why don't we have a joint meeting to talk about job creation? no group in america has -- is hurt more by obama and his job killing then african-americans. why should we reach out a hand and talk about the principles of creating jobs? detroit ought to be a tax-free zone for 10 years because it is a total disaster. the >> this said that they did not normally agree with me but they like this kind of idea. i was startled at how many people came to the meeting, and they have the same interest that you do. >> i am with christian college. i am not going to ask you, but i am sure that whatever you decide

to do will be appreciated. a quick question -- the argument in manhattan is that freedom of religion does not allow us to step in and impose. how would you respond to that argument? >> first of all, there are over 100 mosques in new york city. there is no question about -- and i agree with that context. -- i look at the contrast with saudia arabia. have a synagogue or a church in saudi arabia, just one in the whole country. i want to participate in a interfaith discussion. i am perfectly happy to have this conversation.

if they would take at 13-story mosque and bill the in the bronx, i am all for it. but to pick a site close to the world trader in -- world trade center and expect the rest of us to be too timid did do something so profoundly wrong, this is a political statement. this is not a religious statement. i reject does that claim it is about our tolerance. i am tired of being lectured on tolerance by someone who said that america was an accomplice in 9/11, who refuse to condemn hezbollah, who refuses to condemn sharia, and he is going to lecture us on tolerance? i do not think so. >> i am an author of a blog perhaps 6000 readers. one of the commoners project,

interest said that are inherent liberty does not stem from caught but from the fact that we are human. is not far off from what we're saying that it is not quite there. >> that is not explicitly not true. you respond by saying, a purely secular model of liberty is in danger of being subverted by totalitarianism. the structure and project the destruction of the christian values system was at the heart of nazism and communism because they created a competitive religion. ronald reagan is clear about it. the fact is, if the total basis of your liberty is that you happen to be human, what the human next to you disagrees?

by what model to you have a right because you happen to be human? this is an enormously slippery slope. what made america extraordinary -- lincoln is the person who presented the country on the declaration of independence. if you're right to come from god, then no adolf hitler, no joseph stalin, know fidel castro has the right to come in and take your rights because their god-given rights, and only god can only hold you accountable for being a citizen. and now you and your conscience have to decide what citizenship means, not the state, not the politicians, not the judge, not the bureaucrats. it is fundamental to what liberty in america has survived at times when it has disappeared in other countries. [applause]

>> i am from phoenix, arizona and i will be a senior in high school and a share. unfortunately i will not be 18 by the november elections, but what can i do and how would you encourage other people that are not 18 about their political views, and they're not worried about their political philosophy because they are not old enough to vote? >> i began studying when i was 15, so learn, read, grab everything that you can. we helped create a website specifically for conservative latinos and to create a center- right dialogue and we will have a conference in washington, and

we will love you to write at the americano. be a volunteer. i volunteered at 16 at my first presidential campaign. you can have a big impact. if their candidates that are near you, they will want your help. i started out leaking envelops and putting on postage stamps and making phone calls and all those things that are part of politics. and without signaling any kind of personal interest, make sure that you are registered to vote by 2012. >> i will be. >> i think you get the last question. >> i am from harding university. my question is, you helped lead

the revolution in 1994. what is the biggest similarity you seek a way on today that you saw 16 years ago, and as 2010 has the result of the the same as 1994? >> they are very different years. in 1994, people were mad at clinton and they were tired of his 40 years of democratic control of congress. but the economy was dramatically better than it is now. three things coming together at that makes this a very different year. the first is that the economy is really terrible and this administration has been killing jobs and people know it and they have no belief that obama -- harry reid is running in a state that has 40% unemployment. and he helped created because he is such a job killing senator. second, people are much more

worried about national security than they were in 1994. we had the world trade center bombing in 1993 that did not work and it did not seem like up big deal. nobody at that stage had been done -- begun to connect all the different patterns around the world the day that they do -- the way that they do today. and this administration is stunningly in, but in national security. and this is the most radical administration in american history. clinton was a moderate liberal -- clinton was a moderate liberal from arkansas. obama clearly gets up every morning and wants us to become a country that we are not, and is quite cheerful about imposing our will on us whether we want him to or not. and then nancy policy comes from san francisco, from the neighborhoods that are genuinely out of touch with most american parts of the planet. [laughter] as a result, and if you watch on

television, a congressman from san francisco, what you get a is for the country sees a radical future that they do not want, an economy that is painful, and here is the foreign stuff they are not protecting these from. that creates a pressure against the democrats that is much greater than anything we saw in 1994. i think that means that on the house side, we may win a bigger victory then we won in 1994. what matters and the end is who shows up to load, make things -- who shows up to vote, making sure the votes are counted honestly, when in the argument so that no one can say that we can coast to victory. everyone has to go out every day from now until election day and make the case that america's future depends on creating a check and balance that stops this administration in its tracks. the only way to do that is to lead a republican majority in

the house and senate, and any other future means that if obama keeps moving america to a socialist future. the bank you all very much. -- thank you all very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> that was an outstanding speech. he will be signing his books out in the hallway. if you did not receive a copy, see me and i will be handing them out. and we will resume again -- the next speaker is around 5:00. check your schedules for that.

>> in the cleanup of the gulf of mexico oil spill, dispersants per used to minimize the amount of oil reaching the shore. questions remain about the chemicals affect on the environment. if tomorrow the senate environment committee holds a hearing on the use of dispersants in the cold. you can watch it live beginning at 10:00 a.m. eastern time on c- span and c-span.org. >> every weekend in august, book tv returns to book festivals we have been to around the country with panels from the virginia boat festival this weekend. later in the month, at the chicago tribune and the harlem book festival, the annual meeting of historians and librarians, and freedom fest.

bubble full listing, go to our web site. >> we're not ruling anything out. >> this marks the 20 anniversary of the beginning of the first gulf war. look back at the key players and events that became desert storm online at the c-span video library, all three, every program since 1987. watch what you want when you want. >> we recently spoke to rainbow push coalition president jesse jackson about the economy and unemployment 3 from tuesday's "washington journal," this is 50 minutes. rev. jesse jackson joins to talk about jobs and the economy. od to see. the senate budget committee will have a hearing under senator kent conrad talking about the status of the u.s. economy.

in your opinion, what is the status of the u.s. economy, especially for african-american and other people of color? guest: banks failed us with their greed and lack of oversight. billions of dollars in bailout without any link to lending. the result is well street is celebrating. expect 1 million homes in foreclosure this yea the foreclosures are outdistancing -- when a home is lost, you lose your tax base. you cannot pay teachers, police, and firemen. the ba is so for a jobless recovery. host: 10 geithner had this op-ed in "the new york times." he says the economy has a long

way to go before reaching its full potential. large parts continue to strengthen. guest: he is looking top down. i wish you would go to chicago. unemployment is like a whopping the epicenter for adults, maybe 50% for the youth. public transportation has been cut. thousands have been laid off. you cannot get the work to build the school. they are closing schools. laying off several thousand teachers. closing public housing. this is a top down view.

we need the kind of bottom up stimulus host:. we are talking about -- host: we are talking about jobs and the economy. to call loss, 202-737-0001 -- reblicans, 202-737-0002 -- democrats, 202-628-0205 -- independents. you can also send us messages using e-mail a twitter. you say that we should give the country eight reason to celebrate. you say illinois faces brutal budget pressures. they are calling for cuts in schools and universities and programs for the disabled, the elderly, and the pool. there could be a deficit of as much as $13 billion. how did you close the gap

between where the governor is in states like illinois and or the secretary of the treasury is, and he is talking about the beginnings of a recovery guest:. the first bailout was significant but notinked to lending, not wling to reinvestment. of the ship is celebrating. mealses don't have three a day in america. families do not have jobs yet. we have a crisis over and over again of the anti-social reaction i wish geithner would come to places in chicago where we have a whole streets of boarded-up houses and children are afraid to go to school because of rampant violence.

host: what can he do? guest: those banks that misled people close on people, they should have some responsibility to reinvest and to fix those houses and get people back in those houses. people are paying. they cannot pay the adjusted rates. the could stabilize their families. targeted jobs and job-training. often the close apprenticeship programs. health care. recreation. that is a comprehensive plan. host: our guest is the rev. jesse jackson for the next 30 minutes. our first call comes from arlington, texas caller:. good morning, reverend jackson.

od morning to you. with all due respect, i must say i'm disappointed in president obama and all four black leaders because right now no one in the black community and especially this president has decided against african americans by going against the arizona immigration law. this illegal immigration has devastated the african american communit they are putting black people out of work. and you and reverend sharpton are taking the side of people who are breaking the law eve day in this country and deprive it black people the right to make illegal living in this country. guest: none of us support illegal immigration. we support a path to citizenship. we support the law the supreme court just reaffirm. jobs are not being taken from us

by anybody. thee -- i would hate to see pitting of blacks against latinos. we are each other's future. weust learn to be bilingual. learn to expand our economy. i think president obama was correct and i support the supreme court decision. just because people speak with ccent. caller: i would like to say a to the caller before me. reverend jackson, whats in it for you? for you to support the arizona bill and all the anger, you of all people woul not want to see

the anger -- guest: i do not want to see the anger. we should move from anger to calm resve. there is growth. everybody wins. i have a moral passion for inclusion. we pull together, blacks, latinos, whites, and native americans, jewish americans fighting for a base. i support this. i work with cesar chavez. in the fields of texas, ohio. those who pick our tomatoes and grapes and vegetables, tse who try to work their way up, they are taxpayers. there also veterans in foreign wars. we would do better not to get

sidetracked in our anger against them. host: chris on the independent line from colorado. caller: hello. thank you for taking my phone call this morning. my question rates to the violence. you're talking about illinois. i have not seen a lot of coverage on that. i wonder if he could expand on that. guest: 1000 have been shot in chicago this year,226 have been killed. we focus on the war in iraq and afghanistan. we lost fewer than 6000 solers in those wars. 30,000 a year and 100,000 injured. in the face of that, we keep expanding more -- we must continue the ban on assault

weapons and stop the flow of guns and drugs and jobs in and jobs out. host: the lk of growth of spending shows the economy ended the second quarter on a weak note. growth will slow further in the second half of the year as high unemployment and renewed troubles in housing weight on the economic recovery. guest: look at the disparity between that assessment and geithner's assessment. we are still losing homes and jobs. teachers are being laid off. classrooms are expanding. schools are being closed. there is a recovery coming, but forclosing.e i think we need a stimulus part to as being necessary.

there must be a part two. the roosevelt model was -- there was a chicken in every pot. there was stronger regulation of banks. it was a stronger fdic and more oversight. the danner group has done a lot gethner own -- the da group has done a lot top-down work. host: welcome to "washington journal." caller: i have a couple of comments for reverend jackson. you probably will not hear this very often from a conservative, i agree with your assessment that the economy is a lot worse than people think it is.

is because of these top-down views. i read a ridiculous article that had the epiphany that job growth is a good measure of economic growth. how long will these economists that figured this out, the two economies, will street and main street. have you read a bo called "the $3 trillion war"? guest: i have knocked. -- i have not. caller: i would like to ask you if you think they have considered possible effects of pulling out of the war's and

labeling them somehow as being the cause of our economic woes guest:. we're spending hundreds of billions of dollars a year iraq and afghanistan. these two wars -- we lost money and lives and honor. they are building up their economies, building roads and bridges and sewers and schools and obstacles. we need the same thing at home. i am all for a robust foreign policy we seem to be going it alone in iraq and afghanistan and it is a long way from home. gm is no longer gm because it is 60% owned by the u.s. government.

the number one markets for buick in -- in china it is doing. the u.s. is investing in the market. we wrapped up compensation. gm was able to buy -- how can those deny a job and pay for our cause? i am concerned we more input to forces on the -- they seem to be in growing desperation -- desperation. host: democrat line. caller: thank you for all you do. the miss education of america. the arizona bill. if you left your driver's license at home, you cou be arrested and detained until you could prove you are an american citizen. what obama is trying to do and

the democrats are to provide a pathway to citizensh to bring ese people out of the shadow and make them pay their fine so that employers are deploying people who are illegal immigrants. we have fox news and is bleeding into the mainstream media that the reason that we doot have immigration reform is because the republicans wants an issue to run on. the mainstream media are putting the onus on the people w are causing the problem, the people who are blocking immigration reform. what is a rainbow/push doing? guest: there is some legitimate anguish and fear about the killings on the border. more mexicans have been killed on the mortar in the drug wars then in afghanistan and iraq

combined. much of that is bleedingver into the american cities. the appetite is creating the drug trade traffic. we have linked into predict some is moving over into arizona. we mt not leap past due process. we should not profile people by their race and their religion. i think the supreme courtas right in saying -- not just to guard the borders but to speed up the process of citizenship affirmation. host: tommy majors has this message on twitter this morning. guest: in every city, they have

cut puic transportation money for workers. they passed a bill -- zero money for drivers. only 10% for capital improvement, the buses and trains. you could have new trains but no one to drive them. these are green jobs. so we build more steel, make more still in birmingham and pittsburg and have less highway and you have more efficient transportation. i am convinced that is the wave of our future. we think of solar, turbines, windmill. that is important. mass transportation. i was in chicago couple of

months ago. i had a meeting and the plane was late. it took me to win half-hour's to get from o'hare. i got a train, 25 minutes. looking at all of that contestant on the highway. it says to me the green jobs, we should not be losing green jobs, cutting mass transportation and a timehen -- host: maryland. caller: i have a comment and a question. i'm sick and tired of black people being led around. most black people do not know that martin luther king really was a republican prior to becoming a democrat. he became a democrat with regard to the civil rights movement and john f. kennedy and willing to

pass the civil rights bill. i am sick of black people talking about foxed new spirit is the white people who hire them. this is why we have no jobs. your views, reverend sharpton, at one point would you fall behind black people and help us to prol our children and our people into independence. there has to be a point about consertism among the black community. blacks did not help them. they never hav thank you. guest: dr. king was a repuican. the emancipation proclamation process and the civil war. the progressive wing. democrats were of the stripes

of george wallace. in 1932, america hit rock bottom and the come back with jobs and a chicken in every pot. there was a big shift to republicans to democrats. dr. king was a republican. republicans were not as polarized as they are today. it is true that the mitary was desegregated. we got little luck resolve to some extent. we should devote our interest and not our fears. host: arizona, linda, republican line. you were "washington journal o." caller: i have a suggestion and

a question. i have called in about this before. he takes a that, a program, using their own money and give them $5,000. this is we use the busesses that are driving like in colorado, completely employee-owned. we need to help ourselves. jesse, will you help me? guest: micro-loans given no access to capital. access to capital and credit is ve basic. also, in the creditors do not [unintelligible] people who have homes, have

jobs, who are doing the right thing, the fact is that these major banks are targeting people and exploit them. they charge rates. stopping exploation by stopping banks and fees, yes, we needed the smaller growth and development. we must stop the predators. we're running in this big hole home and bank foreclosures. they're getting a fee on free money. the big time creditors must be stopped. host: your current campaign is restructured loans do not close on homes. why doethat bring to washington, d.c., this week? guest: we will be meeting with the senator harry reid. they lost so much land because of the department of

agriculture's behavior. blacks owned 23 million acres of land and now is down to 2 million acres and a now it is because they cannot get seed money. they were driven off of their land. the sum of $1.2 billion for 80,000 farmers. yet the government can find in the money for afghanistan and we cannot pay farmers. we want them paid the money owed to them. they want to farm. they need a way out. restructure the loans, bring down the principal so people can stay in their house. if the have a lower principal and a longer-term restructured deal, they still have to leave the home instead of these vacant or abandoned homes.

the bank cannot use them. there's no future in these vacated homes. it becomes also a magnet for crime and a loss of a tax base. host: back to the phones. little rock, arkansas. welcome to the program. faye? caller: reverend jackson, on one to make a statement and then talk about this. the statement want to make is that what obama is trying to do is trying to repair the house with the united states. we are having to live, instead of moving out into hotels, we are living in while the house is being repaired. we have a been moved into one room while this gets fixed. then you move into another one. there are a few leaks, a few bugs that comes through. we may have a little rain

dripping for. that is what i think is happening as far as obama trying to correct things. as far as fox, rush limbaugh, hannity, they are all building to incite some kind of race war. i have talked to several people about this. they say, "you should really not say that stuff or listen to that garbage." that is reverse psychology. they are doing everything they can to try and start a race war. what do you think about that? host: thank you for your call. guest: i hope that is not their motivation. the president seeks to get a comprehensive health will which is called a death bill. then they argue. these are insightful diversionary challenges and are

not good for t country. they compare him to hitler. that is not fair. what america needs today, we learned to survive apart and we must learn to live together. we are multiracial, multicultural society. we must seek parity. football, basketball, baseball, we do well. we nd the plang field even. the goals are clear. under those conditions, that is the great american dream. we would have realccess to health care and jobs and college and housing. we must and the disparity with this half and half mind which would make us a more perfect union. by the way, on the anniversary

of the march in 1963, we will have a march in detroit for uaw and the focus will be on jobs, job training, apprentice ship programs, health care, and the war. that is one really takes us above counter attacking each other. host: decatur, ill., on our line for republicans. go ahead. caller: reverend jackson, it is a pleasure to talk to you. i have a comment from central illinois. i know when you are saying. we have 10% unemployment down here. factories are pretty much a thing of the past. people are afraid to spend money, sir. the people that do have money are afraid to spend it. the people that do not have any money cannot find a job. the only answer i see is

extending unemployment benefits but that will come to an end one of these days. we need to get these banks -- back to what you are saying, we need a more friendly tax base to bring more factories in and not ship them out. i do not know how long this will hold up, but what can we do to get the tax base, the banks, and people back to work here? guest: not long ago when president clinton left, there were arguing on how to spend a peace dividend, a robust and growing economy and a fairer tax system. we had the largest -- we had the largest surplus that was ever known. i remember warren buffett saying that they did not need the tax cuts. it was money they did not want back.

they put a huge tax cut on the one hand, lots of oversight, not enforcing regulations, and the wars. the money went back to the wealthy. it went to wars. in the meantime, we have faced real deprivation now. there's no choice now but to reinvest in our economy. only the government can do that. it is their role to invest in growth. when there is growth everyone wins. when they pay their equal share of taxes, on necessary wars must end, we need to give peoe a reason to livin a reason to grow. host: hdlines in "the new york times," ben bernanke says rising wages will lift spending in a speech he made in charleston, south carolina, yesterday. the u.s. has "a considerable way to go, but rising demand for

household and businesses should help to sustain growth," mr. beanke said. guest: rising wages when people make more, they spend more. it is from the bottom up. that is an absolutely right. they need to make that commitment to invest at the bottom. right now are as a look at and i hear the words coming from the guys in the big offices, they say we're doing better. when you're doing is you're% interest, you cannot help but do better. -- but when you are doing 0% interest, you cannot help but do better. in addition, they are looking at

more homes without modifications the foreclosures. they're looking at the cost of laying off teachers this year. while presiden obama has done a good thing in chicago, but 5000 people are looking for the 12,000 jobs. we have a long way to go. we go from a peace dividend and a budget surplus to the largest deficit will ve never known which has done americans a great disservice. host: curtis on our line for democrats. caller: reverend jackson, i find it to be an abominable for any leader function at the threshold to suggest a pathway to citizenship for illegal immigrants when you can clearly

see the devastating impact as they are having on legal american citizens or naturalized american citizens. many of these people come here -- i would say our country, to them, and as like a huge sand box. they come and play. when the sand is gone, they gone -- they are gone. your position on this issue, sir, i find unbelievable. guest: we came here enslaved. we did not have legal status. we fought to make this a better country. let me say those workers who work in those fields to pick the fruit and vegetables that you eat, many of them served in the military on the front lines, they are not why the automotive industry collapsed. they are not why the banks

collapsed. they are not why we are in iraq and afghanistan. they are not why we want homes in foreclosure for working people. we should not attack the weakest link. on the positive side, when people can work towards a little citizenship -- arguing about illegals coming north, those who have come here on visas and to have overstayed their visas. they are in universities, the workplace, or they come from canada. haitians were leading the deprivation and were sent back. there is one policy for haitians trying to come here. there is another policy for cubans to come here. we need a comprehensive and fair immigration policy for word. to not allow your anxiety and fear to fool you into hate.

host: our next call from canton, ill., on our line for democrats. go ahead. caller: good morning. i feelonored to be able to talk toou. the first point i would like to make is i really do not understand why the black leaders are not behind the deportation or to clean up the immigration. the unemployment rate for black americans and the black youth is leading to high crime. when you add a 13 the 17 million more people to the working world, that will devastate the black community with more unemployment. the second point i would like to make, i do not understand why the united states government does not put import tariffs on products. if we did this, we could supplement, open up new factories, employing our own people.

they pay ridiculous liberates of $10 per week. we could start supportingur own country instead of subsidizing the other foreign countries by having an import. guest: years ago i was working with cesar chavez. the farm workers were about to have an election two weeks from that friday. they said in the mexican workers by the thousands cled the "guest workers." the brought them in to undercut the workers working the field for a decent wage. then there was the crisis with katrina. people in new orleans could not pick up their own houses. they brought in thousands of mexicans, people from latin america, to exploit their need

in desperation to take those jobs. they did not take jobs from the blacks that there were given to them by the contractors who we accountable and nt for them. can you imagine a trail of tears again? sending 12 million families across the border? it is unreasonable, unimaginable, uust, unfair, and on likely. -- unlikely. part of what makes america great and fair is to open up the field to all of us. inclusion leads to growth. when there is growth, everyone wins. host: 81 to find a more about rev. jackson's new campaign, you can find the information on their web site, www.rainbowph.org. guest: august 28 we are having a

huge uaw, other unions, and churches focusing on a way from the english we feel and the tensions we feel -- from the anguish we feel and the tensions we feel. if we forgive student loan debt, that cou free up students who would guarantee jobs, free up that money, for example. we marched around the country, including washington. this transcends our fears abou race and put america back to work. host: in addition from getting information on the web site, can they call you on twitter? guest: yes, of but i will not read back. -- i will not tweet back.

caller: good morning, reverend jackson. i need a little time. i have a lot i would like to say. i agree with a call pertaining to this race war. there will probably be a race war. we're looking at the way immigrants and the illegals come into this country. the used to be a time when you could walk on in, but now we have laws as to how people come in to the country. things are being set up now because when obama appointed one of his first supreme court justice and now we're looking at florida? we have the rubio hamas have a good chance of going into the senate in washington -- who may have a good chance of going into the senate. when you become a senate -- a citizen, you have not only the right to vote and to be informed of, but you have the right to

move around the country. obama looking at politics, it would be a good possibility if they're given citizenship tha obama will become president threw their support. host: we will leave it there. reverend jackson? guest: we have immigration laws and they must be enforced. enforcing those laws, we must be consistent, not be brutal, and let us not scapegoat our pain. the housing foreclosures that was not because of immigration. the automotive jobs that are now in china is not because of this. the student loan debt where banks get free money and tried to keep it, that is not because of immigrants. war inrapped in the

afghanistan, pakistan not because of immigrants. there are huge pockets of unemployment in these major cities. it is not because immigrants are trying to get here. we should have a pass to citizehip. we should have border patrol. i say do not be misled to fear. do not let fear become head. let us not go down that road. host: on a line for independent s. good morning. caller: i think we need to simplify things by creating a non-resident permits the requires pictures, fingerprints, require them to pay income taxes, and obey our laws. they could opt in or out of health care or citizens' security. do they could apply for citizenship while they're

working. host: that mr. this. how would this non-resident worker part differ from a green card which we already have? caller: it would not much. i do not know what they require if they require fingerprints and a picture. hot: i do not know. i am asking you. caller: when someone comes in this country to work, they do not have to become a citizen. what we should do is at least have the picture and fingerprints so we can track them if we have to. guest: what strikes me is this conversation about green cards soldiers. they come across the border and join our military. this in a front-line position. if they are killed, they get citizenship in the grave. if they survive and are not killed, they go the to the front of the line to get green cards.

they are exploited as soldiers. they are exploited as workers. we'll support legalized citizenship. we share to a thousand miles of border. on one side eve had green grass -- on one side of the border we have gen grass. our trade policies have an impact on their property. texas, mexico, arizona, let's not create other problems. the idea of saying people who are born here are no longer americans it turns the 14th amendment upside down. the idea of using americans as an object of our an english, fear, and even hatred is not a good thing -- of arcane bush, fear, and hatred. host: on our line for republicans.

go ahead. caller: think you for having me. i just wanted to comment. i have to wonder why the intellectual left continually likes to preach about us being a country of laws and then selectively rationalizes to justify any law they seem to disagree with. we either are or we are not a nation of law. i would ask mr. jackson is is ok for someone to come here illegally and break a lot to do it was involved he feels you or i should be able to break every single day? guest: people should not break laws whether they are legal or illegal. one reason is because no state has the right to make immigration law because it encourages upon the federal domain. -- it encroaches upon the federal domain.

people in the new york or oregon border economic laws with canada. people on the southern border chemicals with mexico. it did not srt recently. let's resolve this with some calling congressional process. sending more troops to the border, for example, that is one piece of it. many of these workers came because they were sent for. they were employed and they were using cheap labor to undermine organized labor. they are accused of being illegal but theyre sent for. when there are guest workers, if you protest a new lease. you generate revenue, taxes, b you cannot benefit from taxes. that is a state of inhumanity of beneath their dignity and values. host: atlanta, ga., on airline

for independents. caller: limit, the woman who called up -- hello? let me comment on the woman who said dr. king was a republican. there is no record on whether he was a replican nor a democrat. you had these people going back to state's writes. the people driving this r fox and the right winrs. we have these right wing conservatives who want you to believe they are patriots. you look at their military service record and they hav not served. they are first to support the wain iraq, the wars they would not serve in. they found a way not to serve in vietnam. they worry about losing their freedom under president obama. they do not have a clue what is like to live in this country. i am an african-american and a veteran.

we did this while serving in the military protecting the freedom that they enjoy. i want to mention some of these people. you have people like rush limbaugh, bill o'reilly, glenn beck, dennis miller, ann coulter -- host: we get the point. and is starting to become a commercial for fox. caller: as africaamericans, we have to live in this country -- guest: dr. king grew up in a republican household in a time where the lincoln republicans were progressive. george wallace was a democrat. and was not a partisan matter but it was an interest matter. thurgood marshall and

secretary: 5 democrats and republicans at that timeould find common ground on like today's polarization. he did choose kennedy over nixon. that was his political leanings at the end of his life. he challenged kennedy just as he voted for m. remember talking about marching on washington and kennedy was reluctant. the national guard was surrounding washington, d.c. they gave a reception. they said they keep for the reception and we need the right to vote. they said we could not give you the right to vote unilaterally. people like john lewis bed -- bled enough and died enough.

the change the culture and the national dialogue. he supported johnson and he chose to march for the right to vote. he was not locked into an ideology. that is why the last great movement of appellation white, blacks, middle america latina as -- the great movement of appalachian whites, blacks, middle american latinos. there are not enough bridges. when is the opposite position of barack obama? we are locked into polarization and it is not good for progress. host: the headline in many of today's pager -- papers is about ethics and the investigation of rep rangel, waters, and ensign and how that will play in the 2010 midterm elections in november.

can i get your thoughts on the current wave of these ethics investigations? guest: i do not know. congressman -- congresswoman waters has integrity. she is believable. this should be handled in a full committee and not the news room. i think congressman rangel is choosing to stand on his position and that is being worked out through due process. congresswoman waters will not take this sleight of her honor. i have a high regard for both of them. byope they'll be judged their record of service which has been a long term. host: md., sam on our line for democrats. caller: think you for taking my call. -- thank you for taking my call. i hear people talkg about the frustration because of the

situation with labor competition between african-americans and illegal immigrants. there is some over- simplification going on. there are other industries that have affected like the meatpacking industry, construction. over the last 10-15 years, in the 1980's me-packing was in -- a unionized shop. today it is overwhelmingly dominated by illegal immigrants. that happened. it is not just to brush away. there is a real competitive competition in certain labor industries. that is not accurate. there is a multiplier effect. peoplcome from mexico and the land a job i there is an employer willing to break the law and hire them. they tell their friends and they tell of their family. the multiplier effect uses the

safe haven with that job to make it an en worse situation so you see them moving into the industry. there is a multiplier effect the changes over the course of several years. guest: i agree with sam. these people are sent for. give me your tired, your poor. for dinner-ng asylum. they're coming from mexico, coming from haiti. -- they are coming for inner- asylum. we sent for them and we hired them. we protected them. the burden is on the employer. we do not seem to be concerned about latin-american baseball players. they entertain us and make us feel good about ourselves. . makes this idea of a

multicultural america and get everyone on common ground. i hope that we will keep fighting for fair immigration law, passed foritizenship, but ultimately passed for full employment. let us stop the anguish and hatred. host: thank you for being on "washington journal" today. >> on "washington journal" tomorrow morning, our guests include john boyd, founder and president of the national black farmers association. he'll discuss a class action lawsuit by black farmers on the agriculture department. we'll look at immigration with alfonso aguilar with the group latino partnership for conservative principles. our week-long discussion of the

new health care law focuses on how it affects individuals. we'll be joined by michael cannon of the cato institute. "washington journal" is live on c-span every day at 7:00 a.m. eastern. coming up next on c-span, speeches from some of the winners in tonight's primary elections. the senate budget committee holds a hearing on the u.s. economy. and later, former house speaker newt gingrich speaks at the young americas foundation, conservative student conference. >> c-span program, politics, books, history, is available any time on c-span radio in the washington-baltimore area at 90.1 f.m., nationwide on sirius xm satellite on channel 132, on your iphone and ipad with our c-span radio answer and an loin around the world -- apps and online and around the world.

c-span radio is available any time at 202-626-8888. it's free but check with your phone service provider for long distance or other charges. c-span radio even more available on your phone. >> missouri was one of several states holding primary leches today. in the closely watched senate race, the secretary of state won the democratic nomination and seven-term congressman roy blunt became the republican nominee. we'll hear from both winning candidates who will face each other in november's general election. here's congressman blunt's election night speech in st. louis.

[no audio] [applause] >> hi, there. wow. thank you all for being out here tonight. it is my great honor to be your democratic nominee for the united states senate. missourians expect a senator who is willing to stand up to

the special interests in washington, not get cozy with them, and they deserve somebody who is going to fight and bonn their side and that's exactly what i intend to do in the united states senate. [applause] you know, i want to -- i just want to start by thanking all of yawl for coming out here and -- of y'all for coming out here and thank you for your support and friendship all these years. my mom and my husband, juan carlos, are here. thank you all. you you know they deserve special thanks for their love and support and patience through all of this. and to my campaign team will you raise your hands, wherever you are out there? i have got a great, great team. they are working day and night

to win this election because they understand how high the stakes are for both our state and our nation. now i want all of you to do something for me. i want you to take a minute, maybe a couple of hours, and savor this victory. celebrate this victory. but do it just for tonight. because tomorrow the work begins. the work begins because we have 91 days in this battle ahead and we know that tonight's results confirm what we thought we knew, which is that there's going to be a very clear choice in this election, a choice between my record of standing up every single day for missouri families and the record of congressman roye blunt, who for 14 years has been in washington get coge sy with special interests, standing up for big oil company, standing up for big wall street banks and that's

the choice in this election. we're going to get to that. now you know, cleaning up, cleaning up after those like congressman blunt who have been in washington way too long is what this election is going to be all about. and whether i'm in cameron or kinnett or blue springs or st. charles, there's one thing i hear over and over again that missourians are fed up with business and usual in washington. because we are never going to get our economy going again, we'll never create the jobs we need right here, we'll never get our budget balanced and under control unless we change what's broken in washington. now many of you all know -- many of you all know i still run our family cattle farm outside of the town. you learn a lot of lessons on

the farm. there are many things you can apply to the rest of your life. one of those lessons, yep, i learned to know bull when i see it. which is coming in pretty handy these days. one of the other things i learned, though, was when something break you fix it. you don't bicker, you don't complain you don't blame somebody else you don't say it's too hard or too complicated. you fix it. and to me, washington is broken right now. we need to set about fixing it. not bickering and complaining. not blaming somebody else. but set about fixing it. because washington continues to have a culture that all too often breeds corruption and influence peddling and gives power to special interests instead of the regular people and doesn't hold people accountable for how our money gets spent. it's that kind of behavior, along with looking out for wall

street more than main street that got our economy into the biggest mess we've seen in our lifetimes and that's what we've got to fix and stop. i'm running for the united states senate to do just that. [applause] now, how we -- do we -- how we fix the things that are broken in washington is what i've been talking about a lot. i've been on my stop the bull tour around the state. i'm going to continue to do that. i'll talk about what we need to do to stop the wasteful spending. i'm going to talk about how we put missouri families first, ahead of those that are too big to fail and i'm going to keep talking about what we need to do to stop the culture of corruption that's taken over far too many people out there. now, here in missouri, as secretary of state, i've been able to succeed by knowing who i work for and never forgetting that. first and foremost, we've been looking out for consumers.

particularly seniors, against big financial interests who have been taken advantage of. we have gotten back over $10 billion for tens of thousands of people at a time when folks in washington were asleep at the switch. [applause] and we've been -- we've been looking out for small businesses and cutting costs and cutting red tape and that's what i think that ought to be about so they can spend their time growing their businesses and creating jobs that we need so badly here. so standing on the side of missouri families against big interests, whether they're in washington or wall street is what i have done as secretary of state and that's what i'm going to continue to do in the united states senate. unfortunately, though, we all know that there are some folks who just don't agree with that. there are some folks like my opponent congressman roy blunt who has been in washington too long and i know, you know, that he can sometimes sound pretty good when he comes out here to

missouri, flies out, gets in that rented pickup truck, puts on that played shirt and says he's -- on that plaid shirt and says he's looking out for us. the problem is his record in washington tells a different story. i need to give you a couple of examples about that congressman blunt loves to say he's worried about the deficit. you know what? i'm worried about that too. the difference is, when he was in charge, one of the top leaders in the house and had a chance to do something about that, you want to know what happened? we went from having a $128 billion surplus to a $1.2 trillion debt. under his watch. and you know, he also likes to brag about how he's a fiscal conservative. it is. it turns out he's a king of wasteful earmarks. under his watch we went from having 1,600 of these earmarks

in our fwounlt 12,000. $225 billion. so when it comes to wasteful spending and the deficit, congressman blunt is not part of the solution. he's part of the problem. and has been for the last 10 years system of when you hear that, in the next 30 days, the next 90 days, here's what i want you to say. bull. you need to say it. and i'll tell you, this guy is not just the king of pork, he's also mr. bailout he not only was there to deregulate wall street in the first place and let them run wild, but when they devastated our economy, he was there to bail them out to the tune of $700 billion. and then, and then, every time he had a chance to hold them accountable and stop the worst abuses, guess whose side he came down on? he was right there with wall street. and has taken more than $1.5 million from big financial interests.

that's not a coincidence. it's not a coincidence. folks on wall street, i'll bet, are calling congressman blunt a pretty good investment. to me, i have another name for it. i call it bull. and so should you. this last one just takes the cake, to me. congressman blunt says he's out there looking out for us. i've got a question about that. why is it, congressman, you are the number one top recipient in all of congress of lobbyist' campaign contributions? i don't think that's a coincidence. i don't think that's looking out for us. i think that's bull. and you need to call him on it too. here's what i want to ask you tonight. i've got a couple of questions. first, what are you going to say the next time you hear congressman blunt say he's going to stop the wasteful spending in washington? bull! absolutely. you got it. and what are you going to say when he says he's going to

stand up for us against the big financial and special interests? bull! and what are you going to say when he says he'll be out to washington to look out for you. bull! so, you got it. there's no doubt that there's going to be a very clear choice in this election between congressman blunt and me when it comes to whose side we're going to be on in washington. in the u.s. senate, i am going to do what i've always done, stand on the side of missouri families. because we know we can fix what's broke in washington and have a voice of common sense representing our state to help get our country, our economy, and our future back on track, i'm running for the united states senate to do just that. so i -- [cheers and applause] i very much appreciate you all being here tonight, i want to thank you for what you have

already done to get us to this place. we have 91 days until election day. if we're going to succeed on november 2, i'm going to need every one of you to help me every step of the way. that means knocking on doors, making phone calls, it means helping me raise money and being there by my side through this whole race. so here's what i need to know from you tonight. can i count on you? can i count on you for help? can i count on you in this fight? can i count on you to go to my website, robincarnahan.com and sign up to be volunteers? can i count on you to call bull every time you see it? can i count on you to get us past the line in november? yeah! all right. that's good. because i'm going to need your energy and your dedication and your help to do what we all know we need to do.

we all have to do. that's to fix what's broken in washington and get our economy and our future back on track. god bless you all. thanks for being here. [applause] >> thank you all. thank you all for being here. what a great day for our party.

what a great day for missouri. what a great day for the future. when brian crmbing oge wrote me and said, come to the plant any time you want to, this is probably not exactly what he had in mind. but we're here tonight because he wrote the letter and said, these 32 jobs will not be here any longer if things like cap and trade happen. and this is a campaign about jobs. this is a campaign about opportunity. this is a campaign about what we do to create more private sector jobs and get the federal government under control. not enough jobs -- not enough jobs, too much government spending, too much government interference and by the way, missourians spoke loud and clear today about their view of government controlled health care.

[applause] the first voters in america to send that message to washington, d.c., that we want a health care system that works for people, not a health care system that works for the government. and i think they're going to send another message about health care and cap and trade and tax policy and government that's bigger than the people in november, 90 days from now. we're going to be part of that. this is a campaign about whether the government is bigger than the people or the people are bigger than the government. and in our country, the people have been bigger than the government and they want to ensure that they continue to be bigger than the government. ronald reagan said -- ronald reagan said that liberty cannot be passed along in the

bloodstream that every generation of americans has to secure freedom for itself. and this is the time, 2010, is the time when the generations of americans alive today decide if we're going to extend the lease on freedom for another generation or not. because you know what, what ronald reagan didn't say but could have said is that any generation of americans can lose freedom for a long time. freedom is easier to hold on to than it is to get back. and this big government extreme agenda that not even all the democrats in washington will support, the democrats and independents and republicans in missouri are going to say, that's not who we want to be. we want to be the united states of america. we want to be a country that stands for freedom in the world. we want to be a country that doesn't put government ahead of

people, that puts people ahead of government and works to create private sector jobs that ensure the future of our family in a free society. thank you all a great night, a great night in our state, the first and the last 90 days that's going to send a message to washington and if i get to take that message to washington for you, it's a message that every day, for the next six years, i'll do everything i can to represent missouri values and represent a country where the people are bigger than the government. thank you all. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]

♪ ♪ there's one day here the next day gone ♪ >> michigan voters also went to the polls today to choose candidates for governor. in the republican race, rick snyder, the former c.e.o. of gateway computers, won a crowded republican field with 37% of the vote. defeating congressman pete hoekstra and state attorney general mike cox. he'll face bernard de niro. here's election night coverage from wdiv-tv in detroit. >> welcome to this special

decision 2010 edition of local four news at 11:00. tonight, the field for michigan's next governor is narrowed to two. >> results continue to come in as we speak but it will be a bernero-snyder face off. bernero beating out the speaker of the michigan house, andy dillon, by a wide margin with 57% of the vote counted. >> businessman snyder, also known as the nerd, will be on the ballot. representative pete hoekstra just conceded. attorney general mike cox came in third. oakland county sheriff mike bouchard, followed by senator tom george. again work 57% of the vote. in snyder will lead the republicans in the general election. >> the so-called tough nerd who ran a nontraditional campaign found a way to get a lot of democrats and independents to

vote republican. >> let's goad sond rah, sond rah, he's expected to speak at any moment. >> he sure. is you are exactly right. it looks like the one tough nerd campaign wrked. this is now officially a victory party for republican rick snyder. s the man who you mentioned, besides dubbing himself one tough nerd, referred to himself as a bright entrepreneur he went into the race as a bit of an outsider. he's not a career politician. he's been criticized widely for skipping the final two debates. you can hear the crowd here chanting, let's go rick! everyone has been here waiting for him for hours. he has decided to stick to a pretty strict schedule tonight he said he wouldn't come to the ballroom until 11:02 and it looks like he may be making his way into the ballroom right about now. he has been pretty much staying in his hotel room here at the marriott since about 2:30 this

afternoon, watching the results come in with his family. and you can hear the music there getting louder as we wait for him to take the stage. >> sandra, let me ask you. as we watch the votes come in tonight he had an early lead and the lead kept growing. i don't know anybody who thought that there might be a double digit lead in a field of candidates with five candidates in it. are people surprised there? or were people that you have been talking to expecting it to come out this way? >> they weren't surprised. a couple of minutes after 8:00, probably about five after, we checked with his campaign staffers, i couldn't believe how confident they were. they said they were optimistic. they said he was cool, calm, and collected and they said they felt great and that was really early on in the night, shortly after 8:00. >> if he said he's going to speak at 11:02, we've all got

our watches and we're looking at it, it's about five after. >> you can come out now, rick. >> i think it might be a situation where they're building the anticipation out here. and the crowd has certainly been excited. these are -- go ahead. >> he may be taking calls, we went to the other campaign, he was talking with house speaker andy dillon because dillon was calling to concede. snider may be doing the same thing. we'll get back to you at the rick snyder celebration tonight as we wait to hear from the nerd, the tough nerd who is going to lead the democrat -- the republican party in november. now to the leader of the democrats. bernero beating out dillon tonight. >> we'll get you back there as soon as we're ready to hear from rick snyder. in the meantime, we're live with the bernero campaign. i'm not sure people thought this kind of margin would occur

tonight either. >> no doubt. i think it's a big shock when you look at the numbers. bernero will tell you, we're joined live now with mr. bernero, i have to ask you quickly carning we have you step here for one second, about a year ago you were known as the angriest mayor in america. how are you feeling tonight? >> i'm not as angry tonight. but there's a lot of anger out there that's what we're responding to. we're going to put people back to work that anger has to be answered. people are being left behind in this economy and a state government not answering their need. >> moving forward to november what's the game plan? >> to continue to reach out to people to be a people-powered campaign. we're not about wall street, we're about main street. we'll invest in main street and jobs here. >> we've got to let mr. bernero talk to another reporter that's been waiting for him. he said from he beginning that his focus is jobs. he got the u.a.w. endorsement

and talked to the voters explaining his family's history, his father working for general motors for a number of year that could be it. he spoke directly to the people saying his focus is jobs. mr. bernero obviously very excited about the outcome tonight, no longer the angriest man in the united states. >> he certainly has good reason. let's get to rick snyder. >> we got onboard with having a vision a plan, and an attitude of action to reinvent michigan. [applause] >> thank you. you worked hard, we worked hard as a team. michigan has spoken. and we've got a new definition for a nerd now, don't we?

but seriously, tonight we've take an giant step forward in creating a positive future for michigan. this campaign has been about creating a future for michigan where all michiganders can win together. let me share some thank yous. first, i want to congratulate my opponents. they're good, hardworking, well-intentioned people who ran a good race. we welcome them to join us. and then i've got some special thanks to the woman that started all this.

>> sue, sue, sue, sue, sue! >> so when you go out to dinner with your spouse and she says those words, we need to talk, they can be good words, right? and i need to thank the children. they have been wonderful. jeff, melissa, and kelsey. thank you for your great effort. [applause] jeff has been volunteering on the campaign, melissa turned 18 and she voted for the first time today.

>> there you have it, rick snide for the ince lan tee accepting the no, ma'am -- snider in ypsilanti accepting the nomination of his party. we have two candidates who don't like ties. >> it's hard to protect elections, it's hard to protect -- predict who people will want and why. we have two people the newspaper mace not have predicted. >> it's been a tight race for the republicans, i don't think anybody saw the margin, if this hold up, nobody saw a double digit win coming out of the republicans. but snyder's biggest competition was hoekstra and he's already conceded. >> let's get to laura, live at the hoekstra campaign he did bow out about 30 minutes ago. >> he did. good evening from west michigan.

congressman hoekstra is still on the floor, -- about 30 minutes ago, he said he called rick snider and conceded without any bitter -- bitter hns or remorse. >> we want to thank you all for your support for the last year. i didn't get through to rick but i left him a message congratulating him on his victory tonight. it's not the result we expected, not the result so many of us work sod hard for over the last 12 months. >> back here live, congressman hoekstra had said at the beginning of his run for governor he would not seek re-election to his congressional seat. tonight he and his wife said they're not sure what the future holds in store for them but they're excited to find out and it appears that for now he's out of public life. >> thank you. >> there was a third head in

this triumph vi rat of strong republican candidates, a hard fought campaign for attorney general mike cox didn't end the way he hoped it would. >> what's he saying about the results tonight? >> mike cox has a very combative image but he gave a gracious concession speech tonight with his wife laura at his side he congratulated rick snyder on running a great race and urged republicans to rally around him in november. >> and i want every republican out there to take heart. their enthusiasm is very heartening out there. there really is a hunger and hankering for change in michigan. we have to use that this year, capture that, and bottle that and take it across the state and explain to our independent and democrat brothers and sisters why it is that michigan needs new ideas and new force

and new energy. >> mike cox says he has no idea what he's going to do after 21 years of public service which will end in january. but he says, quote, they will have to drag me out by my fingernails. back to you. >> i miss -- i misspoke, i said hoekstra had the endorsement of the "detroit news," cox did, hoekstra had the support of the "free press." >> numbers are still coming in. >> who was that -- ok. shaun is at the andy dillon campaign. what's the mood like there? >> i'll tell you what, shell shocked for supporters. dillon graceful in defeat. he's still working the room 45 minutes or an hour after his

concession speech. supporters say they're shocked bauds dillon was last to declare his candidacy and first on tv to get his message out, against a challenger that up until just days ago had such low name recognition with voters. but the campaign here for dillon is saying they had an onslaught. they were faced with an onslaught of b embing rnero ads, almost $2 million worth, many of which they say were negative that they could not keep up with dollar for dollar on the airwaves. let's listen to dillon telling his supporters he talked about negative campaigning and basically telling the other candidates the rest of the way to keep it clean. >> i encourage everyone in the state to, hey, let's have a great general election on the issues, on who has the best vision for the state who will d the best job, but let's start

the -- stop the negative campaigns. >> two quick notes here to pass along, mayor bing was here he supported dillon he says he's throwing his support behind bernero. mayor bing is term limited out, i asked what hale do after that, he said he'll think about that tomorrow. >> another hot race we've been keeping a close close eye on is michigan's 13th congressional district. >> let's look where things stand as we bring up the vote with a little more than half of the vote in, hansen clarke has 48% of the vote to carolyn kilpatrick's 39%. half the vote. in we expect the remaining -- a large part of this vote that is yet to be counted could be detroit. this is a very complexly drawn district. so we are not calling this race but clearly hanson clarke with a lead he's going to enjoy

right now. but we'll see if that holds up with, again, half the vote yet to be counted. >> he's had that lead all evening long. we'll see if it continues. has representative kilpatrick said anything? >> we're at the doubletree hotel in downtown detroit where everyone is waiting for her. we have not seen her, we are told she's here in the building but we haven't seen her or heard from her. look at the video, bernard killpatrick, as well as former city councilmember mcfale. supporters and fans waiting here to hear what cheats kilpatrick has to say. the numbers are not working in her favor. state senator clarke is holding a substantial lead over the

14-year incumbent. he had -- her son had a few words to say, he's not claim anything victory but he's -- unfortunately, we don't have any sound there right now. as i mentioned back here live, the wait is on, the mood is somber, not too many people -- they're not feeling defeated, so we'll keep an eye here at the cheeks kilpatrick election and we'll bring it back to you. >> very difficult year for carolyn cheeks kill pat path rick, she's the incumbent, served the city for a number of years, hoping to do that again in the fall. >> kansas also held primaries on tuesday. senator sam brownback won the republican primary for governor. the republican senate primary between congressman todd tiahrt

and congressman moran is too close to call. for the latest campaign news and election results, visit c-span.org. coming up on c-span, the senate budget committee holds a hearing on the u.s. economy. former house speaker newt gingrich speaks at the young americas foundation conservative student conference, and a senate haring looks into the environmental factors that may contribute to autism. in the cleanup of the gulf of -- of mexico oil spill, dispersants were used to minimize the amount of oil reaching the shore. but questions remain about the chemicals' effect on marine life. tomorrow, the senate environment committee holds a hearing on the use of dispersants in the gulf. you can watch it live beginning at 10:00 a.m. eastern time on c-span and c-span.org.

>> we're not ruling any options in, but we're not rule anything options out. >> this month marks the 20th anniversary of the beginning of the first gulf war. look back at the key players and events that became desert storm, online at the c-span video library, all free, every program since 1987. watch what you want, when you want. >> at today's senate budget committee hearing, committee chairman kent conrad and leading republican judd gregg both called the current $1.4 trillion budget deficit risky and unsustainable. members heard testimony from a panel of economists. this is just over two hours. >> i want to welcome everyone the senate budget committee hearing. we'll do a series of hearings on the economy this hearing is focused on the status of the economy now.

how are we doing? where are things headed? we're going to do some fool lowup hearings on what action we should be taking here in washington to respond to the current economic conditions. so this will be the first in a series, i'm delighted senator gregg is with us today. and i'm going to begin with an opening statement then we'll go to senator gregg for any remarks he might want to make, then we'll go to our distinguished panel of witnesses. i think all of us know that we have just gone through the worst recession since the great depression. economic growth in the fourth quarter of 2008 was actually a negative 6.8%. in other words the economy was contracting at that point by more than 6%. in the first month of january -- first month of 2009, we

actually lost 800,000 jobs and unemployment was surging. the housing market crisis rippled through the economy. home building and sales plummeted. we had record foreclosures. we had a financial crisis that threatened a global economic collapse. lending lockdown. and we saw very severe effects throughout the financial sector. let me just say, i will never forget being called to a meeting, i believe senator gregg was there as well, the secretary of the treasury and chairman of the federal reserve told us they'd be taking over a.i.g. the next morning and they told us if they did not, they believe wed would face a financial collapse in a matter of days. so this was an extraordinary crisis. we have just received news from the economists allen binder and

mark zandi entitled how we ended the great recession. they said we find its real effects on g.d.p., jobs, inflation are huge and probably averted what could have been called a great depression two. for example, we estimate that without the government's response, g.d.p. in 2010 would be about 6.5% lower, payroll employment would be less by some .5 million jobs and the nation would now be experiencing deflation. when all is said and done, the financial and fiscal policies will wil have cost taxpayers a substantial sum, they say, but not nearly as much as most had feared and not nearly as much as if policymakers had not acted at all. if the comprehensive policy response saved the economy from another depression as we estimate, they were well worth their cost. we can now look back on the

economic performance, as i kind kated -- indicated, the first quart over 2008, there was a negative 6.8%. in the most recent quarter, a positive 2.4%. but you can see in the fourth quart over 2009, it was a positive 5%. so we're seeing the recovery decelerate. that has to be a concern to all of us. going to the next slide, we can, private sector jobs picture, as i indicated in january of 2009 we lost over 800,000 jobs. in the most recent month for which we have figure we gained 83,000. a remarkable turn around. but well below where we need to be. let's go to the next slide, if we can. unemployment remains stubbornly high at 9.5%, it's down from its peak but nonetheless, too

high. if we go to the next slide, the housing slump continues, you can see the peak there in january of 2006, we had 2.3 million housing starts on an annual basis. that was the peak. we're down dramatically off that peak to 549,000 in june in 2010. the next slide is a "usa today" story headline, expect lots of layoffs at state and local levels. tight budgets, lack of medicaid help put governments in a bind. all of us know the states, most of them have a balanced budget requirement. when there's an economic slowdown, revenue decreases. they are compelled to cut spending. in some cases, cut it dramatically. the next slide is cuts in

europe stoke global fears. britain and germany plan drastic austerity measures that may hamper recovery in the united states. i want to indicate in my context with business leaders across the country, they tell me that the financial crisis in europe has had a notable effect on the economy here. that is, they have told me almost without exception that the recovery was going quite well until the european debt crisis hit and that has slowed economic growth here and certainly has affected those countries as well. if we look at the deficit, we see that under the president's proposal, the deficit will come down quite sharply over the next five years. but not sharply enough in the judgment of many of us.

most concerning to me is the years beyond the next five. where we see the deficit again rising. that cannot be. -- that cannot be the course for the country that is why the fiscal commission has been put in place to come up with a long-term plan to deal with deficits and debt, but what the -- what has been outlined in the president's budget for the long-term cannot be the course that we take. that would simply add too much to the debt and we are going to have to face up to that as shown in the next slide. because this this -- this is a longer term look at the -- by the congressional budget office, looking at 2010 and beyond, going to 2054. if we stay on the current course, we will have a debt

that approaches 400% of the gross domestic product of the country. let me state that again. if we stay on the current course, the congressional budget office tells us by 2054, we will have a debt that will be 400% of the grose domestic product of the country. nobody believes that's sustainable. nobody believes we wouldn't face a financial crisis well before 2054. let me go to the final slide, which is the chairman of the federal reserve board saying that we need a credible plan to achieve long-term fiscal sustainability. ben bernanke, the federal reserve chairman, on april 7, said to the dallas regional chamber, quote -- is probably ner advisable.

however, nothing prevents us from beginning now to develop a credible plan for meeting our long run fiscal challenges. a credible plan that demonstrated a commitment to achieving long run fiscal sustainability could lead to lower interest rates and more rapid growth in the near term." that is the challenge before us. that is absolutely imperative that we develop a plan and implement a plan to face up to our long-term debt. with that, i want to go to our witnesses. let's start with dr. berner, we will go left to right. we will hear from senator gregg first. >> you are trying to shut me off again. [laughter] >> i would never try to shut off. i am so eager to hear from these witnesses, i was going to go to them and maybe turn to you after the hearing was concluded. [laughter] >> that would have been perfect timing.

i appreciate the chairman holding this hearing and i appreciate the exceptional panel that it has been put together. i look for to hearing from them all. i also want to commend the chairman for putting forth from -- some stark numbers that are accurate, as he always does. once again, pointing out that the path that we are on is simply not sustainable as a nation. i asked my staff -- i did not know the answer to this -- i asked what the greek gdp is to their desperate they said it was about 100%. 400% for gross debt is a staggering number. let me take a more global view of the issue.

our witnesses will take a macro view or rather a micro of view. let me take a macro view. if we look at what is happening here, we are seeing a new normal, as is the term used by many people in the way we work as a nation and we function as a nation and i'm not sure it is a good new normal because basically we are taking american exceptional is and which i believe has always been uniquely founded on the basis of fiscal responsibility, individual entrepreneur ship, and the capacity of the country to grow as a result of people taking risks and creating jobs which requires access to capital and access to credit which is reasonably available at a fair price. we have contracted all of this. we are contracting it because the government is growing so fast for the government has gone from 20% of gdp 2.5 years ago to now 24% of gdp and is projected

to go to 27% of gdp. historically, it has always been in the range of 19-20% of gdp since world war two. even if our revenues are covered and it appears they will be under the present budget. it looks like they will exceed our normal level. we cannot fill this gap. we cannot fill this gap because the government has grown too much. the question is, how do we bring the government backed down but how we do it in a way that does not stifle this recovery to the extent we are having. that becomes a complicated to step event for us -- two-step event for people of economic policy because is the act precipitously to try to control the deficit, do we end up stifling the recovery? if we don't act soon enough or put in place a reasonably

acceptable plan which is perceived by the markets internationally and domestically as legitimate to bring down long-term debt, do we aggravate the short term recovery? i happen to believe a short-term recovery depends on the markets, specifically the marketplace believing that we will get our fiscal house in order. in getting it in order, how do we do it in a way that does not also dampen this slow, slow recovery? these are complicated issues, policy issues that we face. i would be interested to hear from our witnesses and what they think it what can we do in the short term for the deficit or what should we do? and what must we do in the long term for the deficit in order to give ourselves of viability as a nation that we will be serious about the fiscal insolvency of our country and therefore the

recovery. i look forward to hearing from our witnesses on whatever they want to talk about but hopefully on these topics. thank you. >> i thank the senator for his very good opening statement. i agree with the way he has framed it which is very, very good. i also want to welcome the newest member to this committee, senator goodwin of west virginia who is here. we very much regret the passing of senator byrd who was a giant in the senate and a valuable member of this committee. >> senator byrd created this committee. >> he wrote the bill that created this committee and many of the rules under which we operate three we are delighted the center good win has agreed to join this committee. -- senator goowin has agreed to join this committee. we have a have a responsibility. based on what i have seen of

your past and your conduct as a new senator, you will be up to the responsibilities of this committee that and that we faced her welcome, we're glad to have you here. will next turn to our witnesses. richard berner is the chief u.s. economist at morgan stanley. dr. simon johnson, a fellow at the peterson institute. dr. joel nieroff, the founder of the nieroff advisers. docked berner, welcome and please proceed. >> thank you for inviting me here discussed the state of the u.s. economy. with your permission, i will talk a little bit about what

policy makers can do to improve it. first the status report on the economy -- as you noted, mr. chairman, we have emerged very slowly from the worst financial crisis since the great depression but the legacy of the crisis is scattered across the landscape you noted some of the things that are important i would add that one in for homeowners with a mortgage owes more than their house is worth. lenders are still hesitant to lend to many borrowers. the process of cleaning up lenders and household balance sheets is incomplete. additional steady progress is required to achieve a sustainable recovery. likewise, headwinds from the crisis will. gdp is still 1% below its peak from two years ago. federal, state, and local budgets are strained. a faster pace of job gains is required to generate needed in, and also consumer confidence this sub-par recovery has left a

vacancy rates and the unemployment rate site and other measures high. there is a risk that inflation could sink too low and turn into a deflationary. i see signs of a bombing in inflation, we cannot take that outlook for granted. what about the outlook for our economy? nonetheless, despite those problems, moderate but sustainable growth of about 3.5% through 2011 is likely. i would note that that is pretty tepid for the first couple of years of a recovery. four factors underpinned that view. first, the shock from the european sovereign debt crisis that you noted earlier has begun to fade. and mental conditions over the past several weeks have improved and that is essential for growth. second, global growth in the big emerging market companies where domestic demand is now strong is still party. we expect global growth to be

4.7% this year, 4.2% next year although the chinese economy has slowed in response to restraints on lending and tight monetary policy, growth is still strong and we estimate it's slowing from 10% this year to 9 percent -- 9.5% next year. third, the ongoing revival in income and jobs will provide modest gains to sustain 2.5% consumer spending growth. that is a big step down from the past but nonetheless sustainable. we expect this friday to show that hours and payroll improved in july. infrastructure spending is the last part of the fiscal stimulus and acted in 2009 is now starting to gain steam. five aspects of the recent data we saw from our national income supports that reasoning. domestic demand accelerated in the second quarter to over 4% for that base is not sustainable but i think around 3% probably

is. that is likely. second, we have seen the personal savings rate ramp up significantly suggesting that americans midsummer's have rebuilt their savings and balance sheet -- that american consumers have rebuilt their savings and balance sheet. underlying income growth in the revised data we got last week is now stronger. i think consumers will spend more of that income in the second half of the year. a wider trade gap was a drag on growth in the first half but i see signs it is likely to narrow as global growth process and the u.s. produces and satisfied more domestic demand. profitability has been sharper than expected and the profit margins lie ahead of businesses have the wherewithal to replace worn out equipment and are spending money on those things to do it. finally, inflation measured by the fed's preferred date of the

core personal consumer price index has run at 1.4% over the past year which is still located it is a couple of tenths higher than originally thought. the revisions reinforce our conviction that inflation is now bottoming and the inflation scare will just be a scare. there are obvious risks to any scenario. i have mentioned it two that are important to me. it remains in housing. in addition to the payback following the expiration of the first-time home buyers tax credit, housing demand and other problems are still present. second, political uncertainty -- and increased uncertainty around taxes and the implementation of health care and regulatory reform is a key reason that consumer confidence slipped in the last couple of months. that is not the only reason but i think it is a factor. i would like to spend the rest of my time discussing policies

that congress might consider to improve the outlook for housing and unemployment. as i noted when i testified before this committee in january, 2009, mitigating foreclosures is necessary to stem the slide in house prices, slow credit losses, and reduce the pressure on household wealth. the neglect of the past 18 months has created additional risks prefers from accelerated strategic defaults which are now 18% of total defaults. these are cars who cant pay but are sold for under water that they choose not to permit high loan to value ratios, unemployment and low credit scores block refinancing opportunities for it the best options for relief continue to be simple, act quickly and spread the pain broadly. the home of portable modification program has fallen short -- the home affordable

modification program has fallen short. the short refinance program could help. principal forgiveness could give homeowners a chance to make up the payments. if these programs should be strengthened. they are not working because the language in that forgiveness modification rules is weak and the fha shorts sell program continues to be advertised as lenders pushing back on a boat parade of the proposal -- another proposal comes from my colleague. mr.greenlaw hail from new hampshire. the government has guaranteed the principal value of the 37 million mortgages backed by the agencies. there would be no credit risk for the mortgage originator who agreed to refinance these

mortgages if the government guarantee was extended to guarantee loans. we can provide details to you but households could save $36,000 annually at half the mortgage is among these 37 million refinance. what about policies to improve employment tax private non-faram payrolls have been flat over the next year -- over the last year. in our view, there are four structural components at work. what is the cost of labor resulting from the escalation benefits. -- one is the cost of labor resulting from the escalation benefits. we are out of line with other countries. as employers seek to cut the cost of compensation in tough

times, these benefit costs and drive a growing wedge between total compensation and take-home pay and continued to escalate the cost recession made that wedge bigger leaving benefits intact. long-term solutions indicate -- include implementation of healthcare reform to save costs and innovation to boost productivity and labor skills. the affordable care act will possibly realize cost savings from medicare but more work is needed to reduce the soaring cost of health care for employers and employees alike. short-term remedies perhaps maybe a refundable tax credit. we have one of those but more aggressive implementation might be helpful. the second obstacle is a mismatch in skills for the problem is that for years, employers have complained that they do not find the skills they need in today's work force. the long-term solution includes policies to keep students in school and provide access to education, reorientation of our higher educational system toward vocational training and

immigration reform. in terms of short-term remedies beyond unemployment insurance, one remedy would carry training and basic skills with income support. two other groups speaking -- seeking unemployment are newly minted college students and unemployed teachers could be an ideal nucleus for a drop ginning -- a job training program. the third obstacle is related to housing. negative equity of bonn -- among nation of homeowners leads to lower mobility rates. 1/3 less according to one study. long-term solutions could include the ones i have outlined before it short-term remedies beyond the ones i talked about would include an effort to establish a protocol for short sales and/or principal reductions. the last obstacle is the policy of uncertainty factor pe.

the uncertainty of around the implementation of the legislation solutions we have adopted i think to some extent is weighing on business and consumers to hire and refinance. the market participants are used to thinking that political gridlock is good because we keep politicians from interfering with the marketplace. today, gridlock is more likely to be bad for markets as our long-term economic problems require solutions with political action. long-term solutions require bipartisan leadership. mr. chairman, your work as commissioner of the deficit- reduction commission is obviously critical crafting a long-term credible -- credible plan will ease concerns and uncertainty about future tax hikes and the potential loss of our safety net. in addition, reducing policy uncertainty now could be a tonic

for growth, offering investors a chance to reassess the fundamentals again. we assume that congress will agree to a one-year extension of all expiring tax cuts and other provisions. doing so should reduce uncertainty as well as sustained fiscal stimulus. the sooners such action is implemented, the sooner the reduction uncertainty can be achieved. we have many challenges ahead. our short-term challenges are to enhance a more vigorous recovery and our long-term challenge is to promote a sustainable's -- does. -- promote a sustainable fiscal policy. thank you for the opportunity to offer it buys and i would be happy to answer any questions you have. >> that you very much. we will go to dr. johnson, the senior fellow at the peterson institute for international economics, someone who has testified before this committee before. we welcome you back. doctors

johnson -- >> thank you very much i think i am more pessimistic about our major process. and our about policy ability to put in effective countermeasures. i would suggest that we bring our discussion of the u.s. economy in the following stark terms -- if you look at the latest numbers b from theea and compare the first quarter of 2006, real gdp with the latest quarter, the second quarter of 2010, real gdp has hardly changed. we are on track if we are pessimistic about the second have appears to experience a lost half decade of growth in the united states. this should remind us all of the lessons from a. japjapan. in terms of the damage that has been done to balance sheets for example of homeowners, the

latest data suggests around 20% of all homeowners still have a negative equity and this percentage has not decline much over the last four quarters. you see this in the latest consumption data that came out today. consumption is on likely to rebound quickly -- and likelyun un likely to rebound quickly. most corporate leaders do not want to rely on borrowing or extend themselves and higher as much as they would have done in the past. this undermines and slows the growth rate until we have the sovereign debt crisis and pressure toward austerity which is manifest in western europe, the withdrawal of fiscal stimulus is prevalent around

the world. i was recently in china and i was talking to some of the leading economists and they are the least bullish economists on china that i meet anywhere in the world. they were very much about the need for cutting back on their expansion programs and they were worried about the waste of government funds and infrastructure the bottom line is i think global growth on a fourth quarter over fourth quarter basis, i think the global economy will struggle to break a 4% this year. next year should be a little better. i think slow growth will be with us for awhile but globally and in the united states. the second point i would like to make is that while i agree about

our long-term fiscal issues and a very careful analysis done by the congressional budget office on these issues, i am concerned that american -- fiscal issue is completely missing from this discussion and that is the contingent liabilities created by our financial sector and the risk that is caused by the continued existence of the under-capitalized banks that have an incentive to take big risks too big to fail. this is not unique to the united states, but it is a big fiscal issue in the u.s.. you can see this again for c in thebo numbers per -- you can see this again cbo numbers. you can look at the projected debt level as a percentage of gdp for 2018. it is 40 percentage points of gdp higher now than it was in

2008. you can decompose that increase in debt and see where the deficit come. from it is mostly from the lost tax revenue due to the recession. there is a small part that comes from the discretionary fiscal stimulus, but with or without that, you still would have had a massive hit to the budget and the debt. this is assuming a low rate of interest. the more difficult scenarios that to outline that the beginning start to play out, we can't expect an increase in long-term interest rate which will increase the debt even further. we can obviously have a discussion as to the extent to dodd-frank addresses these risks. this is a step in the right direction but it did not go far enough. we can agree that these breasts

have a z not goneero and -- have not gone to zero. -- we can agree that these are risks have not gone to zero. there is a budget scoring for that. i think you are leaders in insisting that cbo scored as appropriately. the contingent liability, the damage to the government budget that would arise from a future financial crisis is palpable. we can argue about how frequently those crises occur. many people say this occurs in a three-seven-year time horizon.

the ideasd about taken individually but take them all together, there is a danger for the budget short term. i completely agree with all of you that over the longer term, we must act and the good news compared to other countries and i was formerly chief economist at imf so i look at these numbers in a comparative framework including the great numbers which i have right here, my point would be that we have plenty of capacity for tax reform and the united states. our tax system is antiquated and it could be modernized very easily. i see the beginnings of a bipartisan consensus on tax reform issues that will generate somewhat more revenue than senator gregg was anticipating.

medicare remains a huge problem and i think that is the most difficult issue and that is about ethics more than arithmetic than it is about economics. the question of how much you're willing to pay for people late in life is a difficult and emotional question. the conversation has not moved forward very much over the past two years. we do not face in a fiscal crisis and that is the good news. we should also deal with the issue of the contingent liabilities posed by a still dangerous financial section of this country. thank you very much. >> let's go to ni dr.eroff. please proceed with your testimony. >> thank you. thank you for the opportunity to discuss my views on the status

of the u.s. economy and to provide some ideas on the direction that fiscal policy should take the good news is that we have had one full year of economic growth in the economy expanded at a 3.2% which is pretty impressive considering the problems we faced over this period of time. consumers are rebounding a little. business has made a strong comeback. exports are solid. inventories are being rebuilt and workers are being retired. all these factors indicate that the recession is over. however, i am in the camp that is extremely concerned about growth over the next year. i believe the economy will face a significant number of head winds and the damage done from the housing basel and the near collapse of the international financial system cannot be cured in a relatively short period of

time. while the banking industry is better, it is hardly in good condition. banking lawyers this year are running twice the pace of last year. -- bank closures this year are running twice the pace of last year. credit is still very limited bankers like to say they are not turning them good laws. they are correct, but the devil is in the definition of a good glove. -- a good loan. many firms had to deal with a bed, they -- with a bad economy, good loans are hard to find. credit standards may not ease significantly for another 12-18 months. the economy runs on credit so it is hard to see how growth can happen. the housing sector will continue to restrain activity, possibly through 2011.

there are too many challenges to overcome. first, it is back to the future when it comes to mortgage credit standards for the days of no documents and little or nothing down thankfully are over. that means that your people will qualify for mortgages. more important is the loss of equity that homeowners have suffered. in terms of housing demand, the point is that without rebuilding that equity, a smaller number of households will have the ability to make down payments on additional homes and without being able to that, they will not be able to move. the definition of the matter is one fact during the dismal forecast in residential construction. the results of the foreclosure crisis. foreclosures are greatest in the parts of the country where construction is typically -- as did a good been strongest, california, arizona, nevada, florida. as long as builders face the competition of low-priced

foreclosure units, new construction activity will be limited. the new home construction recovery is especially worse because in previous upturns, housing either lead the recovery or was once again growing robustly, often at double-digit rates. i don't expect that to happen now. or can growth come from? normally, we look to the consumer will make up 2/3 of the economy. except for the 2001 recession and recovery, consumers returned to the malls early after the downturn ended. this time, the upturn in consumption is being delayed. there are good reasons for households to be cautious and consumer confidence to be depressed. two decades ago, consumers believe that if they did well their positions were saved. businesses learn that in a globalized economy, productivity and cost containment is critical to long-term survival and workers are largely overhead for

the employment compact between businesses and workers was broken. several years ago, i argue we should read the fine job security as the ability to walk across the street and get another job. people will feel comfortable about their economic situation when they can sell their labor easily and not feel they are stuck in their current position or with their current employer. this new definition is critical. labor is the largest expense of business, there must be tight controls over payroll parity do that by limiting hiring and wage gains rate in the early part of the recovery, that strategy allows profits to rise. the combination of modest payroll gains and rising earnings has created a disconnect between main street and wall street. firms will remain hesitant to hire until they believe the economy will expand strongly for an extended period of time. if companies limit hiring,

workers to find jobs security as the ability to get a new job and will be worried that consumer confidence will remain low and it depressed workers do not usually spend lavishly. this cycle will be broken but not until the expansion lengthens and corporate balance sheets and prepare a payroll to continue rising as they have this entire year. the increases are not likely to be large enough to reduce the unemployment rate. it should not be a surprise that we are having a jobless recovery. the reality is that the last couple of recoveries and most future ones will be defined by slow job growth. the mass of industrial sector that credit lots of jobs early in the recovery by rapidly ramping up output and hiring is history. the latest gdp report shows is that we felt the need with

products from u.s. companies and good produced around the world. we should stop using a "phras ad "jobless phrase recovery." this should be enough to keep the economy going but that is about all. if consumers are not spending lavishly, can business investment remain robust? spending on software and equipment gained over the last three quarters but that may change. from the summer of 2008 to the spring of 2009, firms reduced capital spending. businesses have started making up for the failure to invest in capital required to read. competitive that is fulfilling delayed investment grade was the process is completed, firms will invest only when they believe their returns warrant the cost per to is hard to rationalize major new

purchases of software equipment if the economy is not expected to grow strongly. uncertainty about tax policy is not helping either. all this argues for decent but not spectacular gains in capital spending the inventory rebuilding that added greatly to gdp growth is likely over. in 2009, firms reduced inventories at a breathtaking pace. this year, they have refilled their empty warehouses. want to reasonable levels are reached, -- once reasonable levels are reached, that will be over. as the recovery continues, imports will grow faster. i expect that the trade deficit will widen further and that will further restrain growth. we are facing a lack of credit, stuck in the housing market, an uncertain consumer, a weary business community that is

already restocked warehouses, depleted work forces, and replacing business software, and had not even talk about local governments that are cutting back dramatically my forecast for the next year for growth is in the two-2.5% range. we should not compare the pace with the past two decades when strong growth was close to 3.25%. over the past 20 years, the economy hyped by atecthe tech bubble. without another bottle, -- without another bubble, growth will be slower. look at what is possible and that is a slow but steady recovery in this context of a badly weakened economy that the

structure of fiscal policy must be determined monetary policy it is always a value on the sense of where we are in the business cycle, fiscal policy seems to be viewed in a vacuum. they are often proposed regardless of the condition of business, households, or the federal budget deficit. i believe that policies intended to grow the economy should always be evaluated on a basis of where they make sense in the context of the current economic circumstances and where we are the business cycle. tax cuts should not be implemented or should be implemented only to the extent that they produce new growth and set the stage for further economic activity. spending increases should be implemented only if they can quickly and efficiently increase domestic demand. we're moving from an economy that lacked demand to one where demand is growing slowly. we need to take that to the next level where businesses expand

sharply we have to meet the changing economic conditions. thank you for your time. >> thank you. let me go right to it, if i could. there is a debate going on here about what is the correct fiscal policy to pursue now. i think the three of you have outlined insignificant detail the economic conditions we confront now. the question for us is what do we do about it? to boil it down simply, on the one hand there is a camp that says you should provide more stimulus to the economy. paul krugman says you have to provide more stimulus. he recommends that we provide more aid directly to the states other provisions and do more in terms of its route -- emperor structure. on the other side are those who say that we have record deficits

and debt and we have to take immediate steps to reduce deficits and debt now. they say no further stimulus. dr.berner, what would be your recommendation as to what course to pursue? >> as i indicated earlier, i think we have a number of specific problems. we should address our policies more specifically to address those problems. one of the biggest problems that all of us have talked about today involves housing financing and a state of balance sheets, the negative equity position in which many mortgage borrowers find themselves. cleaning those problems up, mitigating those problems really involves fiscal policy. we are using fiscal policy currently to do that.

losses incurred on mortgage- backed securities from fannie mae and freddie mac, you and i are paying that as built losses occur. the problem with that strategy, simply letting the forecloses a car and letting the defaults occur including the strategic default i mentioned earlier, is that slow-motion process really inhibits growth and creates uncertainty and prolongs the adjustment in housing and by extension, in consumer balance sheets and therefore has a big impact on consumer spending and friends further downside risks to home prices. >> if i can say from your testimony, you would be for more aggressive intervention to prevent foreclosures and to try to close this gap between some 20% of the people upside down on their mortgages? >> some foreclosures are not

preventable. we want to try to mitigate those which are preventable. we want to give an opportunity with some ideas to allow homeowners to refinance where the only barrier is the refinancing process where we already have the responsibility and liability on the federal balance sheet for those mortgages that might default since they are backed with the full faith and credit of the federal government. in addition, to accelerate the process of bringing borrowers and lenders together through proposals like the principal reduction or forgiveness program so that lenders have been performing asset which is not now performing and the borrower can stay in their home with a reduced payment with some expectation that they will share, maybe not gather

completely, but share in any stability or upside from future home price appreciation. that is why we have strategic default. people do not have that expectation and they will not share in the future price appreciation if in fact it materializes. the policies we are pursuing presently guaranteed that that appreciation is way off in the future. the policies i recommend would mitigate that and speed up the process and reduce the imbalances in housing. if we were to start a job training force to bring together people who have skills with those who lack skills, that will cost money. instead of giving people pure transfer is unemployment insurance which is needed in many cases, it puts money in the

hands of people and gives them activities which are productive and increase training and offered a lot more dignity to those activities. those are some of my suggestions. >> dr. johnson, what would your advice be? what should we do now? >> the risk that we face in terms of the government debt is whether there is a better alternative. we have benefited greatly from the fact that the rest of the world is struggling. it is dangerous to assume this will continue indefinitely or necessarily next year. the europeans are getting their act gather -- getting their act together. if we see that opportunity out there, you will see a shift in international portfolios.

half of our debt is held by foreigners and they could shift away from the u.s. and we would have an increased interest rate. the best way to get ahead of this is to undertake now measures to reduce the deficit 15 years down the road which would be tax reform or some form of medicare reform. that should lower interest rates. you are reducing the risk of our debt and that would create a fiscal space where you could choose either to pay down debt were not run up by higher deficit. you could also put that into short-term stimulus. i am sympathetic to the ideas we have heard today that would try to stimulate the economy, i would caution against doing it without a medium-term fiscal consolidation framework. that is never a what the imf

would do. that is a sound principle. >> the debt commission that senator gregg and i serve on, the success of that commission, in your mind, takes on even more importance given the current economic conditions? >> absolutely, i think the deficit commission and any other initiatives along those lines is the key to being able to provide short-term stimulus and creating scope for whatever measures you'd think would be suitable for the economy over a shorter time frame. if you don't address the shorter time frame, these other measures are substantial risks. >> n dockedaroff. >> -- n doctorsaroff. >> -- dr. naroff --

>> the return to tax cuts would have been be minimum -- a. minimal we are no longer at the point where businesses are not spending or household are not spending. the extent of the fiscal stimulus i think has to be withdrawn. that would draw all need to continue which is already under way. we need to be transitioning from a situation where we are strictly looking at the demand side to a phase where we are looking to sustain some of the demand out there but not as heavily as we have. the key lesson that we learned from the great depression from the 1930's is that you cannot have a failed recovery.

that is what extended the downturn. because up to buy many of the arguments is that we need a significant amount of stimulus at this point. i don't think we need significant amounts of spending at this point, but i think we have to move toward a combination of sustaining elements of the spending but only those that translate into demand immediately. we then need to move toward the tax side of the policy, the supply side of the fiscal policy, which looks to generate some initial demand but starts the process of laying the foundation for stronger growth. i do not believe we will be seeing a whole lot of activity through the interest sensitivity of businesses if we lower interest rates. i look at the levels of interest rates right now and i find it hard to believe that we will go even lower than we are at this particular point.

businesses will be looking at what the conditions are to make those investments and the return on them, not just the cost. as we move through really the first half of next year, we will get to the economic portion of the cycle where tax cuts can become most effective on the business side. i view it as a continuing, in that respect. >> senator brooke greg -- >> you are saying that the

uncertainty issue and the short- term stimulus issue will be addressed significantly if we put in place policies which address the long-term debt issue so that people have confidence in the out years as to where the country is going on the issue of a desperate is that true? >> yes, that is exactly what i am saying. >> can i ask a question again? you all talked about this issue of consumption as being a big driver and we have always been a consumer society. i see this recession as substantially different than any other for many reasons. it is primarily because the baby boom generation, the defining economic engine of the 1960's

to present was so productive and drove the wealth of the country was run on the cost of retiring when this recession hit. a large percentage of the baby boom generation retirement savings was in contributory savings as obverses defined benefit plans. that shift occurred throughout the 1980's and 1990's. what happened here was that you had this huge generation, 70 million people retiring and they suddenly found all the money they had saved for the purposes of retirement was significantly decreased in value. by this recession. they are now seeing some recovery depending on how they were invested, but i think there is a fundamental mindset shift in our nation in this generation it goes from consumption to savings to try to deal with retirement which they

are about to start. you will not see the consumers that dominated our culture when this generation was so cute and so productive and had an income. thus, you will see much less driving of the economy from the consumer side as this generation tries to adjust to the reality of retiring with less than they thought they had prayed is that true? what is the implications of that? >> i totally agree with you. i think we are in the new age of thrift responding to the loss of wealth. their houses and pension plans were affected i think there is an enormous uncertainty about the promises that have been made to consumers by governments

at the state and federal level and local level. all those things i think are coming to we should not expect to see a consumer who is spending as before. the new normal, as you will, for consumer spending will be 2%, 2.5% growth rates that i described. we should look, therefore, to other parts of our economy, to provide growth. i think, for the first time since the mid 1980's, we are likely to see global growth as a source for stimulus for u.s. growth, and we should rely on that. so we should keep our markets opened. we want to encourage the kind of global rebalancing that is needed to reduce the size of our external deficit, reduce our dependence on global investors to hold our debt, and at the

same time, encourage the growth of other economies who will provide market for our companies to export to, and will provide income for people to save and rebuild their balance sheets. that is not an unsustainable environment. in fact, it is more sustainable. the one we have left, where savings rates were declining both national and personal, and where we can rebuild the foundation for a stronger and more sustainable recovery, but i think nonetheless, there are things we need to do in the short run and there are things we need to do in the long run. i just want to express my agreement with the idea that we need a credible plan to address our long-term tesco challenges. that will reduce the uncertainty. the way we do that is also

important, whether that is through higher taxes or spending growth. we have to get our arms around the promise and we have made for the future that we are going to have difficulty in keeping them as a result of the growth of those programs. >> thank you. i have heard this argument before, basically, our society will look to trade. trade with resignation, the bric countries, for example. i understand the logic, but i am not sure that i accept it as driving our economy. i think perhaps energy could play a larger issue. let me ask you about this idea of scoring financial liability correctly in the system, dr. johnson. it is almost a catch-22.

we are telling banks in the financial system they have to increase their capital. then we are hearing from the market there is no credit in the markets because the banks are significantly increasing their capital. if we went through an even more aggressive process of, we need to continue to score capital -- i assume the way that you knew this issue is by raising capital. you will contract credit even more. don't we have a catch-22 situation from a fiscal policy standpoint? >> i do not think we do. there is a wonderful new paper about raising capital requirements from a professor from harvard and another professor in chicago. >> you can send it to my e-mail. >> i do not think the effects

are portrayed by the banking community, as feared by even the u.s. treasury. what will come from the agreements, unfortunately, is little in the way of raising the needed capital standards. the quality of capital is going to be relatively low, so the financial system will have to absorber losses. given the political on come, i do not expect much additional capital to be in this. i think we should score the liability that this creates, relative to the risks that it poses. that is standard procedure. this is 40% of gdp, so it is a big one. not scoring not one would be a mistake. >> just quickly, you do not

ascribe to the view if you put more pressure on the need to increase capital -- which i accept it is necessary to keep the system sound for you will end up with contraction in credit. >> it depends on how to raise capital requirements. the way that we did things after the stress tests -- you can have your reservations about those tests, in general -- but raising capital is the right way to do this. you do not want to tell people you must change your ratio of capital to assets tomorrow because certainly you will get a contraction. there are ways to make the banking sector. banking becomes less sexy, less of a high-risk, high return activity. that is okay, some like it, some do not. but it changes the nature of what a bank is. it does not necessarily cause a

big credit contraction. >> senator goodman. >> thank you for the warm welcome. certainly, an immense honor to follow in your footsteps, senator. although no one can replace senator byrd, what i hope to do is to emulate his work ethic and commitment to this body into the state of west virginia. i have a tangential question for you. you alluded to faith in our local governments in your testimony. i wanted to talk about the impact of the unfunded liability is that so many of our state are facing. in my limited experience in west virginia, we were looking at billions of unfunded liabilities in various pensions, other post-

employment benefits. the end result being aggressive encourages efforts being made to amortize those liabilities over a period of years, but as you might expect, there were other political ideas that were needed in their own right, so my question for you is, what is the impact of these unfunded liabilities on future economic growth, what sort of pressure does it place on the federal government's efforts to tackle the issue? >> that is really the thing that every state and local community is trying to get their arms around, at this point. there is no simple and quick resolution to the problem. that is the first thing to keep in mind.

the unfunded liabilities and pensions, which states are simply not paying their share to in order to have the temporary balancing of the budgets, and that will likely continue, it is going to mean -- whether they were politically necessary programs or not -- they will have to be reviewed. crises, if they are handled correctly, will create fairly significant short-term pain, and i believe that will continue to be the case in state and local governments, but that is a pain that should have been felt over the last five, 10 years. but the unwillingness to recognize them continued. my view is, in terms of federal

fiscal policy, states and the to come to -- need to come to grips with their spending patterns, and to a large extent, make the cuts necessary. at this point, they need to get their fiscal houses in order. to the extent there are temporary fiscal issues that they may be eased through, and there may be able for federal policy, but more so it is time for the state and local governments to start recognizing the costs that they have the imposed on themselves are not sustainable anymore. while i do not argue with some of the fiscal stimulus fund having gone to the state, because there was certain truck that you could not plan for, now that they have had a couple of

years to deal with that, and one you cannot address 10 years of fiscal irresponsibility overnight, there is a need to address that. >> i just want to emphasize the importance of education in this process. what we see at the state and local level are big cuts in education. what we have seen over the past 20 years, the difficulties that people have if they do not have a college education, how hard it is to participate in the modern economy, have wage growth. senator gregg, your idea of other motivators for growth, we support them, but increasing wages in the economy, not being able to participate in getting a job in the global economy, for example, the situation just gets

worse with long-term unemployment. this is going to really come through as a huge weakness for our growth potential, but what can you do about it when you do not have space at the federal level because of longer-term fiscal issues? unless you do with that, you cannot create the space to do with these pressing issues. >> thank you. senator bunning. >> thank you, mr. chairman. thank you for showing up, a panel, lots of brains sitting at one table. i would like to give you one quote from a formal federal reserve chairman, who in my opinion, cost three major recessions in the united states with his monetary policy. on "meet the press" he said the

u.s. is experiencing "a pause in a modest recovery that feels like a quasi-recession." do you agree with that characterization, what policies would you recommend to change that situation, what is the worst thing the federal government could do in this situation? realizing that we have 15.5 million part-time or full-time of unemployed people, 8 million of which were unemployed in 2009. will we have any jobs to put them back to work? will we be able to raise our economic level so we can create those jobs?

opinion.ike anyone's >> let me start the discussion. i do not think it is necessarily a pause. given the damage done from the blowup of the housing market, near collapse of the financial sector, the idea that we could get anything more than a modest, slow-growth recovery was hopeful. the 5% growth that we got at the end of 2009 was largely just making up for excessive inventory cuts and investment cuts that were done at the peak of what we could call the panic of the first half of 2009. except for that, this 2.5%

growth forecast, which i have and others are not far off of, is likely to be sustained. i do not see the deceleration, a pause in growth, as much as that is the reality of what we are facing, given the damage done to the economy. >> on this statement from dr. greenspan, i agree, it is slow growth, a disappointing recovery, one of the slowest since world war ii. >> doctor johnson, you are a member of the cbo panel of economic advisers. i am sure you have predicted that economic growth will fall by 1.4%, if the 201 and 203 tax

relief is allowed to expire. why does cdo expect that it will slow down our economy? cbo expect that it will slow down our economy? i am looking to get it going faster. i want everyone to realize cbo is the independent scorekeeper here. you expect a 1.4% decrease. >> i am only on the panel, and not responsible for -- >> >> i did not say that, but maybe you can explain. >> if you are worried about stimulus, you could look at other ways to stimulate the economy -- >> i have looked at them.

>> i would expect and support continuing tax cuts. >> kentucky has a $2 billion shortfall, out of an $18 billion budget out of a two-year period, and they are coming to the government for $240 million. are you kidding me? so there budget can be balanced? what if all 50 states did the same thing? >> senator, we are obviously in a difficult place from a fiscal point of view. my point is, if you had an agreement on the longer-term budget, you could create fiscal space in order to choose.

the financial markets, as much as they like you now, allow you to borrow the two-year at record lows, that will not continue. >> you obviously know zero to 1% is the rate that the federal government is borrowing money on. what will happen if we get some economic recovery? won't our borrowing go up some? >> yes, and relative to other countries, we have a relatively short time frame. i am not playing this down at all. you need a longer term fiscal consolidation framework. without that, we are asking for trouble. >> i also believe when you look at the tax cuts from