that is billion with a b. to put things in perspective that is greater than the gross domestic product of poland or saudi arabia. that is $35,000 for every household in the state. teachers funds are estimated at, teachers pension funds are estimated at being underfunded i almost a trillion dollars. $933 billion. the city of cleveland, cleveland alone to fully fund their pension plan it would cost more than busing kids to school or paying for their textbooks for a year. in milwaukee, the union blocked fully funding the pension cuts-- fully funding their pensions. in milwaukee they were seeing a 48 million-dollar deficit in their school funding.

the cities simply sought to make the teachers have co-pays like everyone else and benefits. small expenses, taking a few pension cuts. the teachers union balked. they said no. as a result, 428 teachers were cut. what was the union funding for instead? getting full funding for and other medicines of this sort to their health care plans. what are the reasons? first, lavish promises. as grover already pointed out, pension funds and employee compensation passes the private sector. that investing in overestimating returns. instead of estimating a normal, reasonable rate of return like they do in the private sector which is usually around 6% most states operated on estimating getting seven, eight, nine or greater percent return on their

investment. pension spiking. public employees at the end of their career working overtime, working to public jobs to replace-- inflate their salaries. in new york, a sheriff who was make in $60,000 a year did overtime 291 hours of overtime in one year. he had $134,000 per year, which his pension will be then based on so instead of being based on the 60,000 it is based on 134,000 for the rest of his life. double dipping. some public employees will retire and the next day go back to the exact same job they were doing before they retired, so now they are getting not only attention but the salary they were getting before they retired. a police chief in utah retires from his job, making $107,000 annually.

he went back to work the same day and got the 107,000 annual salary but guess what? now he gets to kick in a pension. so, who pays for the bill? we pay for this. this is why pension funds are significantly underfunded. so what is the answer? the first answer is, stop doing defined contribution plan. stop allowing politicians to kick the can down the road, not telling taxpayers how much they are spending and losing it for another generation. when a politician makes a promise to a public employee union, they are not paying for that year. their children are going to pay for it. the taxpayer children are going to pay for that and they are doing this because they are underestimating the returns. second, we have to eliminate pension spiking and doubled it thing. it has to be eliminated immediately. it is contractual. the next contract, don't allow the public employees to engage

in this practice. third, we have to reduce the pension. we have to reduce the pension promises. we can't do it for retirees. current retirees are extremely difficult. new employees coming into public jobs can do it from day one. current public employees that have been working on the job, extremely difficult to cut what we have party promised them by but as soon is that collective bargaining agreement comes up as soon as you renew their contract you have to cut the pension. i am sorry, it is difficult and these are teachers and these are firemen that they are making more than people in the private sector. these are also transit workers and government bureaucrats and also administrators so you can forget that. if we don't do something we are going to see a financial collapse. it is that serious, it is that difficult. it is going to happen in the state or is going to happen from the bailouts from the federal

government. either way you are going to pay for it. thank you. >> thank you any. lastly we will hear from mario lopez the president of the senate leadership on. mario is going to offer it unique perspective on how the cost of government day impacts communities. >> thank you maddy and thank you to u.n. you and to grover and everyone at atr for the invitation to be here with you today. my name is mario lopez. as maddy said i am president of the hispanic leadership on. we are dedicated to promoting doublet policy solutions limited and government and individual freedom and we want to focus the way, i know you have heard some from fine speakers so i will be very brief but i want to focus

on the government spending and debt, the impact on small business and what that means for the rapidly growing hispanic community and the united states. small businesses often overlooked as the economic engine that drives the american economy and american job creation. a lot of times we forget it is small businesses that are creating jobs in our communities. small businesses are a vital part of the american dream and account for two-thirds of the jobs that are created in the united states. for american latinos, owning a small business represents the height of what it means to pursue economic opportunity. it is a chance to provide and improve your own life, provide for the future of your family and of course for your children. according to the census bureau hispanics start small businesses at a rate three times that of a general population. the number of hispanic owned businesses for example, again according to the census euro rose 33.6% from 2002 to 2007.

receipts of those businesses totaled $345.2 billion, which is a 55.5% during that same timeframe from zero to 207. hispanic owned businesses accounted for 23.6% of businesses in new mexico, 22.4% of businesses in florida and 22.7% of businesses in texas and incidentally though all three of those states are substantially above average, in the rankings of the cost of government day state rankings that you have been reported in front of you. so we see examples of small business under attack. the more government taxes, spence, regulates and grows the less opportunity there is for small business to grow and create jobs and the less opportunity there is for someone to create a small business of their own. we heard a little bit from gem jim on the obamacare example, and obamacare is just one area

where small businesses are being under attack. they will face higher taxes, especially in the form of the dreaded individual employer-- excuse me, the employer mandate which is going to be a huge cost of government moving forward and is going to be backed up by a penalty of two to $3000 per employee so those costs are all going to be tacked on, not just of course with the small business in itself but also to consumers. i want to point out especially that hispanics are a very young population and the united states. not only are they the largest minority population currently, but they are also the youngest. the medium ages 27. for whites it is 41, for asians it is 36 and for african-americans it is 31. one quarter of all newborns in the united states are hispanic. in 11 states minorities represent a majority of

elementary and secondary public school students, and all these numbers are likely to grow as the population rises to nearly 55% by 2030 and almost 60% by 2040. all of us try some fundamental points that we should keep in mind when we are talking about economic issues. debt a definition has to paid back. government cannot create wealth, but it can certainly destroy it. at the same time, people who are today driving our government spending and debt through the roof, those same people are saying going to be knocking on the doors of future generations demanding that they give up their dreams and pay more for the reckless policies that the government necessarily demands. the burden of paying for out of control government spending will disproportionately fall on on the american hispanic population because of that ovulation compared to the rest of the country. i just want to wrap up quickly by saying the pursuit of the

entrepreneurial spirit is one of the factors that may begin a of america the greatest country on earth and if we want to see the united states of america remain the greatest country on earth than we have to protect the ability of people of any back round to own small businesses, to allow those businesses to thrive and create jobs in their communities and provide opportunity and prosperity for themselves and their families. thank you. >> thank you mario. with that i would like to open everything up for question-and-answer and remind our panel is once again that you can repeat the question anyone ask you so we have the media present so everyone can hear that. does anyone have any questions for any of our panel is today? >> to pay for one share of

government created cause. the other thing is, what numerator and denominator are you actually using and how do you break down the numerator? the denominator i assume is personal income, which is $12.3 trillion for last year. and then the numerator is $5 trillion of spending, it dea table 3.1 and then you are adding $2.5 trillion of indirect costs on top of that? >> so, let me make sure that i get all of your points. so, we use net national roddick. the numerator in the equation is you are starting with what will be called cost of government, both of spending federal, state and local and in the regulatory so those are the two parts of the numerator. does that answer your question? >> what actual reference are you

using? are you using, likes tax foundation for their spending freedom day which is never mentioned by the media which was may 21 of last year, they were taking bea table 3.1, which was $5 trillion of total spending for the last year. are you taking that and then adding $2.5 trillion approximately of indirect costs? >> we do get a lot of our spending data-- data from bea. [inaudible] >> that is actually explained very well in the report itself, but it is based on analysis by dr. martin crane. he actually did some stuff with a small business administration that went in and discuss how do we actually figure out how to put an easily quantifiable number on regulation which is something that is most at the time this. that is the hidden cost a lot of people have a hard time seeing and unfortunately hasn't been addressed very well so that is more explained there. >> let me ask you about the

denominator. is a $12.4 million for this year? >> i don't remember the number off the top of my head. >> i am wondering, the one thing i didn't hear about was the bush tax cuts, and i'm wondering how much is it going to cost the government if the bush tax cuts are extended? >> the tax rate reductions from 2001, 2003 certainly if you look at the rate reductions on cap gains and dividends the economy grew rapidly after they passed. they actually raised more taxes than before so there are some tax changes, tax increases that do actually lose money and some tax cuts that game the government -- make gain the government money particularly sensitive issues like capital

gains have historically done that so you have a tax credit, the government will lose revenue. there are a couple of arguments here. one is low marginal tax rates, and perhaps the most important thing you can do with you are worried about the deficit is to have faster economic growth. a 1% faster growing economy, growing at 3% instead of 2% get you $2.4 trillion more in revenue over a decade, so you really want to avoid slow economic growth. with faster growth, stronger growth, more jobs, wyatt income, unfortunately the government gets more money with which they can do stupid things with but the cost of economic growth, the good things and opportunities for people and to avoid more deficit spending. but there is a cost to faster economic growth and that is the government playing with more money. i think it is important to maintain a lower marginal tax

rates to avoid what is a looming tax increase, january 1, 2011, the largest tax increase in the history of western civilization. they will not be helpful, and i know there is some argument from some on the political left, they intend to ask this then, sunday for some people but they couldn't fix it anytime in 2007 when the democrats have the majority of the house and senate they could have done it anytime in 2009 and the president or in 2010 and they happen so one might wonder whether they intend to do it at all in the future. >> what about people like alan greenspan who says that you know he very much favors these tax cuts that you know not with borrowed money. >> i saw alan greenspan speak at aspen and why he is depressed because he doesn't think this congress is capable of reducing expenditures. he may be right that this but

alan greenspan is old enough to remember we have elections every two years and we are not stuck with this congress forever. and this november, this is an opportunity to change the house house and/or the senate to stop the bleeding. that doesn't mean you turn everything around with one house or the other. you can't perform things if you don't have 60 votes in the senate and majority of the house and president but you can't stop the bleeding. and as we saw in 1994, when the republicans took the house and senate with the capacity to stop new bed things, that alone was fairly helpful in turning economic growth around and getting stronger economy. so, we have been talking about spending. on the other side, if you open the door to tax increases, you never get the spending restraint, because the whole point of having a conversation about tax increases or suspending reductions is so tax increases day on the table and

it forces a large government, the advocates of larger government will constantly come back to tax increases. only if you take tax increases off the table, as chris christy the new successful rock star governor from new jersey of all states, who has stared down the labor unions, and defended taxpayers, only because he took tax creases off the table would be allowed to have a national state and national conversation about spending restraints. when under reagan in 82, tip o'neil said how about this? we will cut $3 in spending for every dollar of tax increase you give us. reagan mistakenly cut the deal. the tax increases were real. the spending reduction never happened and then bush, who must have not been paying attention during the reagan years walked into the same track-- trap, 1 dollar of tax increase for every $2, 1 dollar of tax increase for

$2 a spending. spending increased after that deal faster than i was expected to before the deal so there wasn't any net spending reduction. there were tax increases, so step one to all of the spending reform ideas that have been discussed tiers to take tax increases off the table. if you don't take tax increases off the table you never get to the conversation on spending which is why the advocates of more spending always want tax increases on the table at some capacity. >> is there any reason why do you guys measured your data and calendar years as opposed to fiscal years? >> the data was more continuous that way. that is the simple answer.

>> it makes sense to people that way. most american families don't think about their year in terms of a fiscal year. they don't understand if you are talking from january 1, making the budgeting your helpful. >> mr. lopez mentions the difficulty fiscally of having such a high percentage of young hispanics in the country and the effect eventually on the pension system. would we be wise to import more aging spaniards? would that do it? >> now, i don't think i mentioned the effect on the pensions but i would just say that it is not necessarily a burden to have a younger

population. it is a good thing. the problem is when you have a lot of government spending and debt all that stuff has to be paid back so the burden of paying backpack is going to disproportionately fall on the group that is younger. >> thank you. >> one of the battles for taxpayers when congress reconvenes next year's defense authorization bill and there is a theme for the presidents pushing-- i wanted to see if you have any thoughts on the level of exposure to the taxpayer to insourcing or canceling the federal contracts for private-sector firms and then having federal do the exact same work most often for commercial activities. can anyone address the level of exposure to taxpayers? >> i am not sure if you want to talk about this but i am going to say it is going to be the coming theme in the next couple of months.

it is gaining visibility, how much we are spending on government employees and government work, and secretary himself mentioned how this insourcing thing was in saving them as much money as he is hoped and it is something that will continue to resonate as they see what the government is putting out there and paying for it to be done in the private sector. do you have anything to add to that? >> the question was what do we think of insourcing, right? well, there is an interesting challenge on this. if you look at insourcing, all that the people that want to do that are crediting is how much we are paying government contractors and write down how much we could be saving by bringing them inside the federal government however what they are not usually balloting is that when you are creating a new job inside the federal government you are saddling permanent new costs on taxpayers ed are much greater than the cost of the contracting you just save money on. we had a separate study if you

want to talk to me afterwards i can give you contact information where we found that the median real after inflation caused of hiring a new federal employee is about $4 million over the course of that employee's career and that is a mid-gf level employee with a normal 40 year career. that is about $4 million after inflation so that is the counterbalance the people always need to be able to say against here is how much money we are going to save by not paying contractors any more. >> and a more questions? one more, sure. >> an individual with a 50,000-dollar income, using a 10,000-dollar deductible, something like that? >> we are going to have to do a lot of things and certainly moving toward-- that is part of

the program in some sense. there is a bit of income testing in the premiums paid for part b which is physician services and part d, but the real problem with medicare is bad, it did think what you are alluding to is right on which is that we need to move in general across the board, not just the medicare population but for everybody toward higher deductibles and more consumer use of their own dollars below the deductible so there is more cost sensitivity on youth services. there is lots of talk when they are passing this bill about how to make health care more efficient. they call the delivery system reform. ..

as we move into september. thank you. [applause] >> now, a discussion on the federal budget deficit for 2010. our guest was on friday's washington journal. this is about 35 minutes. pan two. "washington journal" continues. >> director of the congressional budget office.

c-span watches and knows this is important for members debate on policy. yesterday, spb o here in washington gave us new estimates for the federal budget deficit and trends for the u.s. economy. what's your major story from what you said yesterday? guest: central message is projections o of the budget have not changed since the previous projections in march and or forecast of economic conditions have not changed since january. the bad news is things haven't changed because the economy faces very serious economic problems and very serious budget problems. host: specific data point you projected the unemployment rate that's so important my people stay steady to nine and nine and a half percent rate, which many people say is not a real snap shot of the unemployed americans that the numbers a larger. i was interesting that you

projected several years it returns to a 5% rate. what didou see to get t country to the 5% rate? guest: we think it'll take some years to getthere. about 5% by the end of 2014. that's long-time from now and i think there will be a lot of suffering between now and then because of the elevated unemployment rate. eventually, we think it'll come back down because our economy has shown for many decade as great underlying resill yans. a lot ofntrepreneurial activity and we'll be investing and hiring again. the path between here and there is very uncertain and we also discuss in the report, the risk that the recession will have lasting effects on the labor market and we built some of those into the expectations because when people lose jobs and stay out of work for a long time and the rate of long-term unemployment is elevated in the

recession. all unemployment rates are risen but the rate of people unemployed for more than half a year is at a level wve not seen before and there's a risk and those people will have particular difficulty getting back into jobs again. host: why is that? guest: different things happen. part of it is people were working in certain industries that are now faltering and a lot of people were building house there's years ago, and are not now and probably not six years from now. the composition of the economy shift as way from people's six expertise perhaps. people are not learning the thing this would in new jobs so it's harder for them. host: phone numbers to invite your participation. ou would like to make comments or ask questions about the state of the u.s. economy and projections over the next

several years we welcome it. (202) 737-0001 for republicans. (202) 737-0002 for democrats and (202) 628-0205 for independence dependents. send an e-mail or message by twitter. we'll take all of those in our conversation with the head of the congressional budget office. we as a nation received bad news about the continuing rate of foreclosure since housing was at the heart of this, how does this ra effect the projections for the economy? guest: a variety of ways. part of it is there's less demand for housing. people that like to be in-houses can't afford to be in-houses so that is pulling down construction. we're building far fewer houses we need in a regular economy to house the expanding population. another way it effects the forecast is people losing their

homes are reluctant to spend money or anything else so it holds down consumer spending in away that's drag on the economy. another way it effects the forecast is relating to the issue we discussed on people trying to find new jobs. sometimes they're available in some other part of the state or the country where somebody lives to day. if they owe more in mortgage thanl their hou is worth it's hard to sell that house and move. tradition this country has a fairly mobile population. that's harder with people trying hang on to their houses. host: financial times wrote they're story with warning on bush tax cuts extension. the lead on ts from james is permanent extension of the tax cuts enacted under george w. bush would boost growth in the short-term but as 3 point 3 billion in the next decade according to the cb o.

conclusions is a blow to republican and some members of the business community that extend the tax cut would bring in extra revenues to a cycle of economic growth. would you like to additional thoughts to that? guest: our projections for the budget and the economy both assume current law is unchange and we view that and have done that for 35 years so the projections are neutral benchmark that policy makers can use in judging the effect of the actions they're considering. under current circumstances that means we assume the 2001 and 2003 tax cuts expire, at the end of this years they're scheduled under current law. we assume minimal taxffects many more people than congress making a fix to the problem as they have in the last several years.

we assume mamen paymentunde medicare fall. that's appropriate for the baselineprojections but makes it difficult for people to compare our fecast with the other people. most other people making forecasts are building in assumed change in the policies. we try to show how if one picked an alternative fiscal path or policy, we would then get a different budget outcome and economic outcomes and forecast and the projections of the economy are mh closer to what many private forecasters are saying. that's the context. yes, what we find is if those tax cuts were extended and we - the analysis didn't extend tul of the cuts except for people with the higher incomes. if the other where is extended and a t.p. experts were of inflation there would be a boost

relative to the baseline forecast, but overtime as decade goes on. the higher government deficits and the extra accumulation of government debt you get would ultimately weigh on the economy and output would be lower by the end of the decade than under the baseline projection. host: we'll sta here. on twitter. mr. douglas elmendorf are there particular sectors growing or typethat should produce unemployment? guest: at the moment, there's very little net gain in jobs in the economy. there's people being hired all the time but there's almost as many people losing jobs so at the moment, there's very little growth. particular sectors have been hurt are construction. to some extent manufacturing. for many years now. employment in the services is growing more strongly as part of the shift of the economy. right at this time, there aren't a lot of sectors doing very

well. host: headline in the washington times suggests, your projections are based on a 2% growth in the next couple of years. what happens if the nation doesn't meet that? guest: to be careful we're projected 2.8 percent and 2% in 2011 conditioned on the current fiscal policy law. if the economy falls short, there will be higher unemployment and larger budget deficits because the budget responds automatically. if incomes are lower, payment of unemployment compensation is higher. worst economic outcome and becoming bad budget outcome. we talk about alternatives. this economic forecasting is very challenging business. ther are important risks as economic growth coulbe a good deal stronger or weaker than we expect. also risks in inflation could be

significantly higher or lower than we expect. that report talks about the risks. host: little later on after we take calls, you mentioned economic forecasting being a challenging business. arguing in the finanal times there's a w model, as needed for economic forecasting and i want to get to the inside for economists. let's get viewers involved. start with a call from spring, texas. barbara, democrats line. good morning. would you turn down your t.v. volume, pleas caller: yes. i was wondering if the most of the outsourcing was - for our corporation share. in the - if i understand the corporate tax rate - as the most recent that they do this because basing the tax is too high. so that they can - what if we,

you know, got together with the corporations and lowered the tax rate - substantially, with the situation they would bring back jobs to the u.s.. not talking about all the jobs, but bring back, you know a portion of the jobs back to the united states. you thinkhey could do that? guest: well, i think there are a number of factors that effect where businesses choose to do goods and services to employ people. taxes are one of those factors and i think there's a widespread view among analyst as cross the political spectrum that we probably don't have the most effective corporate taxes in this country that we could have. in particular, an official tax rate higher than other countries but also special loopholes and provisions that distort the behave of companies in ways that aren't vy useful for the country. there's been proposals overtime

and on-going work suggests we're doing it in ways that the tax code might be adjusted and may have some of the effects your suggesting in terms of where employment is located in this country or others. host: c.b.o.'s august report and easily available on the internet but we've linked it at c-span dot or f if you would like to read yesterdays comments. yesterday a comment from wisconsin. tom on the independent line. you're on for mr. douglas elmendorf. caller: thank you for taking my call. one comment. this was a private sector meltdo. it was - like the public sector played a part, i think because the private sector bought it. it's a private sector meltdown. b business people. i have two questions.

on msnbc, former cbs. jobs increased by companies going to china from the u.s.. they pay them 20 cents an hour and they work 18 hour days and take ten per room and basically, we're looking at you know, 19th century um... you know 19th century conditions they work under and i'm wondering does the cb o have a way to factor in job projection. how many companies a going overseas for cheap labor? this is slave labor, actually. guest: forecasts do try to take into account the flows of goods and is services from this country to others. it's a difficult part, of course. to anticipate all of th. but we do try to take that io account in what we're doing.

host: related to that. melissa says could mr. douglas elmendorf summarize the taxes here in the united states verses u. companies that produce overseas? guest: i don't think i can do that offhand. especially theax rules as they effect international transactions are complicated and i'm not an expert, to be honest and i don't want to lay out the amateur perspective on that. host: mans field, ohio. ken, republican line. your talking to the head of the congressional budget office this morning, ken. caller: yes. i have the good fortune of living quite a while and my - i'm a history buff. at t great depression, i know we had certain factors in place there. and i know that it's a lot different than today, of urse,

after 70 something years, but we had a lower debt which meant that we would have less interest to pay that didn't have it around our neck. and we had - we had people that took care of themselves more individually than we do today. they didn't have to have all of the federal money and state money going to take care of them. we didn't have to have that load dragging on us and the people were - honest. - in a way that - at least i saw. the people who were unemployed i never heard of anything happening that was, in our area where anything was ever taken. had hard any nothing in the newspapers about it - so i see that what happens if the interest rate - sir, i wonder

what happened if the interest rate were to double or remember when 1980, it was up to 20%. what do we do when that happens? nearly 800 billion now in interest payment?. .

>> we issue day brief last month. there was that kind of development. we do not think that is likely right now. there is a risk that increases over time as long as the debt is why is it faster than the economy is growing. host: the wall street journal

has a big story today on the debate over changing social security programs and how it is. last month that talked about the risk of a fiscal crisis, which is that sort of development. we don't think that is likely right now but it is a risk that increases over time as long as the government debt is risg

also, the benefits of the taxes that were received and paid let different people, depending on the income levels and depending on the years in which there were going. we have offer that information to the members as we offer them options for changing the budget and other ways. beyond that, we do work with members of congress and leaders of the committee's that are trying to develop alternative policy proposals. we work with them on a confidential basis. as soon as they release a proposal, then we will release any announcements that we have done. fiscal commission. people at c.b.o. have made a number of presentations to the commission on different aspects of the budget which i think are feeding into their deliberations. i can't speak beyond that. host: back to the social security, of the major proposals

being debated which include raising the beneficiary age which is now set to reach 67 in 20 2027, other cuts under consideration include means testing and trimming annual cost of living increases perhaps only for wealthier retirees and increase the share of earned income subject to social security taxes which is currently income beyond $106,000 is ex-settle. when you -- exempt. which has the most impact on solvency. guest: if one raises the retirement age that could matter a great deal if it is a noticeable amount. if one expands the amount of income subject to the tax tt can also change the financial outlook but only if one makes a

standing -- substantial change in the threshold. the precise numbers of what matters depends on how sharp a change is made. two of the areas, as we know many americans are living much longer than when the social security system was first set up and 65 was first chosen. that is why congress decided in the 1980's to raise the full retirement age in steps from 65 to 67. even at the age of 67 people will spend a much larger hair of their leaves in retirement collecting benefits than was the case when it was first set up. that is an important reason why the tax rate has gone up a good deal and the system is suffering long-term financial problems. in terminals of how much income is taxed for social security

that has moved up to the current level you mentioned. but it hasn't moved up as fast as incomes have moved up. so a somewhat smaller share of income is subject to social security tax than was the case in the past. that is also motivating some to change that part of the program. how much difference you make depends on how large a change. host: the next question is from meridian, mississippi, jan, democrat line. caller: good morning. both me and my husband are age 59. i worked for a business that went out of business about two years ago and my husband about a year ago. he was let go from a business that appeared to be somewhat thriving but he was let go after six weeks due to the fact he had cancer. how many over the age of 50, if there is any kind of stats particular at all, that are being let go a even those let go due to health problems?

guest: i don't know if those -- i don't knothe answer to your question, i'm afraid. i'm not sur if those numbers are available or not. but i don't know them myself. i'm sorry. host: a viewer has a question about how your office operates me. this is a local person from arlington, virginia, who wants to know what usually what happens when your draft report doesn't say what your committee chairman wishes tha it says? guest: as your viewer undersnds we write reports that offer our best professional judgment, the implication of certain proposals without regard to the political consequences. i think thais what congress established us to do and that is what congress is paying us to do and we take that very seriously. inevitably reports that we issue will strike some members of congress as not reflecting their

views of the world, their best assessment of what would happen. sometimes they will make that poeupint on the floor of the ho or senate or they will make the point in a committee hearing. sometimes they will call me and make that point directly. we are always interested in hearing people's perspectives because we are trying to learn about different views of what affects policy. but we are not swayed by pressure. host: this is a good time to bring up the economic paradigm argument that joes stiglitz made. if you are familiar he won the nobel prize in economics in 2001 university professor at columbia and served as bill clinton's chairman of the council of economic advisors. he writes this. the blame game continues over who is responsible for the worst recession since the gat depression. the financiers who did such a bad job or regulators.

but he says the economics profsi bears more than a little culpability. it provided the models that gave comfort to regulators that markets could be sever regulating and they could be ev and self-correcting. any reaction? guest: i think he is right that economic did not work out as well as many economists hoped and expected. those are models of different aspects of the world. there were a number of financial models that gave people in financial institutions and regulators greater confidence in the robustness of certain strategies that turned out not to be very robust. there are also models of the economy as a whole that thought that if there were some problem to develop in certain parts of e mortgage market for example, that those problems would be fairly limited in their overall

scope and wouldn't have as large an effect on the economy as a whole as it turned out. i think there is a lot of introspection and hard thinking going on among financial analysts and among economists about where we were mistaken in our judgments and what we can do bett in the future. i think that is an appropriate t introspecti introspection. host: he argues for a new economic paradigm which he says the intellectual building blocks are there r it. there is an organization he promotes called the institution for new economic thinking providing a framework for bringing a diverse group of scholars together to create the new paradigm. he says what is at stake is more than the credibility of economics profession or policy makers. it is the stability and prosperity of our economy. we will go back to your phone calls for doug elmendorf.

syracuse, new york, up next, this is tim on the republican line. caller: good morning. how are you doing? what i would like to know is, i'm disabled. they are not giving us a raise soon for social security. but what is the budget directing, what do they do about taking care of their own like the congress? are they thinking of making any cuts in what they gut -- what they get? guest: so, to the first point about the lack of cost of living adjustments right now in social security for older americansnd in the disability insurance program, that is a function of inflation being extremely low and prices having declined over some period. and we project low inflation the next few years and thus only

small or no cost of living adjustments for a few years until the economy strgthens and we think inflation moves up a little bit again. then there will be renewed cost of living adjustments according to our forecast. in terms of what else is being done to save money in terms of what is spent right here to run the government, right now congress is in the process of setting appropriations for running the government over the coming fiscal year. i know from what our own agency went through we were asked a lot of hard questions about what we were doing with money we were getting and whether we could get by with less. i don't have any way now to speak to the overall impact of th

that. a lot of money is spent by the government in a lot of different ways and all aspects presumably need scrutiny but by far the largest part of it goes to a handful of very significant progra programs. for social security, medicines care, medicaid and other health purposes and for defense. those programs alone represent the lion's share of all federal outlays. and when one thinks about budget deficits and tryin to ruce th them, particularly reducing them by trimming outlays, then one needs to recognize both the potential in smaller programs to save money but one needs to look at the larger programs where the large majority of federal outlays goes. >> this viewer treats the greatest threat is hyper inflation but the economy nee and market wants deflation.

guest: from our perspective, the risk of hyper inflation is extremely low. it is true that the federal reserve has greatly increased the money supply, the supply of bank reserves, in the past few years. but that is not likely to lead to higher inflation until the economy strengthens and banks usthe money to make more loans and when that occurs then the federal reserve can take a different policy tack. so, there is some rick of higher in-- some risk of higher ination and it is not great and we don't see of risk of hyper inflation. there is a risk of lower inflation and deflation. that is not good news for the economy. we talk in our report about this. we say this is a serious possibility of deflation in the next few years. it is not our basic forecast. it is not likely but it is possible.

we talk in the report about the dangers of deflation. a falling price level encourages consumers to wait to spend money on the hope that prices will be lower and that waiting means a reduction in demand foods andservices. then it would mean less production and less employment. in addion, debts that you will have outstanding are often fixed in dollar terms like mortgages. it is hard tore meet the payments -- hd tore meet the level becau wages would fall along with it. so deflation is a dangerous condition for an economy and it bemes harder for the federal reserve to take the right actions to spur economic activity. so that is not something that the economy or anybody in the economy is hoping for or should be hoping for. host: since the depression has the united states ever experienced a period of deflation? guest: we have not experienced any sustained periods of

deflation. there were short periods of time say oil falls sharply but not broad based declines in prices. host: is japan the largest model to look to about what a country experiences experiences during longer spaoerdz? guest: japan is a recent example. to the extent it is a model is debating. there are economists that are worried we are heading down that same path which has been a prolonged of very slow growth. some economists see substantial differences between the two economies. in particular the fact that our policy makers in terms of monetary policy from the federal reserve and government budget there have been much more aggressive reactions to the financial crisis and the recession than seen in the early stages of the japanese experience and that puts us on a

different path for many. host: for douglas elmendorf next a caller from columbus, ohio. independent line. caller: yes, my question is and i don't agree with him on deflation when he quoted the other guy with his comment about social security. my thing is we've got indicators of inflation with commodities, especially oil and energy, anded if. then on the other side of the coin we have deflation of jobs, wages and housing. so, basically we have both at the same time. so i see mixed signals. now you have china w is unpinning themselves from the u.s. dollar and the euro overtaking the dollar. china selling off u.s. debt. it loo like we have indicators of a possible collapse in the dollar. what do we have to protect us from that? guest: well, in the past few

months, as worries have grown particularly in the spring about the condition of european financial institutions and about the budget situation of some european countries, money came into this country to strengthen the value of the dollar at the expense of the euro. so there tend to be ebbs and flowas investor sentiments change. it is possible that investors would become a much more worried group about the state of the u.s. economy and financial system and would pull money out of this country,s therebyush down the value of the dollar. that is one of the risks of fiscal crisis. but it is worth remembering during the recent financial isis money came into this country for all of the problems in our own financial system, many invest worried about other systems more.

and u.s. markets a treasury securities in particular were viewed as a safe haven from those risks. so, we don't think it is likely the dollar will suffer a large drop. we think over the next decade there wl be some gradual decline in the value of the dollar because of the large trade deficits we are running now. but we don't think i is very likely >> today, on north "washington journal", called trysgstad. from afghanistan, major general michael ward talks about the u.s. and nato forces training program for the afghanistan national police, security forces and afghan border police. charles hopkinson, univ. of florida discusses his report that says that a% of world from

the gulf spill remains. we begin a week-long series on defense issues with retired lieutenant general michael hough. talk with him about the defense department's f 35 aircraft program. our series considered -- continues on tuesday.

>> it's an act of war under international law but it's not combat, per se. none of the options are easy but they demonstrate the commonly

advanced see scenario is not the only option and there's room for innovation, should it come to that. as i've said in my talk, thrust in my talk that basically, the u.s. allied strategy is starting to have some grip, the regime is badly rattled by the sanctions and many are recommending that the preferred strategy is to stick with that program and keep imposing further sanctions coupled with an offer or exit ramp for iran. thank you. >> thank you very much, again for your remarks. obviously triggered a lot of questions which we're going to deal with here a little bit

later on. one relates to the military option whether it's still on the table. as you know, basically, the former u.s. am bass ditto the u.s.. it's over. i'm looking for all of us to the remarks by deputy director that has major research dealing with this issue. and directing also the eye ran security initiative is consulted by the media and congress on

this issues. he published dozens of studies and reports and books and he also served as a research professor as the national defense university and the center of economies at the international monetary fund and the world bank. >> the title of today's section is is next middle east war gaza and iran. both because interesting in itself and because i think it gives us some insight into how israel approaches the issue of potential military force against iran.

israeli, gaza strip border has been relatively quiet. rarely operation cast led into gac and although that operation was widely criticizeed a broad it's regarded inside israel as having been successful. the criticismed directed at it said israel must be aiming at the de skruks of ha ha mass where in fact what they were doing is carrying out their long standing approach towards the use of military force which is very different tro the american approach to military force. we think of something like the powell doctrine. the overwhelming approach to gain a result where the defense

forces think to use their horrible expression is to mo'w the grass. you're not going to change the nature of grass or cause it from growing. you have to do it again periodically but for a period of time things will improve when you mow the grass and that's what israel thinks has happened with operation cast led. they got a period of quiet. they understand that hamas controls gaza and obtains the same objectives but the fact is hamas itself, has taken forceful action against those in gaza strip that wish to launch rockets in israel because they understand the negative consequences after the serious setbacks it had during operation cast led. now when we think about the use of israeli military force against iran's military

facilities. quickly a comment made by military officials is what will you accomplish. you will only temporarily set-back iran's program. the typical response is, so what's your point. because that is precisely the convention of what's the appropriate use of military information. when israeli pilots were briefed in the raid in iraq, the general briefing them was asked by the chief pilot if we're successful what will we accomplish. the general said you will set-back iraq's nuclear program by two years. the pilot said your asking us to risk our lives to set-back their program by two years. and he said, if your lucky, three years. now. that is the israeli approach

toward the use of military force and please bear that in behind when we think of the question of iran's look le or program. from the israeli perspective and frankly, i would say from the american perspective we've got a big problem right now. that iranian leadership seems to feel that there are no red lines that we have. that we're full of hot air. and that in fact, they do not face any resistance pushing against us including for the use of military force and frankly, we've done a great deal for that. we've used strong rhetoric and talked about an urgent and building crisis that needs to be resolved soon and then done very little about it. the bush administration frequently refer to certain

developments in this part of world and elsewhere as unacceptable. in fact they had every intention of accepting. you may recall when north korea explodeed a nuclear weapon. george bush said well what would really be unacceptable if it transferred it's nuclear technology, exported it. so, when north koreans technicians were found in the facility working on the nuclear facility the united states advice to israel was don't attack it. the israelis ignored advice and a tacked it and now a single government around the world other than korean. not a single arab government objected. not one.

complete silence. that also puts factors in the israel thinking about advice from the united states on whether or not to attack iranian facilities. but to return to my point about no red lines the iranian leadership thinks, in fact the united states and israel are in decline. they're power issing afrd and they're way of war does not work where as iranian way of war was working and they accomplish much and we accomplish little. furthermore iranian leadership thinks that the only really successful thing, only troubling thing, excuse me that the west is able to do against iran has been to stir up trouble at home. iran's supreme leader has spent the last 20 years warning about

cultural innovation and the risk of a velvet revolution refers to the very sudden appearance of a movement in czech less lula vak you that over through that country's congress. and he's managed for both. that is to say, out of nowhere there came mass protest in iran that brought millions of people out in the street quite apposed to this regime and he thinks it was because of the bbc and the voice of america and it was our efforts that did that. that we provoked this and that the worst we can do against him and that's much more trub bring than military action. this man has a record of saying many more skirts is more dangerous than tanks. he's worried about hollywood. so he thinks we're doing our worse and military action is not

what he has to particularly worry about. let me remind ourselves, that this is a revolution in iran. it's a revolutionary regime. much more than the islamic regime. the relationships with the senior clerics are not the best. and with the ordinary bias buys believers not so good as well. they're deeply committed changing the status quo and a regime that sees hard power as an important component to doing that. this is a regime that doesn't just talk about wiping israel off the map, but spents hundreds of millions of dollars providing arms and financial stance and training to recruit fighters to

do that this is a regime that provides support to in insurgents in iraq and afghanistan including groups that cannot stand iranian government. this is a regime that feels that it should have great influence. much greater than it's neighbors are prepared to accept. and therefore, when we think about what this regime is going to do, it is important to factor into our calculations their actions and not just ours. the talk in the town is often about what are the americans and israelis doing about the program. i want to know what iranians will do? because they're not spending billions of dollars on the program just to have the prestige of saying they have scientific accomplishment. that would not fit the pattern

of a regime so actively supporting the hard power insurgencies throughout the area. they intend to change the regional status quo. and they're sufficiently ignorant and sufficiently risk prone and sufficiently arrogant that they would do something really stupid that would in fact, cross a red line. let me just suggest if you want to know how ignorant and risk prone i think they are. think about the june 2009 presidential election in may 2009 all of us said the regime is rock solid and in power and things going great. they managed to put their very hold on power at risk. by blatantly rigging the election. they could have modestly rigged the election.

nah, that wasn't good enough. they were ignorant about how their own people would react. they miss calculated this profoundly and put at risk their most vital interests. they are - in other words sufficiently - how shall i put this? well, arrogant, ignorant and risk-bon risk-prone. they can do something that they have no idea will lead to a ferocious action. that's what concerns me. not apocalyptic and irrational. no. but miss calculated. when su damage hussein would have invaded kuwait if he realized what was going to

happen next. he did not do that because he was apocalyptic thinking. he did that because he was ignorant, arrogant and risk-prone. - and the islamic republic has shown it's self fully to be the sadam equal to the front. and let me close by a few words and lebanon because there is a good theater to a my all these lessons. i mean it is striking in the last few months what risk prone behave we've seen from he is bah lula with the syrians and the iranians. first the business about the skud mu siels from syria that appear to be under hezbollah's

control. probably syria and not on the border but a sad hasad has comp. may i remind you the skud missiles in the syrian warfare have chemical warfare, warheads on them. some of them do. and - kind of troubling if you're an israeli and the most recent episode in which - a sniper killed an israeli lieutenant colonel along the border. an episode well-designed to evoke an israeli response. i'm concerned that hezbollah and it's now leader, seems to be very interested the moment of taking an aggressive stance in order to avert attention from what everybody knows is coming

down to road. everyone at lebanon does is that the special unit at lebanon set up by the international community has followed evidence of which to indictment senior members of hezbollah for the role and fascination of the former prime minister and that is by the way, very surprising so. many of us thought it was something done by the syrians at their request. they were and furthermore they were income pe tenth doing it in a way that they got caught. and this is going to be a very delicate issue and in lebanon, and so what we see is, he standing up there giving this widely anticipated speech about response and accusations putting forward what we're blatantly

obviously phoney excuses how israel was responsible for this evidence. i mean that's who has a problem. he's got a problem. this is an issue that's turned down or out being something in which this man can step aside and a void the principal charge against him in eyes of the much of the arab world and it's a good way of seeing you in may with him. and furthermore, it's in his interest to say well, we told you lebanon would be unstable if we're not there and if we were there we would play a role bringing stability to lebanon and you the west and you forced us to withdrawal and that's why this place is once again becoming unstable. so, i'm concerned that there are a

number of important players in the middle east that are ignorant, arrogant, risk-takers who seem to feel that the winds at their back, that the united states and israel, arab moderates. the day is passing. and that is what worries me. when i think about the risk of war. the idea that the principal factor that might bring about a military confrontation is an american or israeli strike on iran, i find far-fetched. >> thank you. thank you for your remarks to remind us again the potential threats from the north and from the south and obviously iranian

- i'm sure all of you were here when we discussed. i think basically we have to look at both the strategic as well as spectacle. i think contributing factors that might lead to anest canlatcanlanest canlation beyond the region. focusing on-going on libya, syria and gaza and iran. before or beyond this we have to consider developments in the large middle east. for example the possibilities of development in yemen and the civil war there and so on. so before i turn the podium over to the audience, i would like to ask if you have any comments at

this point to the remarks of your colleagues? mr. ambassador? >> well, um... patrick's closing remark i certainly would want to association myself with and i think i eluded to it. the dangers of miss calculation are very, very high right now. and i am not convinced that any of the parties at this point in time want awar, war. i think it's very possible they're going to blunder into one that's going to have far-reaching consequences not just for themselves but obviously for u.s. interest and the region. as i said at a time when obama tries to have his hands full getting as vacuum that can, escalate violence within the country?

and perhaps, cause the dismantling of the eye rack space and we're going to have another challenge that we'll have to deal with? i know the panelists are never supposed to say they don't know, but [laughs] beats the hell out of me. - but, what i, but i think you've asked the great question that's unknown. the top analysts in the explanation or add min administration are pondering and c can't answer in trying toppling the sadam regime and trying bring about a pluralistic,

inclusive government of iraq. will the country fall into chaos after we leave? i suspect if i had to make a guess i would guess it would look more like maybe something like lebanon did when there wasn't open warfare among the factions. you know, after - but where there is always some instability and there are tensions and there's things that remain in the oil fields of the north that remain a very, very contentious issue. there's iran and some factions desiring to show they drove the u.s. out and as we wind our forces down. there's a great possibility that we'll find them being attacked on their way out in the like and of course there's inability we're seem together put together

a government after five months. >> ken? >> i wanted to add administration gave a presentation yesterday on the transition from u.s. military involvement to what they call u.s. diplomatic relatively normal diplomatic relationships with iraq. and defense secretary. colin powell and michael corbin. deputy consistent secretary of state. al queda and iraq. they're assessment is it's not any long another strategic threat to the iraq government. they feel confident that the eye rack government will be able to handle, with its own forces the challenges from remaining in insurgent groups. that's the, u.s.g analysis. we can all maybe not totally agree with that but that seems to be the operation of the

assumption right now. >> okay. pat? okay. please identify yourself. okay? >> hi. i'm dan and patrick talked about red lines and whether or not the united states had them in place. wanted to see if the other two panelists agreed we have failed establish red lines and that's true, what can we do short of the threat of actual force and you both enunciated why you think the uninhibited consequential forces leads down the road with everyone knowing how that government feels how can we reintroduce stopping the iranians from crossing. >> well, in my talk i did mention presenting iran with an

usualty ma ultimatum. where by we've tried through these resolutions to say that you must stop and reaching uranium and repeatedly refused. we cannot get further agreement at the council to go further however we the assembled say we must see this now or else. these are options. on obviously, we don't get into the business of recommending what to do or not. but there are. there are options like this. >> pat? >> can i say a word? dan, i think you under estimate the problem. because iranian leadership doesn't see there are penalties that they would pay if they cross the red line. and they also don't see benefits remange on this side.

of any perceived red line because in the eyes of the supreme leader. especially he thinks the west is doing it's worst and most effective to overthrow it which he sees as the real objective. deter raps requires there's a red line if you stay on this side you're okay. but if you cross it you're in big trouble. well iranian leadership doesn't see big trouble crossing the red line so they stay where they are. so our problem in establishing effective deterrent relationship with iran is on both sides of the red line. >> mr. ambassador would you like to come up here? >> no but i would like to ask patrick though, your speaking as though you're inside the head of a supreme leader, but on a number of occasions when iranian regime seemed to sense they were

basically trying the patience of much of the community international they have pulled off. much like korea to hold out negotiations or you really didn't understand our position and like. i'm not quite sure why you think iranians think we've done our worse? >> the supreme leader is. he's not the only one. wherever there's these initiatives of what we have are launched the supreme leader seems hesitant about them. you know, i can't - i spend a lot of times looking at his speeches but it's never warmly that he endorsed. they're always sort of back handed but when you see him committed with discussions between the united states and iran are like the discussions

between the lamb and the wolf. he's not the only actor and i will quite agree with you. there is a prospect that iran will pull back. but there's going to be one really important person that will always be very suspicion about these discussions? >> okay. you can come here if you want, please? this would be easier. >> thank you. you and i - i think if first time i've had the opportunity to come to the podium just to ask a question. but thank you. i'm a senior fellow here at potomac. i'd like to ask two questions. first of all. doctor clauser brought out well something seems to be missing a lot. that's that iranians are not trying acquire nuclear weapons

just to say they did it and for the heck of it. this is not the 1960's trying get a national airline. you acquire nuclear weapons for go o political purposes. they may be perverse or whatever you like, but you don't go out and a quire those for no reason. they're obviously up to something and it seems to me we've missed the point and this constant pressure just focusing on the nuclear weapon, we seem to miss the picture that they're up to something else. there's a major political factor here not just to israel but the united states. basically, is that basically true that this is a country aim together bunch above it's weight. wants to have many far more influence than many would like to record it if that's the basic record. nuclear weapon or not. are we not in a situation where

we're either headed for war or regime change whether we help bring it about or it happens, seems to me this is not just something that goes away and just dissipates. second point is something that you and alexander raised at the beginning. we're talking about the middle east but what exactly is that? i tend to come from further in the north in the former soviet union looking down on these things. sometimes academic disciplines we forget overlap a lot and we don't talk to each other. just yesterday. russia signed and agreement with armenia to extend the presence of russian troops for 49 years in armenia. the next day, a statement was made. this is very important. because of the instability of what's going in iran and russian presence in armenia will help

stabilize the situation. i think you mentioned turkey, and this sort of thing. we're at the crossroads of three major reinsurgent empires here and the reason i bring that out is apart from the fact that i'm also director of a center in georgia where we look at basically having been the crossroads of three empires you have russia and iran and turkey all in this region and we so rarely mention russia and turkey as part of the equation and my question to all three of you is this. is it possible as we sit here focusing on this nuclear weapon and hezbollah and hamas and what may happen here or there or what the israelis may decide or the syrians. this is much bigger than we're even thinking and what's the political consequences if this indeed bigger than anyone's calculation in washington. thank you.

>> thank you, very much. well, it's all yours mr. ambassador, if you want to start? >> i would comment as far as the calculations of only the united states but at least the europeans if not the other great powers when they think of the grander political generations the context which comes to behind is proliferation and especially that's true for this president who nuclear proliferation is extraordinarily important on his agenda. this man after all brought 45 to government for somewhat was it about. nuclear issues that barely god him headlines in newspaper. when he chaired the first meeting never security council the level of heads of government it was three weeks before co pen haguer and they could have adopted a resolution that global warming was a threat and the europeans would have kissed his

feet and his political base would have been ecstatic but he committed the yuan inducing proliferation of this. so he thinks much about proliferation and that's the context in which he approaches the issue. that's certainly true for the french government who has been the last six years being the top government around the world about this. not because of france's concern aren't israel. they - yes, this issue is thought of in many governments as an issue of grand strategic concern but the issue is nuclear proliferation. >> ken, you want to make any remark? >> well, i mean - i'm not going to be - i suspect you could answer your question better than us to turkey and russia.

et cetera but when it comes to iran there's many reasons a country with a radical leadership like iran, a history of empire and ideology based on at least both on a mixture of the persian nationalism and islam wants a nuclear weapon. i tend to emphasize regime insurance. you can't afford to really take risks because you don't know what we do. let me think of richard nixon and wanting the vietnamese to think he was an it of a madman telling henry kissinger. tell them you're trying restrain me but you never know what dick's going to do. i think they're playing a lot of games. yes they have strategic ambitiouss in the country. undoubtedly would love to tomorrow night lebanon, sir i

can't recollects iraq. parts of the gulf, et cetera. afghanistan. so no doubt about it. the point i was trying make is while no israeli leader can ignore what they're up to nor american leader, the israelis shouldn't despite akmadejads threats against the jews and like to think necessarily it's all about them. goes far beyond that. >> actually globalization of the middle east issue requires i think, much great another tension in terms, let's say of energy security. and that is basically - i think - the broader perspective. we have to see the forrest as well as trees. ken? >> very briefly. not to put it in terms of

reinsurgent empire. i think russia felt iran was moving slowly than the u.s. assessment. then when iran rejected the teheran declaration that involved russia, i think you did see a change. coupled with obama's outreach to russia and all, but i think if you look at some of the spats that russian foreign ministers and other officials have had lately it's the unprecedented view with various russian officials basically taunting iran to basically, shut up because you're going to be own overthrown soon. it's gotten nasty. from my standpoint, i see russia increasingly as an ally of the united states in containing the program now. >> you want to respond to that?

>> we need to be careful of the notion of russia as american ally in anything. they have a very different interest. we tend to see everything in black and white terms here. are they on the iranian side or our site? they're not on either. their interest is to keep the american's part down and keep iranians in bay. prefer not to see an iranian weapon but the moment they feel they have pushed that away. they will seize to look like an american ally the basic objection is to push the united states out of the region and to the extent iran helps them to that is great to the way they are contributeing in the north caucuses and in the - you saw just the other day there was a bomb - and to the extent that iran is doing that, iran is an enemy but to the extent they're

a problem for the united states, they can be useful. this is gray area. >> yes, sir? >> i have two questions, but first i'd like to recognize the point of view of the ambassador and the empire researchers maintaining that iran is always seeing itself in the collectives of this, you know? that they conquered the world and babylonia. they have this idea that a collective subconscious. that i will go to my questions and do you think that the government verses this will think that financial and the

united states is given to do you think that h hezbollah and them are infiltrating american universities is my two questions? >> okay. pat maybe? no? look. let me discuss lebonese armed forces. potential lebanese armed forces is ethnic and potential for this population. and there's basically better opportunity. iran forces has important element and that's particularly true in the last decade and add to that, hezbollah had remarkable success in gaining

acceptance for the resistance e those in other parts of the lebonese community. so this idea of resistance as an important value has become disturbingly valued in lebonese society. and creates an environment in which, there's probably considerable sympathy for hezbollah among many in the lebonese armed forces z. now do i think the stance of the united states is providing lebanon as being forced and ended up in their hands? no but i worry the lebonese armed forces seem quite unprepared to do much, if anything to limit what are somewhat have been some provacative actions that hezbollah has taken in the south. and it's disstush disturbing t

which the, l.a. f has not tried persuade hezbollah to establish working relationships with the working forces there. and to at least keep a low profile. and not to do provacative things and not the stance taken by some officers and when those officers take rather provacative stances such as recent episode they get supported up and down the chain of command and supported by lebanese politicians so i'm very pessimistic. about the role that the l lafcan play in the future. >> anyone else? mr. ambassador?

>> i agree on patrick with certainly the main point, which is there's absolutely, there's inspections and no indications whatsoever that what is mostly defensive armor that the u.s. has been sell together the lebonese armed forces has been divert ordinary transferred to anybody, least of all hezbollah. i was in lebanon of march of this year. certainly all lebonese i spoke to were very fearful of another war. lebanon's economy on the whole is not doing badly. central bank trill government a much worse than most and protected them from the accesses going on in so many other places, but you know, lebanon suffered a lot. and you know there's a lot of mr. blame to go around certainly to the lebonese for what's

happened all of these years. it is true that there's a brujing admiration for them after 2006 because most lebonese at this point feel they suffered at the hands of the israelis. we could go into the history but we're not going to but it's just a fact of life. the lebanese armed forces is truly the only international institution. i would prefer seeing the u.s. doing what is it and maintaining influence with that institution and in hopes of better days, rather than seating the game two syrian and iran. >> okay. and - yes? >> okay. >> i'm no expert on american universities. >> thank you.

>> why do you think russia has now chosen to start up the operation of the reactor, 1,000 megawatts, nuclear reactor at boucher. is it as a kid in the middle of ramadan or as they enter negotiations with iran? is it to take the pressure off the region because by starting

up this reactor it removes a target from the israelis. this is not a military facility but they still might have this in their size. what do you think about this? >> i am not an engineer on this matter. i am told that this has been on track for many months. since the spring, i have been told this would happen by late summer. >> this has been opposed. >> i have been on -- told it has been on track for many months. i am also told it is easier to bomb the stuff when it is loaded into the reactor as opposed to the cooling ponds. it is easier to bomb- i am just describing the technical question.

>> it is easier but that is quite a statement. i don't believe that is true. >> can i just add? a number of different things are going on. russia is concerned about contract sanctity. there was an agreement it was a completed reactor. the thinking is to go ahead and finish it. the second thing is there is some speculation -- russia voted for the most recent sanction. they supported us. the u.s. is not a post to the boucher and resolution1737, the first sanction left a clear loophole for equipment for the reactor to continue to be delivered the u.s. acquiesced to

that loophole as an expression that indeed the u.s. would not stand in the way of russia to complete the reactor. the u.s. position is not to oppose the iranian production of electricity for peaceful purposes. in some way boucher makes the case that we are not all -- against all nuclear activity in iran, we are against iranian production. >> yes, please. >> my question is for the whole panel -- do you think turkey is an ally of iran or the united states? >> turkey has played an ambiguous role. most recently in the last few weeks, the turkish government has been helpful in encouraging

iran to hold conversations with the p5 +1 countries. my understanding is the turks play an import role to convince iran that they would meet with this group and each side would bring -- would be free to bring up the issues they wanted. it was useful that the church made clear that iran should attend a meeting of the the and a group. -- the turks made clear that iran should attend a meeting of the p5 +1 group. i think they were very naive in reaching the tri-partite

agreement in late spring but i think their position has gotten somewhat better recently. >> it seems that turkey has been in -- trying to improve its relations with all its neighbors. it has been on a charm offensive for some time. as the first questionnaire indicated, there is certainly some latent level of competition because there was an ottoman empire for 5000 years and -- 500 years and i don't think the turks are interested in iran acquiring nuclear weapons. they also have a stake in the outcome in iraq and the kurdish question. it is important that the u.s. not let that happen.

i think there is a perception in the region of a weakening u.s. and we need to take more responsibility within our own region over what happens. i think turkey is among those in the forefront of that. >> my sense is that you were optimistic about the economic measures being taken that may have the desired impact. i wonder if you share that optimism. >> the big question is whose side they are armed. -- they are on.

iran has encountered problems with their nuclear program and they have had significant clutches. we may have more time as a result. to the extent that we're getting success with the sanctions being applied more vigorously and i would very much echo the comments that the withdrawal by private companies is at least important as the actions of governments, it may be that we are in that sweet spot where the nuclear clock is running very slowly and the sanctions clock is running faster. that is certainly what the administration thinks. i will be interested to see what the next iaea report says. the may report gave every reason

to indicate that there are real problems that the iranians were having with their program advancing. >> last question in the back. >> you mentioned that the israelis are quite happy with buying time by striking iranian nuclear facilities. wouldn't that ultimately point to a failure of policy and strategy in the sense that a strike and a nuclear facility would do nothing to ultimately penetrate the iranian center of gravity and ultimately do nothing to impose the will of israel and the united states on iran? >> the israeli attitude is that you could have limited accomplishments. a small state like israel can only expect to have limited

accomplishments. it is not only the united states back in the size of the change situations from the use of military force necessarily. let me suggest that from an economic point of view, the economic center of iran is from oil. all their oil goes for one pumping station. >> anyone else? ok, i guess we will have to close this. we will leave many other questions and issues for our next seminar. one contributing factor that not only would it but will encourage escalation of terrorism as well as perhaps an all-out war is the

ethnic and racial and religious intolerance that we see the escalation of education in hatred, propaganda, psychological warfare, if you will, and the use of the internet in order to bring about hatred, misunderstanding, and violence in the region and clearly the arms proliferation on the conventional and unconventional level, the so- called aspiring nations to become superpowers that we seek in the region. it seems to me that unfortunately we will have to deal with these issues not only next year or in 10 years but decades to come. the young children of today who are in the region prepare

themselves to become the next generation of terrorists. incidentally mr. embassador, just as a footnote, interviewing some of the children at the refugee camps going back to lebanon and most recently even in syria, when you ask a child, a palestinian child in a refugee camp where they were born, the standard answer would be a was born in palestine and they would mention a particular city. that child did not move from one side of the refugee camp to beirut or damascus but nevertheless this is the indoctrination and relic -- radicalization will have to deal with. i want to thank our distinguished panel for your contribution and the participants and have a good evening, thank you. [applause]

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> next, q &a. live it 7:00, your calls and comments on "washington journal ." >> i am not saying the report is entirely wrong. i meant saying the statements about me are wrong. let me be clear, i have never taken steroids or hgh. >> with the roger clemens indictment, go back and watch all the hearings on the cspan the video library. watch what you want when you want.

♪ >> this week, on "q&a", philip terzian, literary editor of "the weekly standard" and author of a new book on foreign policy achievements of presidents eisenhower and roosevelt. eisenhower and roosevelt.