, barry i'm glad you are taking notes on this swedish specifically need you mentioned the swiss as well cap the entitlement spending and i think you said quote on quote work remarkably well. i would like to know what the phrase worked remarkably well means to you and that is my multi part question. >> the first question was looking at multi year spending targets and using for example the lling average of gdp or something like that in order to do that. you've got from my earlier comment my issues and questions of making cyclical adjustments, and i think that the effort to look at the rolling average of gdp i sort of think is in that

line of one way to take a look at that. i'm not a belver and i tell you why. i think it would be btter to sit down right now and do ten years ith caps with the recognition that it isn't going to last ten years. there is a way to be a congress that comes back nd say hey, the economy has changed. we are in a difficult or a different international situation. there is something else and therefore the cap that we set in 2010 need to be revised. that is not only possible but the but to me it is going to be a certainty. i much rather defer to what i consider to be a certain automatic political than to try to build in a difficult concept no matter how you define it, rolling average of gdp, a difficult one whiff of that. in addition it fulfills that last point that i try to make,

simplicity matters. if you have a set of nominal targets for come five for ten years, great. then the public you can say here's what the target is. did we meet it? how much and we are going to do about it and if we change it in he is what the target is and we are going to change it to this. so rather than to make a system more complex to deal with that i would rather do nominal targets for fifer ten years. again from my international advantage of the of interest the u.s. has with respect to constitutional is that for all the difficulties we have in budgeting, the judicial branch is almost never involved. belcher was i think about the only significant element that the judicial branch has been involved in budgeting. thank goodness.

we have an of difficult times without getting the judicial branch involved. this is not true in other countries. in other countries sometimes they have to determine and wait for the justices to decide before they know what the budget is going to be. i really think that we need to ke this a good aspect of the u.s. budget in mind when we go forward. so, with respect to a statutory, yes, i think it needs to be statutory what we have done that in the past without getting our friends in the supreme court involved every budget. constitutional, and agreed that would open the door up that i don't think we want open. i think statutory is required. by the way if i can just a quick side on that, looking at the 1990 budget act, one of the loopholes that was created was for emergency spending. now, when i was at andrews air

force base in september of 1990, the instruction from the people at andrews air force base to us at the omb at that time was to create definitions for emergency, and we did, and wasa five part definition. and i feel it worked fairly well. but it was never called fight -- codified. therefore there was always this that's another gimmick that was used and sure enough number of years later the congress and the president decided the census was an emergency. if there was ever something that wasn't an emergency was the census. but that's the kind of thing i'm suggesting not constitutional the codification of the emergency aspect. the swedish worked well. well, i tried to do that from two perspectives. the first prospective was with respect to the budget themselves. i was in paris we had these meetings in paris of of the 30 oecd countries and the swedish representative tama -- i still remember this about five years

ago -- came and talked about their entitlement cap. he didn't use the phrase but entitlement cap, and they have a social security program that we have, including disability. and keep the chart on the board, i am a numbers kind of guy. he put a chart on the board that sort of looked like our deficit. he was the disability insurance and then it was spiking up and because of the cap they didn't have the cap they might have done what we did. that'soo bad, go on. but because the cap they had to ta action elsewhere to meet the targets and they didn't like it so they started investigating. and they found that a lot of the swedish ople much more than in the past were going to doctors and getting permission to quit work because among other reasons they were allergic to work. what a wonderful concept. why didn't i think of that years ago? allergic to work. [laughter]

what i am trying to put out was the system worked because it forced the government to go back to the health people and say okay. now l's look at the criteria used. why are you getting all these exemptions for that? and within a very short time, they basically stopped the gimmick and they've been able to get control of the spending. but the second aspect that i would cite is the economic one. as i say i've been in budgeting for a long time but i never like to lose focus that we in budgeting are not there just to balance the budget or get the debt. we are there to create the conditions and higher standard of living. a look at what sweden experienced in the mid-1990s and what has happened to them since. the fiscal responsibility and fiscal sustainability i think has created an environment that has been much more conducive and they have had a steady more

consistent good economic growth where in the other countries you have ups and downs and ups and downs. so that is why i highlight the swedish system. >> excuse me. >> that's okay. i think this is a really important area where we ar headed and there is different layers of rules that are going to be necessary and robably different types of spending of rules the we will be able to implement over three to think the paper congressman ryan pointeout this kind of the first step and what it says is right now we have a huge portion of the budget on automatic pilot. theris no budget let alone the calf and we need to start putting budgets in place. but it's not an overly aggressive approach because what it lets you do this every five years if you fall out of whack with your budget you can go back and change your budget. so that's kind of the first step in getting used to the spenng rules. the next step i think we have to move is a little stricter which says we have to put in place plans and once they are in place, you have to hold the

spending or you could also do savings rules, the savings generated from something to the level but it is anticipated. when did the prescription drugs still in place, one it would have had been paid for but assuming that, it would ave put the spending on a path and limit to that amount projected. the same could happen with the health care bill. he could spot spending limits on that and of the spending grew beyond that to but have to change the policy so it wouldn't allow as much flexibility. the third and strictest form of it would be an actual spending the world looked basically limits the overa federal spending as a share of the economy, you could of is the door to th kristen mineral that cannot be higher than 21% of gdp. i don't think we are tre yet. i think the battle the would break out of trying to pick that number would be harder than going out and putting in place a plan and then say let's keep the spending on track at one of your plan we've hashed out so those are kind of the 3 degrees how the stricter spending caps can

be but i think the points that barry made and things the imf put out and their state show that a spending rule has to be a piece of the whole kind of new budget enforcement regime. to the question about the constitution, i think you only want to put something in the constitution if it is the perfect role and there is no perfect budget rule but if you are going to identify one would probably be something along the lines of a balanced budget. that is not something that we are likely to see in the immediate future. we have just waited too long. the long term problems are mixed in the medium term problems. the judges are so great it's probably unlely we can fix this all in one huge swamp. we of to the back to this a number of times and you can actually stabilize the debt while still running small deficits as long as the economy is growing. and so there is a very important tension between the budget regime that is complicated and sensitivenough to the very complicated budget we have that is tailor-made for it and one

that is simply not people to understand. and i don't think you want to put the kind of -- we would have to put up a recommendation that basically says do this. it seems simple that people could understand it could be a bumper sticker. we are past that point. and i don't tnk you want to put in any budt rules likely to work in the constitution at this point because they are tailor-made for the unique time and the budget histy that we are right now. >> yes, ms. fudge. >> thank you, barry and maya for youromments i find them useful. maya, you are the first person of all the people we've heard from to talk about in more detail about the announcement of fact and particularly the comment of making sure that what we come up with is understandable why the public. could you elaborate on that, because i think that is a critical pie of what it is we have to do since our actions or

lack of them will impact the regur joe? can you talk more about that? and also i hadn't heard about your debt some later. spin the direction of the debt some later for everybody, not that i'm a on the person that's, the gift so it will be fun when i hand them out. yeah, i mean i think the announcement of fact is actually quite a remarkable fact that the oecd has done most of the work of looking at the different countries forced to put in place consolidation plans because they waited too long and the fiscal crisis hit them and one of the things the study shows is that one day your newspaper headline to be great, economic is strong and things are going wll. canada went through this and then in a very short amount of time whether it is a contingent of other countries or fear or whatever it is a trigger the whole situation can change. so these countries are then left in a situation they have to ma