party elections, would not grant that same right, actually they don't have the power to grant the right. those are given by god. but they have the power to prevent people from enjoying the rights that were bestowed on us through our constitution and with the grace of almighty god. we're endowed by our creator with certain inalienable rights. apparently the president left out the creator, it's understand -- understandable, when you rely as heavily on teleprompters as our president does, it's understandable that sometimes you read past things. and certainly the person who fills in his teleprompter with the information would not have left that important part of the declaration of independence out, we're endowed by our creator, because if it were otherwise, if we were endowed

by the government with inalienable right, then the government could take them away any time they wished.1 any time they wished. but when you go back to the founding of this country to the time when those people gathered together and gave us the foundation of what we've grown from and grown into this fantastic republic, the greatest coubt country in the history of the world, as tony blair recently said and as another member of parliament saying this week, this is an extraordinary country, like no other in history. and we have so much to be proud of. and i know there are those recently proud of america, but when you study its accurate and

true history so thoroughly, there is so much to be proud of and the founders could see that. they had the vision. proverbs tell us, where there is no vision, the people perish, yet those people had vision. they stood firmly on eternal truths. one example is meter pullenberg. since the 1950's, lyndon johnson had gotten tied into the internal revenue code that for the first time since our country's inception said if you are a charitable institution is designated by the internal revenue code, you cannot get involved in politics. that was new and different, because for over 170 years, it

was the churches that were behind the most important movements. one of which was the declaration of independence and before that, you had the vaian commonwealth laws that were put together and later, the northeast ordinances and there was so much that the churches pushed forward and peter mullenberg was a christian minister and washington had made him a colonel, unbeknownst to his congregation, but he was preaching that sunday in his robe and he was preaching from eccliastes 3.

and when he got down to verse 8 and recited the words in the last words, there is a term for war and a time for peace. that's when mullenberg took off his robe as he is depicted of doing, and underneath, he had a revolutionary officer's uniform, including with the sabers. he had been carrying that around underneath his robe and then he said in essence, ladies and gentlemen, now is the time for war, because they believe they were endowed by their creator with certain inalienable rights and those are things worth fighting for. and when you read those founders' letters and their

journals, read their speeches, you find out they knew they were on to something that would be something new, a new order of things, a new order of the ages. that's why at the bottom jurnedneeth the one side, back of everyone's dollar bills, not a new world order, new order of the ages, new order of things where people would get to conch themselves and for so long, this country has borne out the old addage that democracy ensures a people are governed no better than they deserve. that was one of the hardest things for me to come to grips with in the 1990's is that as a nation, like it or not, we had

what we deserved as a nation. and in fact, in every election, from the beginning of this country, whether we like it or not, regardless of which party was in power, we got what we deserved. and i do not seek to ever use my position to force my religious beliefs on others, but when i was a judge, i was required to discern whether or not people who claimed a disqualification had a legitimate disqualification from jury duty. and i was struck over and over, because i had christians who come up and sit, i cannot sit, because i'm a christian. and i would explain to them, i'm not seeking to change your religious beliefs, but i need to find out exactly whether or not you are disqualified for

religious reasons or whether this is just a personal preference. i would have to inquire, does this mean you believe what's in the old and new testament. of course, i would be told. does that mean you believe in matthew for it to be true when jesus said if you say rock out of your brother, the verse was mainly about answering what is in your heart, but jesus knew that in an orderly society there would have to be some form of government which would hold people accountable. and they would say generally, yes, i believe that. and over in romans 13, it makes clear if you believe that the romans are supposed to be part of the new testament and you are a christian do you believe that romans 13 is valid as part of

your belief system and they would say, yes, of course. you have would have to believe that god is basically ordained any government for good or bad. and that in romans 13. . 4, god doesn't give the sword. he rewards good deeds. and of course, in our constitution, it's to provide for the common defense. but i would ask people who had come forward as christians if those were their beliefs, if they believed those things in romans to make the judgment as to whether or not they were disqualified as jurors and their

response was normally, of course. and i was in a position to point out, then if you understand our history, you believe and you understand that as a called juror, you have been given the sword. and if you believe romans 13 when you are called for jury duty, that sword has been placed in your hand and you are expect todd comfort and administer and make sure that people who have not done evil do not get punished and if they have done bad, they will be punished, because they, as the juror, called forward by the government. in fact, the founders believed that the people would be the government. and every so often there would be a day the people as a government would come forward

and would say we are going to hire new folks to carry out our will, we the people will hire people to do what we tell them for the next, one, two, four, six years. and over the years, you know, we have been told even still that the most widespread religion in america that people in poland is christianity. if they believe the founders and they truly believe the old and new testament, they have to understand they're the government. they have been given -- in fact, we all, as american citizens have been given the sword. now, all of those in this body are hired public servants. we get hired every other year. the government, we, the people, the government, have the right

to fire us every other year. and as the government, if you truly believe that the responsibility is to carry out your duties as the government in the most effective and efficient manner possible, well, that would require coming out on hiring and firing day to see that the best people got elected, because when people stay home, they get what they deserve on hiring day. when people come out and vote, they get what they deserve on hiring and firing day. and when people don't bother to educate themselves on who all has applied to be the public servant to get hired on hiring day, then they're not carrying out their duties as a proper government.

when people know that they would be a better candidate and be a better public servant, then it's their obligation under our founding documents under the concepts on which this nation was based, to step forward and run for office or to help others as they run for office if they know they would be the best person to fill the job of public servant. but we have forgotten what role who plays. the people are the government. we're the public servants. and all too often that gets forgotten. peter muhlen berg's, his brother, he wasn't happy that his brother got recruited from the church. he got people in the con degree

gation and recruited from the town and came from the army all together and frederick wasn't that pleased what peter did from the pulpit. there are other stories that when frederick's church was burned down, then he did likewise. he recruited and joined the revolutionary forces and helped defeat the british and the christian minister was the first speaker of the house of representatives. we also know that behind the and litigation nist movement was the churches -- abolitionist movement. the primary group was the churches because when they studied new testament principle, they worried and feared how could god continue to bless america when we are putting our

brothers and sisters in chains and bondage and they fought it. and abraham lincoln, so troubled by that battle and after he was defeated for a second term in the house of representatives in 1848, new person took office, early 1849, stories were that he did not plan to ever run again. but stories that john quincy adams had told and sermons basically that are john quincy adams just preached down the hall on the evils of slavery and pleading with his colleagues to end the blight against america called slavery, that fell not only on deaf ears but abraham linchingon, between the time he was someone in in 1947 by the

time his successor was sworn in 1849. 1850 was the compromise of 1850. other states were going to be coming in. they were going to be allowed to have slavery. lincoln knew and those serm mondays that john convince question adams preached on the floor of the house ate away at him, we couldn't continue to go forward without stopping this terrible sin called slavery in america. he knew that was no way to treat brothers and sisters. and eventually, he got back into politics and ran again as we know. and had the debate with douglas for the senate and later elected in 1860 to be president. . there are those who say that

when lincoln cease son died, he thought it was because he had angered god because when he got elected it was to do god's will to get rid of slavery, but he waited too long. he blamed himself when his son died that he should have immediately sought to end slavery but as the slaves started seceding from the union, he thought, i'll hold the union together and then end slavery. but he carried a heavy heart as president of the united states, as a christian. and his second inaugural address that's inscribed on the north inside wall of the lincoln memorial is so profound. it's an intellectual giant dealing with theology and this

issue of how could a just god allow so much injustice and so much hate and war and he goes through, deals with the issue, and ultimately says we have to proclaim god is righteous all together. we have an extraordinary history. what was that inspired dr. martin luther king jr. to push for civil rights for everyone? some people think, well all he did was make sure that african-americans were treated like others, like everybody else. that he fought for minorities. but the truth is, his theology as a christian minister was so deep, he understood that in bringing about a society where

people were judged by the content of their character rather than the color of their skin, that he was also freeing anglos who were christians who, many, for the first time, treat people the way a christian brother and sister is supposed to treat another christian brother and sister. but that was in the 1960's. and the change of the law in the 1950's in, for the first time in our history, saying churches could not be involved in politics, had a profound effect. then in the early 1960 we have 1963, the supreme court said, we're not real sure, we don't think you should be having prayers in public schools. and yet, it was ben franklin

that broke the logjam after five weeks in the constitutional convention of 1787 by being recognized, he was 80 at the time, he was two or three years away from meeting his maker. he was suffering, apparently, from gout, had to have help getting in and out of independence hall for the constitutional convention, but he got recognized and he pointed out they've been meeting for nearly five weeks and accomplished basically nothing. how, as it happens, -- how has it happened, sir, he said, that we have not once thought of applying to the father of lights to illuminate our understanding in the beginning contest with great britain, when we were sensible of danger, we had daily prayer in this room. our prayers, sir, were heard and they were graciously answered.

franklin went on and then came to the point. we're told that a sparrow cannot fall to the ground without his notice. is it possible an empire could rise without his aid? we've been assured in the sacred writing that unless the lord build a house, they labor in vain who build it. firmly believe this, franklin said. then he said, i also firmly believe that without his concurring aid we shall succeed in our political building no better than the builders of babel. and he knew, this 80-year-old man in pain and suffering had a mind and wit as sharp as ever. though his body was deteriorating. he ultimately moved that we begin each day with prayer led by a local minister and from

then until now, today, when we start, we have a minister start with prayer. so it was staggering in the 1960's that the supreme court as they continue to do say, we don't think prayer is appropriate. well, thank goodness i had a great legal education at baylor university and we learned about the constitution, we learned about the constitution's history. and it doesn't take much digging to find exactly where it came from. one of the things the founders pointed out was that we don't trust government. because the people as the government in this new creation , republic if we can keep it as franklin said, is going to rely on people being diligent and coming to the polls on election day on hiring day, and making

sure they hire good people to carry out the will of the government, the people. and over the years, we have lost that. of course, they wanted not just one legislative body, a huge house of representatives, big for that time, and then also, that was not enough. not some just elite -- social elite in another body, like a house of lords. they wanted a group they would call the senate. and they would have the power to knicks anything that the guys in the house of representatives -- to nix anything that the guys in the house of representatives of did. that's what the founders thought, we want to make it as hard as we possibly can to pass laws because when it's too easy, then you have tyranny. and that's what we've seen a great deal of lately. we saw with the automobile bailout, an auto task force, we

had all these czars, have an auto task force, unelected, unaccountable, certainly to congress, they wouldn't tell us what went on, they wouldn't give anybody any information about the conversations that took place who said what, and yet they come out with a bankruptcy plan that turned the bankruptcy laws upside down. the law is supposed to mean something. there are businesses and individuals that have had to file bankruptcy and they were forced to always play by the rules. and yet here were these automakers who got to just thumb their noses at the law. why? because the safeguards that were put in place by the founders were just ignored. there were checks and balances, you can't just have a czar or some task force that's

unaccountable. just ignore laws and come forth with a bankruptcy plan that doesn't allow for any motions, doesn't allow for any other alternative plans, does not allow the secured credit jors -- creditors to be treated as secured creditors but flips them upside down so the secured creditors are untreated as unsecured and the unsecured union is treated as secured. nobody could get away with turning the law upside down like that. we have too many other checks and balances, we thought. not here in washington now, we don't. that's why this body and the senate allowed a terriblely illegal bankruptcy plan to go forward. wasn't hard, apparently to find a bankruptcy judge that would welcome the chance to avoid ever having to have months and

months or years of hearings. he would just simply sign off on that. because as we know, bankruptcy judges are subject to reappointment on a regular basis and we also know many bankruptcy judges want to be district judges and other things. it wasn't apparently too hard to find a bankruptcy judge to sign that order, giving it color of law. this body should have struck it down. we had the power. we turned our heads. there was one hope left, the supreme court, another wonderful check and balance put in place by the founders. ruth bader ginsburg, to her credit, put a 24-hour hold on the deal that was born out of these private, secret meetings, unaccountable, unelected people were having when they turned the law and the constitution upside down. there were takings of dealerships born out of these private, secret, seedy,

discussions. they took property rights away from these people. some of them still owe money at the bank today. yet their dealerships were taken away, their security was taken away, the banks were harmed, they had loan money to buy dealerships. when the dealers -- the dealership was taken away by this anarchy group. but the supreme court let the 24 hours go and an illegal, unconstitutional bankruptcy plan went through. unimpeded. and lots of people suffered. i understand there are claims being made currently, sounds like to mele jit matly, by dealers who had a federal taking without due process and without remuneration, sounds

like they're doing the right thing, yet we've heard from people on the other side about how terrible the economy was, that the democrats inherited from president bush. when you go back to january 3 of 2007, that was the day that the democratic majority took over the senate and the congress, we just visit that day, january 3, 2007, the dow jones closed at 12,474 -- at $12,474.52. the g.d.p. for the fourth quarter of 2006, we found out after election day, had grown 3% higher than in the third quarter. the unemployment rate was 4.5%. bush's economic policies had led to 40 straight months of job creation. more jobs than were being lost.

january 3, 2007, was also the day that barney frank took over as chairman of the house financial services and chris dodd as senator took over the senate banking committee as chairman. over and over, the bush administration had asked congress to stop fannie mae and freddie mac, to reen it in, and to -- to rein it in, and two republicans, -- and to republicans' dismay and dishonor, it was not done. certainly the democratic friends across the aisle were objecting. the man who was to become chairman, barney frank, was objecting, of course we've seen the speech where he said no, they were fine, in essence. they were not fine.

they were in big trouble. and nothing was done. it should have been. if we look back and find that fannie mae and freddie mac, they weren't sitting dormantly on the side, oh, no, they were actively involved in politics. if you look at the period as open secrets did from 1989 to 2008, to find out who gained the most in political contributions during that period, from fannie mae and freddie mac as they sought to try to entrench their future. the second highest amount of contributions from fannie mae and freddie mac went to a senator named barack obama. things changed, didn't they? and now we have the book come out from mr. wood ward -- mr.

woodward, to know exactly what's absolute -- who's to know exactly what's absolute truth and what's affected by an artful memory. as a judge, we would hear well-meaning witnesses, all tried to give their version of what they saw with their own eyes and it was amazing, eyewitnesses so often varied on details that occurred, but mr. woodward has a book out, i was deeply saddened to see what he had said about president obama's discussion with secretary gates, that he could either endorse the president's idea, 25% fewer new troops going to afghanistan, 25% fewer than the military had asked for

in mcchrystal's report, or the president could go with what he described to gates as a, quote, hope for the best, unquote, plan of 10,000 trainers under which afghanistan would almost certainly be lost to the taliban.be lost to the taliban. woodward quotes president obama as saying, can you support this? and quoted as saying, because if the answer is no, i understand it. and i will be happy to just authorize another 10,000 troops and we can continue to go as we are and train the after nan national force and just hope for the -- afghan national force and just hope for the best. the words hung in the air, unquote. well, there were reports that supposedly, possibly, that

mcchrystal had said, we probably need 80,000 troops in afghanistan to have as much effect as the surge in iraq had had and to get things under control. i'm not sure if those were true, but one account was that the president, the white house asked let's cut that down from 80 to 40 because that is more doable, but nonetheless, the request was in writing for 40,000 and the report made very clear that time was ftesens and if we delayed this the whole outcome of afghanistan could hinge within the next 12 months and it was hocking to wait for 990 days, 0 days nothing happened. the president said he had been busy and congratulating people

all around the country. kind of like in here. we don't have time to help the economy by ensuring people and businesses we'll keep the same tax rate for at least the next year or so. oh, no, we had to do 84 suspension bills. no time to help the economy, though, by assuring businesses and people their taxes will not have the biggest issue r increase in american history, which looms as of january 1. but anyway, 30,000 troops were authorized and it's a shame if it ends up being true that president obama told gates, either go along with the 0,000, 25% less than what mcchrystal said and absolutely having the best chance to defeat the taliban and to win in afghanistan. but the trouble is friend down

the road had let me know this past summer that there were some members of the northern alliance that we called upon, some call them warlords, tribal groups, who we had allied ourselves with when we first went into afghanistan. we let them do most of the fighting, and they were able to defeat the taliban. we provided weaponry, consultants, trainers, and they were able to defeat the tall ban. but then as -- taliban, but then as they languished, the taling ban has made a resurgence and these people with the northern alliance, these leaders had heard that the united states was indirectly negotiating with pakistan and with karzai as the leader of afghanistan and

indirectly with the taliban, basically if you just let us out next summer and not make a fuss, you can have the country. you guys can work it out. that's what the people of the northern alliance were hearing. and what i didn't know until we met with a number of those leaders, these are brave warriors. these are brave fighters. but they were concerned for themselves and more so for their families and for those who looked to them for leadership, because what i didn't know was that after they had defeated the taliban to help us, we demanded that they disarm. and basically, you can count on us, the taliban has been defeated, you can disarm now. it's the only way to peace and

don't worry, the taliban won't be back. you defeated them. we'll make sure nothing bad happens. so they disarmed. and they said they really did. they trusted the united states. their ally. and now the taliban making this resurgence because milk crystal didn't get the soldiers he asked for and although the president said that is the war, that is what bush's messing up. this president has not done any better and instead has announced to our enemies not in so many words, but it's something any enemy would get when you say we're going to pull out next summer, it tells the enemy, if you can just hang on until next year, then you win.

unless we forget the taliban was behind the training and the planning of 9/11 and the killing of 3,000 americans, how quickly we've forgotten. have you forgotten? have we forgotten? they killed 3,000 people and now we're going to walk away from afghanistan and let them have a stronghold there and the northern alliance knows what that means. it means that they and their families are dead. our allies will be dead. isn't hard to figure out if you're out there in the world and united states house of representatives say you can trust us, be our ally, you want to say, no thank you, very much.

i have seen what you have done to your allies, i've seen what your best friend israel has done to them and the pressure you have put on them not to defend themselves, to give away part of their country, to keep giving away unilaterally, when there's nothing being brought to the bargaining table by the other side. we have seen what you have done to your allies. we saw how you voted to demand israel show off their republicry, just like hez a/k/a i when he showed the weaponry to babylonian leaders and he said you fool, you don't show your enemies your defenses. you don't do that. and you don't make your friends do that either or make your

friends give away their ability to defend themselves like we have been putting pressure on israel to do. and now with afghanistan, i don't know what the answersr but i would have hoped that from vietnam we learned not that we couldn't win, because we find out from the true history vietnam was winnable, but we didn't have the will. washington could have decided to win the vietnam war whenever it got ready, but instead, we kept sending people over there piecemeal to die. if you are going to send american men and women into harm's way, you send with them everything they need to win and you let them fight. and the rule of engagement in afghanistan are causing losses of life because we're so tying

our own hands that it puts our people at risk. any wonder erp people are hesitant to be our allies? the northern alliance could tell them, watch out. i hope and pray that the northern alliance leaders were wrong, that our administration here is not indirectly sending messages to the taliban if you just hang in there you guys can divide things up, because it does mean our allies in afghanistan will be dead. and it's rather hard to hear people in this administration say that the republican party has no leaders when they took one of my ideas and i did tell them i don't care who gets the credit, but that was back in january of 2009, actually

november of 2008 when i pushed forward the tax holiday idea. it's a great idea. people would leave their money in their own checks. and newt gingrich said this is brilliant. i don't get a lot of emails. or another, that would have been the best thing to do, a tax holiday. but the trouble is, the majority right now believes that it's not -- the money being earned by people doesn't belong to them it be longs to us and we'll decide what of this government's money they get to keep. it's not the way it's supposed to work. and we have been told we are supposed to be for something. we have all kinds of fantastic plans, but the majority has the chokehold on c.b.o. so they'll come forward if the president

needs a c.b.o. score to be under $900 billion, they get it under there and then conveniently find out later on that they missed it by a quarter of a trillion dollars. if the administration needs a scoring to be done in a time that the rest of us are told by c.b.o. they can't score something in that amount of time or what little is given, this majority wants it, they get it done. i don't see how that's bipartisan when you look over 700 bills they've scored and you find just barely over 100 republican bills including what newt gingrich had told me, you got to get your health care bill scored, it could change the debate. it ought to have a good score. c.b.o. has shut out that possibility as if they were the most partisan of all partisans, because they know by preventing

alternative bills from getting scored, then they prevent a viable alternative from being debated here on the floor. shame on c.b.o. there have been some great ideas, but they're so basic. you want to get the economy going? let people keep their own money. you wouldn't have needed a bailout if you let people keep their money for two, three months. you say, you guys on this side of the aisle are only out to help the rich. i'm not, we're not. but what we want to do is focus tax relief only to the limited people who are paying the taxes. and we have the unmitigated gall to think we should not engage in

class warfare, that's decisive, dismissive. tax relief should go to those paying taxes, pure and simple. and it's not a tax rebate if people didn't put anything in in the first place. it was also said, as an economist that helped reagan get the cart out of the ditch, quit buying all this stuff, start selling off things. yet every month that goes by, this government buys and more and more land which takes the land off the tax rolls for the government and the schools. we do so much damage taking away tax dollars from schools. and we take away areas where we got natural resources that could

be mined or produced. i want alternative energy sources and it would be easy, instead of having the crap and trade bill that does much more damage to the economy, start drilling what we have, making sure it's done safely and that does not mean as it was being done when deepwater horizon blew up that the part of m.m.s. that was allowed to unionize was the offshore inspectors and i asked what kind of checks and balances to make sure those union officers could limit what they were required to do, what kind of checks and balance do you have to make sure they are doing the right thing. they said, we send them out in pairs. and they'll report each other if they don't do exactly what they are supposed to do. .

yet the last two people sent as offshore inspector, unionized to inspect the deepwater horizon were a father and son team. that's this administration's and the union's idea of a good check and balance. we have apparently hundreds of billions, and now it's estimated even over $1 trillion of americans' money in foreign banks that was earned overseas and it's been left there and this government will never have a chance to tax that at all, so here we are in an economic crisis. this was proposed in september of 2008, by some leading economists here. instead of a tarp giveaway slush fund, don't get the government involved in socialist action of buying into business. buying into wall street.

engorging goldman sachs and a.i.g. let them go through reorganization like everybody else does. but what you could do is say, ok, for you american people, companies, that have money in foreign banks, that has never come into american banks, here's the deal. you come in and purchase things that will get the economy going and we can direct that, there'll be no tax consequences, no penalties, so you, with private money can get things going. and then of course once that money is here, it does get the economy going and once it's in this country, then it's taxable for the future. we could start selling off some of the land. you know, we've got to start thinking outside the box. one of the great things that happened outside of -- under abraham lincoln, the morell act, which allowed universities

to be started with land grants. we have people on welfare and i know there are some that just don't want to work, but there are some that do. how about if instead of the welfare, we give them an alternative. we'll give you so many acres that can provide land where you can live off of it, make a living and we'll give you seed money to start, but you have to sign an agreement you'll never accept welfare again. how about that. we've got plenty of land. how about using the energy sources we have and taking 25% or even 50% of the royalty and designating that to go for research? for alternative energy sources. so that it happens without the government taxing and destroying the american economy. and how about dropping the corporate tax down to 15%, two

percentage points below china, i'm told by c.e.o.'s who have moved manufacturing industries to china that if we lowered our corporate tax rate to 17%, 15%, 12%, they'd be building new plants in the united states, those jobs would return. we need to do that. we need a zero baseline budget. no automatic increases. i have that bill, i filed it each of the three times i've been here, each of the three terms. i've got a u.n. voting accountability bill that simply says that any nation, since they're sovereign, they can do what they want in the u.n., how they vote, they can applaud ahmadinejad's crazy speeches, but for any country that votes against our position in the u.n. more than half the time, they get no financial assistance from the united states of any kind the subsequent year.

their choice. said it before, you don't have to pay people to hate you, they'll do it for free. there are so many things we could do. to get out of the economic malaise we're in. we need a balanced budget amendment, that would help. i honestly believe we have got to pass a bill on social security that would shore it up and no, we didn't do it my first two years, i proposed it to some leaders back then, our leading thinkers, they said it was a bad idea. that is, for the first time since the inception of social security, require social security tax money to go into the social security trust fund. real money in there. to draw real interest. we could create instruments that would not create risk. that would allow us to draw

interest without affecting the bond markets. there are so many things we can do. we have been blessed so richly. and i've said this before, but mr. speaker, i want to conclude with it tonight. because people have been frustrated, i've been frustrated, but the message is clear. john adams wrote to abigail after the signing of the declaration of independence and he was so excited and he talked about the celebrations and he finished his letter with this, you will think my transported with enthusiasm but i am not. i am well aware of the toil and blood and treasure it will cost us to maintain this declaration and support and defend these states, yet through all the gloom i can see the rays of ravishing light and glory. i can see that the end is more than worth all the means and that posterity will triumph and that day's transaction, even

though we should rue it, i trust in god, i shall not. with that, mr. speaker, i yield back. the speaker pro tempore: the gentleman yields back. the chair recognizes the gentleman for a motion. mr. gohmert: i move that the house do now adjourn. the speaker pro tempore: the question is on the motion to adjourn. those in favor say aye. those opposed, no. the ayes have it. the motion is agreed. to accordingly, the house stands adjourned

health threats, such as pandemic flu or bioterrorism. the senate appropriations subcommittee on health and human services and the head of the weapons of mass destruction center. >> i trust that, following my testimony, both sides will work together on this issue in the best interest of the american people as you always do. >> whether poking a little fun at congress or dealing with issues more seriously, celebrities have often appeared in washington. take a look at some of their causes in the c-span video library. search for names you might know any time. >> the head of the congressional office says that the economic

recovery is what he calls anemic and that unemployment will not fall below 8% before 2012. testifying before the senate budget committee, he also talked about the effects of some of the spending and tax proposals congress is considering to boost the economy. this is an hour and half. director, welcome back. we look for to your testimony. this is their third hearing on the economy in the last two months. we heard from six outstanding economists so far. the director will make it 7. let me begin by providing an overview of our fiscal and budget outlook. i think it is critically important to remember the

economic crisis we faced just a short time ago. by mid-to-late 2008, we were in the midst of the worst recession since the great depression. the economy shrank at a rate of 6.8% in the fourth quarter of 2008. unemployment was surging with 800,000 private-sector jobs lost in january 2009 alone. the housing crisis was ripping through the economy, with home building and home sales plummeting and record foreclosures. and we face a financial market crisis that threatened to set off a global economic collapse. i will never forget being called into an emergency meeting in the fall of 2008. i arrived at about 6:00. there were the leaders of congress, republicans and democrats, sent and the house, the secretary of the treasury,

and the previous administration. they told us they were taking over a id in the morning. they believe that, if they did not, there would be a financial collapse. those were very serious days. the federal response to the crisis, i believe, has successfully pull the economy back from the brink. this year, we have begun to see a return to economic and job growth, although both are weaker than we would hope. two of our witnesses from last week's hearing completed a measure that -- a city that measures the impact of the federal response to the crisis. -- a study that measures the impact of the federal response to the crisis. dr. blinder and doctors sandy's report said that the federal

response and effects of real gdp, jobs and inflation are huge. it probably averted what would have been called great depression ii. when all is said and done, the fiscal policies will have cost taxpayers a substantial sum, but not nearly as much as most had feared and not nearly as much as if policymakers had not acted at all. they were well worth their cost. this chart compares the jobs we have had in our economy recently with an estimate of the jobs we would have had without the federal response. it shows that we would have had 8.1 million fewer jobs in the second quarter 2010 if we had not had the federal response. let me go to the next chart. you see a similar picture with

the unemployment rate. it is now hovering at about 9.7%. that is still far too high and we must do more to create jobs and bring this rate down. if we had not had the federal response, the unemployment rate would now be 15%. again, this is according to the analysis by dr. blinder and dr. zandy. clearly, the federal response to the economic crisis has had and continues to have a significant positive impact on the economy. clearly, we are not out of the woods. the economy remains on city and faces strong headwind. that is why i believe we need to focus on providing additional liquidity to boosted demand and promote job requite -- job creation. we cannot afford to repeat the mistake of the mid-1930's when

recovery measures were pulled back too quickly and at my request, cbo provided congress with a bang for the buck that we get. on the upper end of the scale, it shows that policies like extending unemployment insurance and providing a payroll tax relief for firms hiring unemployed workers gives you a higher impact on gdp for each dollar spent. also at the request, the cbo has not done further refinements of these rankings to help congress as it considers options a going forward. i look forward to hearing from director elmendorf about the latest findings in this area. in addition to the near-term economic challenge, we must also confront the looming, long-term

budget crisis. the retirement of the baby boom generation, rising health care costs, and our are dated tax system is projected to its bloated deficits in the years ahead. i might say if we extended all the tax cut permanently, that would have a profound effect on increasing deficit and debt as well. according to the cbo, federal debt could rise to 400% of gross domestic product by 2054. that is 44 years from now. that is a completely unsustainable course. we should -- what we should be doing is putting in place a deficit reduction policies that will kick in after the economy has more fully recovered by establishing and enacting these policies now, we will reassure the financial markets the united states is confronting its long- term fiscal imbalances.

let me conclude by what chairman ben bernanke has said earlier this year about the need for a credible plan to address our long term fiscal challenges. he said, "a sharp, near to reduction in our fiscal deficit is probably neither practical nor advisable. however, nothing prevents us from beginning now to develop a credible plan for meeting our long term fiscal challenges. indeed, a credible plan that demonstrates a commitment to achieve long run the fiscal sustainability could lead to lower interest rates and more rapid growth in the near term." i believe that. that is why i believe that the work of the president's fiscal commission is so important. as members of the commission, senator judd gregg and i can attest to the hard work being done by the commission. i remain hopeful that we will come up with a bipartisan plan that puts the nation back on track.

with that, i turn to senator judd gregg for his observations and then we will go to the witness for his testimony. >> thank you, mr. chairman. i look forward to hearing from the director on his view of where the economy is going. i would like to associate myself with the second half of your presentation, which is that i do not believe that economic recovery will occur until we make it clear to the markets and the american people that we will be serious about dealing with the debt of this country and rising deficits and their impact on the markets, their impact on companies. i believe the american people have lost their confidence in their government. they are seeing a government which is grossly over expanded, which is exploded in its size from 20% of gdp when this administration came into office and now to 24% of gdp, headed up to 27% of gdp. a government which has exploded not only in size andi in

spending but also in size of regulatory activity, to the point where it is hard for small businesses to be able to do business because they are weighted down by this massive expansion and regulatory activity, especially from the health care bill, creating huge uncertainties in the future of a small company as to whether or not it should expand. that is coupled with the fact that we pass laws which have severely retarded the availability of credit, in a misdirected effort to correct the serious problems of our banking system. the credit -- a financial reform bill being a specific act of transgression here. in that it is a bill which has caused credit to contract. without doing anything substantially significant in the area of addressing the underlying problems that drove the credit contraction which

were the real a state bubble and excessive lending that was occurring in the marketplace. instead of addressing those issues, it created layers and layers of new regulatory activity, hundreds of new regulations -- regulatory agency initiatives, including a brand new agency called the consumer credit protection agency which is going to be headed up by an ad hoc individual who is not even going to appear before the congress for confirmation. what a transgression of the constitutional process that is. this person will probably be one of the most powerful people in washington. with a stream of funding which has absolutely no accountability to the congress, because it comes from the federal reserve and, therefore, is not subject to annual appropriations. and a director will not even come to the congress to be confirmed as the law requires.

an ad agency, i predict that agency will be an agency not for the purposes of protecting consumer credit that but for the purposes of pursuing a political agenda of social justice as defined by the leader of that agency. so the american small business persons is being inundated with excess regulations, excess concern about the debt -- not knowing what will happen in the future in the area of credit. so if we want to get the economy moving forward, we should begin by putting in place a financial systems in the federal government which will control the deficit and debt in the out years and give people confidence we get that under control. to begin the process of an orderly reorganization of our health care system, this will make it function and become more bureaucratic. and we should take a look at our credit markets and see how we

can make them function more efficiently and effectively in a responsible way. all of which we have not done. so i would say that if we want -- there is that old saying from pogo -- we met the enemy, and he is us through the enemy is economic expansion, and the enemy is the federal government. and we need to change. and i look forward to director elmendorf's thoughts. >> welcome back, director elmendorf. please proceed with your testimony and then we will go to questions. >> my comments will summarize our lengthy written statement. although the recession ended officially more than a year ago,

the economy has not bounced back quickly. employment now stands roughly 10 million below the level it would have reached if the recession had not occurred. measured unemployment would be even higher today had there not been a considerable fall off in the rate of participation in the labor force, as lack of available jobs cause people to stop looking for one. cbo expects as do most private forecasters that the economic recovery will proceed at a modest pace in the next two years. international experience shows that recovers from recession that began with financial crises tend to be slower than average. following such a crisis, it takes time for equity and other asset markets to recover, for households to replenish their resources and boost their spending, for financial institutions to restore their capital bases, and for businesses to regain the confidence needed to invest in plants and equipment weak demand for goods and services resulting

from these and other factors is the primary constraint on the recovery. under current laws governing spending and revenues, cbo expects the unemployment rate to remain above 8% until 2012 and above 6% until 2014. and we released an issue brief in april that reviewed the evidence on the effects on people of losing jobs during a recession. policymakers cannot reverse all the effects of the housing and credit boom, the subsequent bust and financial crisis, and the severe recession. however, in our judgment, there are both monetary and fiscal policy actions that, if applied at a sufficient scale, would increase output and employment during the next few years. but there would be a price to pay. those of fiscal policy options would increase federal debt, which is already larger relative to the size of the economy that

it has been in more than 50 years and is headed higher. if taxes were cut permanently or government spending increase permanently, as no other changes were made to fiscal policy, the federal budget would be on an unsustainable path and the economy would suffer even if tax cuts or spending increases were temporary, the additional debt accumulated during that temporary period would weigh on the economy over time. but there is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are under used, and imposing fiscal restraint years from now when output and employment will probably be close to their potential. if policymakers wanted to achieve both short-term stimulus and medium and long- term sustainability, a combination of policies would be required -- changes in taxes and spending that would widen the deficit now but we do sick

relative to a baseline projections after a few years -- but reduce it relative to baseline projections after a few years. the cbo would quantify the effects of some of the alternative fiscal policy actions. in a report to which the chairman referred, we analyzed a diverse set of temporary policies and reported there to your effects on the economy per dollar a budgetary cost, what you might call the bang for the buck. the overall effect of those policies will depend on the scale at which they were implemented, making as in the begin difference in an economy with an end of what of it nearly 15 trillion dollars would involve a considerable budgetary cost. this figure summarizes our key findings. the temporary increase in aid to the employer would have the largest effect on the economy per dollar a budgetary cost. a temperature reduction in payroll taxes paid by employers would also have a large bang for the buck, as it would both

increase demand for goods and services and provide a direct incentive for additional hiring. temporary expensing of business investment and providing aid to states would have smaller effects. and yet, smaller effects would a ride from a temporary increase in infrastructure investment or a temporary across-the-board reduction in income taxes. in an january study, we explained that even those temporary policy actions would lead to the accumulation of government debt that would reduce income beyond the next three years unless other policies were adopted that had offsetting effects. however, we did not quantify those future reductions in income at that time. at the request of the chairman, we know estimated the short-term and long-term effects of extended the 2001 and 2003 tax cuts, extending higher exemption amounts for the amt into reinstating day a state tax -- the estate tax.

the methodology is the same as what we follow and analyzing the president's budget each spring. we make different assumptions about people's behavior. the model is used to estimate the effects of the economy in 2011-2012 and focus on the policy's impact on the demand for goods and services come up because we think that economic growth in the near term would be restrained by a shortfall in demand. in contrast, the models used to estimate effects on the economy in 2020 and beyond focus on the policy's impact on the supply of labor and capital, because we think that economic growth over that long or horizon will be restrained by supply factors. as shown on the left side of this figure, we examined four alternative approaches to extending tax cuts. i am working my way down in order. a full, permanent extension. a partial, permanent extension, that would extend permanently

all of the provisions except those applying to high income taxpayers. a full extension through 2012 that would extend all provisions but only to 2012. and it partial extension through 2012. as cbo's reported before, permanently or temporarily extending all or part of the expiring income tax cuts would boost output and employment in the next few years relative to what would occur under current law were those tax cuts to expire. that would occur because all else being equal, lower tax payments increase demand for goods and services and boost economic activity. a permanent extension, whether full or partial, would provide a larger boost than would a temporary extension. a full extension would provide a larger boost than a partial extension.

however, the effects of extending the tax cuts in the longer term would be very different from their effects during the next two years. the long-term effects would be the net result of two competing forces. on the one hand, lower tax revenues increase budget deficits, and thereby cut government borrowing which reduces economic growth by crowding out investment. >> on that point, do you have a slide that shows the longer term? >> yes. i was going to make the point and then it should read the results. but those are the longer-term results. what you cannot see in the picture is the netting of these two forces. there is the effect of increase of government borrowing which crowd out investment and reduces economic growth. on the other hand, lower tax rate boost peoples savings which increases economic activity and income. and the net effects of these policy changes is the netting of these two different forces. for some of the options, our

estimates of the effects of the forces based on different models spanned a broad range. this figure, however, shows the averages of the estimates across different models for 2020. it indicates that all four of the options for extending the tax cuts would probably reduce the national income in 2020 relative to what would occur under current law were those tax cuts to expire. beyond 2020, the reduction to national income from all of the alternative tax extensions becomes larger, especially for the permanent extensions. moreover, a permanent extension of the tax cuts, combined with budgetary pressures posed by an aging population and rising costs for health care, would put federal debt on an unsustainable path. permit extension that is not accompanied by reductions in federal spending would double

and projected budget deficit in 2020 from $700 billion to $1.40 trillion. a permanent extension except for certain provisions that would apply to high-income taxpayers all it would increase the budget deficit by roughly 3/4 two 4/5 as much. also show in the picture, permanent large increases in that were not accompanied by reductions in other spending or tax increases would also put federal debt on an unsustainable path. if policy makers adopted either policies, putting federal debt back on at a sustainable path require future increases in taxes or reductions in spending that would amount to a large share of the budget. thank you. >> thank you very much. so let me go first to the question of bang for the buck.

in terms of economic policy is we might and that no to strengthen the economy that is too weak, you are showing that the largest affects would rise from a temporary increase in aid to the unemployed, the next largest effect would be a temporary reduction in the employers' payroll taxes. smaller but still significant defects would come from other policies such as a temporary reduction in the employee's payroll taxes, additional 1 times social security payments, additional temporary refundable tax credits for lower and middle income households, and going down the line, other things that would have an effect would be is still smaller would be temporary increase in the investment in infrastructure.

and the final option you looked at was reduction and for all for one year of income taxes that you found what have a positive affect, although it would be the least bang for the bulk of the options analyzed. is that correct? >> yes, that is right, mr. chairman. this analysis in january assumed that these policies would be enacted in early 2010. that is not possible. we have not updated all of these estimates. it would look different. this picture could go back up there. on my screen, that would be helpful, whoever is controlling. that. yes, that is the slide i had in mind. if we update the numbers now, they would change a little bit, the basic pattern were not be different, but it is true that the effect of extending the tax cuts would look little stronger because this extension was one

that action began in 2011, one year into the to your window we are focusing on and that diminishes the effect a little bit. if we updated all of these numbers, the option of extending the tax cuts would have lower bang for the buck than almost all of the options on this list. the other thing i want to add, mr. chairman, is that it is important to recognize that this is the effect per dollar of budgetary impact. if one wants to have an effect of a certain size of the economy, it also matters of the scale at which these things are done. some of these options can be done at a larger scale than others, and that is the consideration for you and your colleagues as well. >> let's go to the question of the tax cuts, because that is one of the key issues congress will confront when we return. as i analyze the results of your work, it is that, although they are pretty modest with respect to bang for the book, extension

of the tax cuts would be positive in the short term, 2011 and 2012, but actually beat-in the long term. that is, permit extensions of the tax cuts, all of them, would be the most negative in terms of its effect on economic growth in the long term. is that correct? >> we have not looked at all of these options over the longer term, but of the tax options that we study, the four different ways of extending the expiring tax provisions, the permanent extensions would have the largest negative effect on national income over the long run. the largest crews in the short run, but the largest negative affect in the long run. that would occur because of the extra government borrowing from the civic and budget deficits would drag down the income -- significant budget deficits

would drag down the income more than the savings that would be generated by the lower tax rates. >> said the effects of tax cuts, which many of us assess it as being positive with respect to economic growth, your conclusion is that in the short term, additional tax cuts, extending a tax cut, the expiring provisions, would be positive, although the least positive of the policies you have looked at in terms of effect on the economy. it would give us the least a bang for the buck. but longer-term, the tax cuts are actually harmful to economic growth because they are deficit finance. is that correct? >>. yes, that is correct, mr. chairman. >> so that creates a conundrum, because we have two things that are working against each other here. on the one hand, we have got a series of policies that have

been rated in terms of bang for the buck, extending the tax cuts is among the weakest in terms of helping boost economic growth, although it is positive. so extending tax cuts would have a mildly positive affect short-term, but it would have a negative affect long-term because they are deficit finance, just as additional spending would help us short term but the negative long-term. >> yes, that is record the effects are symmetric and that way. we have written this on a number of occasions. certain policies that lead to short-term boosts, higher government spending or cut taxes, it's just allowed to increase deficit and debt over time will have negative effects in the medium and long run. >> for many people, it is counterintuitive that tax cuts

could somehow hurt future economic growth. how is that? why is it that in your analysis tax cuts could be actually harmful to long-term economic growth? >> i think the natural intuition is people thinking about their own situations and thinking correctly that if their taxes, their rates were lower, that would give them incentive to work more, to save more, to invest more. and that is right as far as it goes. the problem is that if those tax cuts are not accompanied by other changes in the government budget and are simply funded through borrowing, then that rowds out ing c investment in equipment, computers, machinery, buildings that are the source of long-term economic growth. in that connection is less visible. and i think that is less

apparent in most people's intuition. but it is no less important for being not so visible, for being more indirect. >> i think it is incredibly important testimony you are giving us here today. i hope people are listening, because what i hear you saying is short-term, anything we do to provide stimulus, increased spending or additional tax cuts, will give you a short-term boost, but either of them, additional spending or additional tax cuts, will actually heard longer-term economic growth because the impact of the deficit and debt will serve like to wait around the neck of the economic engine of this country. thank you very much for that testimony. i hope people are paying attention. senator gregg.

>> there is another side to the coin. if you use logic, could not be too that spending would have the exact same effects of crowding out economic activity if it were barred to spend? >> that is exactly right. like i said, it is a center. >> i am not sure that you have done this analysis, but which generates more economic activity -- spending or tax cuts? >> so, actually i did not have time to show it, but there is a table in the report which i think i have here. so, it is a rather complicated table. you can read along if you want, but i will try to make point more directly. if one looks out -- the right- hand columns were remodeled the effects over time both in 2020 and beyond that -- and what we

have done is we have modeled not just the effects of the initial cut in taxes but the policies we need it later to put fiscal policy on a sustainable path. and you can see on the far right column the changes that we assume for a leader to put the policies back on a sustainable path. in the middle columns, it was an increase in government spending. in fact, the increases in tax rates have a much more negative effect on the economy over the longer term than if the budget is returned to sustainability through a reduction in government spending. >> that is very important testimony. let me ask you another question. your projections go reping forward, the deficit as a percent of gdp, goes from what thank you, working for 10 years?

>> our latest base line projection -- government spending would be about 24% of gdp in 2020 compared with an average and the past four years closer to 20% or 21% of gdp, much higher than we have experienced before in this country. >> that being the case, isn't it reasonable to presume that spending is the problem? it is driving the debt? primarily. excepting your argument that, if you raise taxes, we have a present tax law and you raise taxes, you will get more revenues, but if i understood what you said, 4/5 of the tax increase or the tax revenues that are lost are not high and people paying taxes. they are middle income people paying taxes, correct?

>> let me clarify that. extending the top bracket is about 1/4 of a cost of extending all that. the tricky part is that the people below the tax bracket -- >> i did not mean to interrupt. if there is a consensus in congress and the president is calling for an extension of the middle-class tax cuts, and the only thing that the president is calling is an increase in taxes of high income individuals, if that is the case, then your numbers are still 80% off, right? i mean, your revenues. >> exactly. extending all the tax cuts except for those people has 3/4 to 4/5 of a negative effect. i do not want to use the word problem.

it is a choice -- i do not want . the population is aging, changes in the health system and other aspects of the government system. >> i think that is an important point that we needed to keep in mind, but dealing with reality as it is coming at us, the government will go for 20% of gdp to 24% of gdp. that spending is the driver, in large part, of the gap that is causing the deficit and the debt which will bankrupt the country. thank you. and this debate over taxes is in my opinion of bit of a straw dog debate, because as you pointed out, 75% to 80% of their revenues that will not be received because they will not -- we will not be raising taxes,

everybody agrees there will not be received because everybody agrees those taxes will not be raised. so it really is, this whole tax debate, in my opinion, is not where we should be focusing. we should focus on the growth of this government from 20 % to 24%. how we get that back under control and get it to a manageable number, considering our revenue base. ? >> i think that summarizes my points. for youryou testimony. i also want to thank you for your professionalism, your staff's professionalism. you get a lot of pressure, even from my staff. you are always very professional. you always give us a straight answer. you are a fair umpire and we appreciate it. >> we have appreciate it it the support you have given us many

years but for the work we do. >> senator wyden. >> i share the senators of you about your professionalism. we thank you. i want to take your taxes session and a bit of a different direction. right now, there is a comparison underway between the tax policies of george w. bush and the proposal that have been offered by president obama. and i am of the view that that tax debate misses the point, because both of those approaches -- george w. bush and now what has been offered by president obama -- involves tinkering with a badly flawed, discredited tax system. and, to me, the most more relevant comparison -- i want to walk you through the numbers and get your reaction -- are the numbers that you have when ronald reagan got together with a big group of democrats and

reformed the tax system and compared those and what we saw in our country for job growth and economic growth, payroll growth, to what we saw during the years of george w. bush -- 2001-20008 --and get your reaction. when ronald reagan and democrats worked together, 16 million new jobs were created. there was a 17.6% expansion in payroll. that is when democrats and republicans worked together to create a tax system that was more pro-growth and more of an engine for job creation. by comparison, from 2001 to 2008, when there was partisanship in the text area, 3 million jobs were created. there was only 80.3% expansion

in payrolls. now come up -- there is only expansion in payrolls. tax policy is not the only thing behind job creation. but are those numbers relevant with respect to this question of job growth that you saw with tax reform, if democrats and republicans work together, you certainly saw more positive numbers, numbers were pro- growth, pro job creation, then you saw in the years of 2001- 2008? >> as you mentioned, there were a lot of forces affected the economy in addition to tax policy. i think you raised a very important point about the nature of the tax system matters just as much if not more than the level of revenue collected.

we mentioned that a number of places in the written testimony that the experiments we conduct would have different results if the tax code were constructed in different ways, it's the nature of the tax changes over time were different. in particular, what is important for incentive effects are the marginal tax rates and there are ways to raise revenue or lower revenue that involve changing the marginal tax rates, but there are also ways that involve changing the base amount of income that is subject to tax at the corporate or individual level. those are very important decisions for you and your colleagues. >> would you agree that the fundamental model of 1986, which is what senator gregg and i have picked up in our bipartisan legislation, that that model of radically simplifying the code? we have a one-page 1040 form, and broadening the base and lowering rates for both

individuals and businesses, would you agree that that model is more economically efficient than just going out and extending it this amassed a ray taxoophole-riddgeen breaks that constitute the code today? >> i have not studied at model carefully, but i think there would be widespread agreement among analysts that the tax system with a broader base and lower tax rates would be a much more efficient way to raise revenue. and thus, a better way to strengthen the economy while raising revenue. >> why would one think that the tax policy that produced anemic job growth and declining real income for the middle class -- those were the policies between 2001-2008 -- why would one think they are just reenacting them

would create substantially more jobs and substantially more income in the pockets of middle- class folks? i mean, we have what occurred. now someone is talking about redoing it. people like senator gregg and i are saying, no. why not go with a model that we know works, when democrats and republicans get together? my question is -- why would you reup for something that showed such anemic economic growth, job creation, payrolls, between 2001-2008 period? >> senator, i am not in a position to reup. >> we are talking about the analysis. >> the only distinction i would make is between short run effects and long run of facts. in the short run, the principal effect of tax changes on the economy is likely to be through the additional income that

households would receive. but over time, in the medium and long run, the most important effect of tax policy is likely to be not just the changes in toll revenue but also the changes in incentives. and our model reflects that. the printer that you are making about the proposal you put forward is focused on the medium and long run effects of the tax policy and economic growth. >> let me ask you about the international economic challenge and the tax law as it relates to job creation. when you talk to american businesses, they say they have to have this ray of breaks for going overseas, because the united states has a high, comparatively, tax rate to other countries with respect to the business rate. so, along came these various outbreaks, the for earl and others, the american people do not understand -- deferral and

others. senator gregg and i went to that american businesses and asked, how much would you have to reduce the american rates in order to jawlike a lot of the stuff you have overseas? -- in order oto junk a lot of the stuff you have overseas? every single dime is paid for in our tax reform bill. we take away the overseas breaks to use it to strengthen american manufacturing. would that not -- apart from our built in theory -- with that particular change make it more attractive to grow businesses and generate job growth in the united states? >> yes, senator. i think most analysts would agree that broadening the corporate tax base and

lowering the tax rate would be a more efficient way to raise revenue. >> my time is up. i would ask mr. chairman to put into the record several studies that have been very supportive of the bipartisan tax reform bill, particularly that done by the manufacturing alliance, the brookings association, and the heritage foundation. they would just be short summers, if we could put that in. >> without objection. i also want to commend you and senator gregg for coming up with really of very throughtful tax reform proposal. to say quickly, senator ensign, it is a very clear that we will have to cut spending as a share of the economy. it is clear to me that we cannot afford to make permanent all the tax cuts that are currently in the code, which kind of jumps out at you that what we need is tax reform. the tax code is now 7500 pages

long. and it was never designed with competitiveness in mind. the world has changed since that tax code was written. and if we do not write a new tax code that relates to the reality we confront today, that we are in a fully competitive global environment, and we write a tax code with that in mind, i think we are making a profound mistake. just to double down on that current tax code is a huge mistake. senator ensign, thank you for your courtesy occurred >> thank you, mr. chairman. i want to associate myself with the remarks that senator wyden talked about. there is no question that some of the economic effects of our tax code are just complying with the tax code. it is a huge burden on individuals as well as businesses in complying with our

tax code. i mean, you just look at the a state tax, a death tax, what ever you want to talk about, the complexities of trying to avoid taxes, the huge cost -- businesses make investments sometimes based on the tax code instead of what is necessarily makes a good economic sense. and so there is no question i believe very strongly that the best thing we can do is what you just talked about, director elmendorf, and that is broadening the base and a lowering the tax rates. i think that is absolutely the best way to go. i do want to pick up on something that you said a little while ago. you said that if we lower tax rates in one of your charts over the next couple years, it will increase to gdp. is the opposite true -- if we raise taxes over the next couple

of -- if we let the tax rates that are on the books currently expire, will gdp go down? >> our economic base line, as you know, has to be conditioned on current law. assumes that those tax cuts expire. relative to that, it is relative to that we have done all estimates. an extension of the tax cuts would boost employment and gdp. conversely, if you start from that point, then the tax cuts expiring would lower gdp. that effect is in our economic forecasts. >> it does make sense that if you are raising -- raising taxes will increase in gdp. if those go up, there is no question that gdp will go down reverse is keeping us tax rates where they are today. >> yes. the short-term effects. >> i think that is important. and i also -- i think some of the analysis you have done as

far as the long term is a very, very important. like you said, it is not just the tax cuts. the spending, both of those things. i agree with you. i think if we are going to do these tax cuts, we need to be looking at ways to cut spending, because it is not just the short-term economy we need to think about. we need to be responsible in no long-term, and while ideally doing what senator wyden is talking about, to me, that would be the bbest way to do it. if we could pay for it through lowering spending, in the long run would be better as the economy and as a country -- and obviously those are tough choices to make along the way -- but the responsible thing to me because the biggest threat to long-term economic output is the debt, is it not? >> i think that is right,

senator. the challenge on the spending side is that the revenue lost from extending the tax cuts is a very large number, as we reported based on estimates from the joint committee on taxation. the full extension would reduce revenue by nearly $4 to win over the next 10 years. >> what percentage of revenues is that over 10 years? >> that i don't know offhand. we do report in this testimony that a full extension would reduce tax revenue by about 2% of gnp in 2020 against a base of 20% -- about a 10% reduction in revenues. >> have you looked at what states and cities are doing as far as cutting their budgets? >> we follow it a little bit. >> do we think there is 10% waste in the federal government?

>> the problem turns out to be one person's view of what is the waste. >> every family, every business, local and state governments across the nation are cutting their budgets and basically running out the waste. you talk to every business in america and that is what they have done over the last two years. this is the private sector. and they had a lot of fat, the private sector did. local governments have a lot of fat. state governments have a lot of fat. they are bringing that out. the one place where we have not cut the fat is at the federal level. if we can sit here and say that we do not think there is at wasittein in the federal government. all i am saying is that that $4

trillion it is a big number, sounds like a big number, but when you look at it as 10%, and if we do not think we can take 10% and get this government more efficient by 10% by cutting out inefficient programs and streamlining programs, eliminating duplication, eliminating waste, i think that if this congress cannot find 10% ways, this congress -- they should throw us all up. that is all i am saying. that is why i think the 10% number is really important. >> it is up to you and your colleagues to say what parts of the coverage to be bigger and or smaller. the left set of bars shows revenues and spending under current law. and the wright said shows you with the tax cut extension -- nd thand the right side shows you the tax cut extension.

that amount is larger than all the spending on social security in 2020. it is smaller than all of the federal spending on medicare and medicaid and health insurance subsidies. it is much larger -- you can see in the box next to it -- it is all spending apart from a handful of the largest program. >> and a big part of the reason for those deficits as because, in that year, that $1.40 trillion deficit, at that point, how much of that is interest on the debt? >> the interest is a large. >> it is over $900 billion. that is because we are adding to it every year at such huge numbers. what senator gregg talked about about spending been the largest part of the problem, that is why at the federal level we need to get spending under control. we are at a critical point because this is unsustainable. the numbers you are putting up is unsustainable. this country will become greece,

except we do not have the european union to bail us out. if we have these kind of deficit numbers going into the future, it is unsustainable. and that is why this congress needs to heed the warning that we have to get our spending habits under control. it is critical for the future of this country. thank you, mr. chairman. >> senator warner. director you, 202-737-0002 elmendorf, for your comments. i concur with my colleague from nevada, as somebody as a governor who did that. i also think the notion that the problem is that such magnitude that if we will only do it on one side of the balance sheet, this is a challenge that will require us to recognize sufficient revenues to meet core foch's of the government and -- to meet core functions of the

government, and saying that we will find money through cutting spending, that has proven not to be the case. i think it will take both sides. i cannot really hope -- i would have preferred the statutory approach that the chairmen and their ranking member had on an official fiscal commission. unfortunately, many of our colleagues on the other side of the aisle would not join us on that statutory approach that would have forced our feet to the fire. i am hopeful that the presidential commission -- and i hope that all members will keep their powder dry to let this president a commissioned work its way through. i hope it comes up with a very bold and challenging courses that frankly challenges the orthodoxies of both political parties to make hard choices, because the notion we will do is simply on the spending or the revenue side, i think is false.

let me turn my questions back to your first chart, sir, were you looked at things that could have a defect on unemployment in the next couple of years -- that could have effect on unemployment in the next couple of years. we seem to be having kind of of by neary discussion here -- discussion a binary here. extend the bush tax cuts or extend them only on the top 10. a lot of the debate about the value of that talk t2%, $7000 terms of lost evenue, soeme have said, let's extend for the top two years. i do not know if your office has done this analysis.

if we say that taking that money out of the economy on a short- term basis may have some negative effects, and then the only choice becomes, let's just leave it with the top income earners, some of which may spend, but many of whom evidence shows will perhaps simply save those dollars which would not have the kind of short-term effect we might need to get employment restarted and the recovery continued. i guess, you have looked at payroll tax. you looked at full and partial expensing of investment costs. i guess what i am asking is -- if we said what we could do for a two-year period, $70 billion of targeted short-term tax cuts that might have the most bang for the buck, are those the two that you have analyzed and are

there others? my premise being, and i apologize about taking so long. i would argue that at the macro level,we in government have used most of our bullets. we have use monetary policy and lower interest rates to historic lows. while perhaps not as efficiently as many, including myself, would have liked, we have used stimulus. but the one good piece of news in our economy that does not get attention is that during this recession, particularly the large-scale enterprises, have dramatically retooled and, frankly, their balance sheets are healthier than ever. the balance sheets of american corporate 1000 companies are healthier than they were pre- recession $2 trillion at sitting in cash on those balance sheets. we could argue regulatory uncertainty, i will grant that is one of the issues, -- i am asking you to speculate here, but if you had $70 billion of

short-term, targeted tax cuts that would expire in two years to try to get that $2 trillion of those corporate balance sheets into the economy, we invested as the economic engine, private sector and and that would jump-start it, would you choose either employer's payroll tax reduction, immediate expensing, or are there other tax reduction toiles on a short- term basis we could use to get that $2 trillion reactivated into the economy? >> senator, there may well be some other policies. we cast a very wide net in january. other policies that we study, reducing employer payroll taxes or allowing a full or partial expensing of investment costs would have much more bang for the buck, much more positive impact on the economy per dollar a budgetary cost than would a broad extension of the expiring tax cuts. >> and your assumption was that

those would be, whether it is the payroll taxes or the immediate deducting, those would be short term it targeted -- >> we steady temporary. >> a year or two years? there are a host of other things, r&d tax credits. >> we have not looked at carefully at extending the research and experimentation tax credit. it is tricky. because that tax credit has been extended many times before, many businesses probably expected to be extended. that probably means that if it were extended out and uncertainty were resolved, that would have a little positive effect. but if you and your colleagues were to enact an extension anyway, then it is not is incremental -- >> the president has proposed raising it to 17%. many countries are at 20%.

>> a small increase in the rate would matter a little bit. would ask,what i youri would love to see office to some analysis is recognizing that if you had to take one year or two years of the top 2%, could those funds be better put to use, recognizing that taking us dollars of the economy right now might not make that much sense. you are saying at this point, your analysis says that -- >> there would be significantly more bang for the buck than extending all the tax cuts. within the botton bar, extending all of the tax cuts, extending the tax cuts and higher brackets is a less effective piece of that because those people would be likely to spend a smaller share.

>> i would love to have your office go back and describe those a little bit more, and if you could give us with some more specificity bang for the dollar invested in terms of these targeted tax cuts. and i would ask you to look at some of the other menus of suggestions that the business community laid out. my point is that we have $2 trillion. that is the last bullet we have not used. getting those resources back into our economy would be of great value occurred >> thank you. director elmendorf, thank you for coming. my question is one of kind of comparisons. over the last two to three years, we have stimulated or spent or printed about $4.5

count what theof you federal reserve has put in and taken out and put in it, taken out, over the past three years. besides the money that the congress has allocated either through tarp or through the stimulus program. so it is about $4 trillion, give or take your the unemployment ra. the unemployment rate as of denver, 2009, was 7.7%. january, 2009, was 7.7%. as of august this year, the unemployment rate was 9.6%. it has been in excess of 9% for over 16 consecutive months.

with the stimulus that we used, can you estimate -- or have you the ability to estimate when we are going to see 7.7% or pre- recession 5% unemployment rate? can you give me an idea? >> well, we do make projections, and you understand the uncertainty. >> i understand the uncertainty. i have been here for 12 years and have looked at all the projections. >> our current projection is that under current law, the unemployment rate would fall back to the 7.7% you had in mind in 2012 at some point. >> 2012. are you telling me that the 15

million part-time or totally unemployed people will be back to work? ofwell, there is a lot churning in the labor force, so that many of the people in the labor force with jobs will lose jobs and those in -- and others working jobs. there is a significant and growing literature on the pact of longer-term debt text of financial crises. in addition to the recessions that follow immediately, the letter shows clearly that economic growth can be week for many years to come. the question about the 5% unemployment rate that erase, we projected going back down to 5%, but other people are

concerned that they may not happen for quite a long time. his tremendous dislocation in the financial system and the economy. >> i have a grandson who is unemployed. he has been unemployed now for eight months. his job is never going to come back. delta air lines used to have 400 flights out of the greater cincinnati airport. they are at 33% the number of flights now, not to ever return to the zero hundred or more that they had. his job is never going to come back. he is going to have to be reeducated and some other type of position. tell me this -- and have seen all your wonderful charts on the

employment, the tax, the changes or the non-changes in the tax code, the expiration of the tax at the end of this year. have we ever been successful in raising taxes to help our economy in a recession? >> not that i am aware of, senator. raising taxes in a recession will tend to borrow -- slow economic rut. that is why we have such a slow growth rate projected for 2011 under current law. >> how do you get out from under that? >> in the short run, tax cuts or government spending increases provide the boost.

the challenge is what happens beyond that and over the medium term and long term unless those things are off done -- offset by other actions, then there is a long-term drag on the economy. >> we talked about debt and other things. we did not talk about it to agency data. the interagency dead. right now we -- to pay our social security benefits, the federal government has borrowed right at $1 trillion out of the trust fund. he had written -- we have istten iou's and there nothing to back it. it means that the federal government has to make good on those. and they do not have anything to do except to print the money.

or raise taxes -- in the way you can pay off that $1 trillion. my question, this is off the wall and the last question, according to the social security and medicare board of trustees, the most recent report, social security is projected to begin permanently facing deficits in 2015 -- permanently. and medicare will become insolvent in 2029. however, if this was not bad enough, the report indicates the social security will begin operating with a cash flow deficit this very year. should we not be concerned about the impact compared to the large budget deficits that this

administration has rejected on my grandchildren and future generations? >> yes, concerned effects of mounted -- mounting debt will be felt by future generations. ofisn't that a transferring what we cannot pay for and what our excesses' are presently to my children and grandchildren? isn't that kind of a wealth transfer or a debt transfer? >> the issue about how large the federal debt is is important at distributional issue across generations. >> bank you very much for your answers. >> thank you, senator. >> director elman door -- director elmendorf, would you

explain the dominant -- the phenomenon that the u.s. government is borrowing more and more money, although the federal reserve is trying to slow down their rates, and why those rates projected well into the future here -- interest rates staying solo? -- saying so low or to wor >> private borrowers are borrowing much less an interest rates reflect the overall balance between the demand and supply of credit. when you think about the decline in private borrowing reflecting and reinforcing the flow of private spending, the federal

government has stepped in and with automatic stabilizers and partly through delivered action to try to boost spending boosting spending is a part of that. those balancing forces with a supply of funds coming in from overseas and domestic savings, and in our forecasts, interest rates rise a good deal over the coming decade as the economy recovers and private-sector demands go up. meanwhile the federal borrowing would be very high and the combination of that demand, we think, will push interest rates up a good deal. that leads to interest payments being unprecedentedly large relative to gnp by the end of the decade. >> do your projections square with the projections of the federal reserve? >> the federal reserve doesn't

release projections over the entire decade. the embassy -- the fomc has released some, and in general they are. they are not idiosyncratic in any way to west. >> the market would give us some idea of what the market thinks about interest rates. that you square the fact 10-year treasury bills are at such low rates? in light of what you just said. >> i think that, again, part of it is the overall weakness in the demand of credit from private borrowers in this country, part of it is the flow of money in this country.

the u.s. market still seems safer to many investors and market overseas. the the part of that is that financial markets seem to believe that you and your colleagues will put fiscal policy on to a sustainable path. when physical -- we released a brief about this, it comes from aulos of that confidence when investor feels that some government of some country is not acting in a way to put fiscal policy in the country on a sustainable path. it is very difficult to predict what sorts of events or circumstances can lead to that loss of confidence. at the moment, investors believe that u.s. fiscal policy will be put on a sustainable path. how that confidence will evolve in response to actions taken or not taken by you and your colleagues, i do not know.

comment, if you to you will, on the wisdom on tax policy, given the fact that in your testimony you said that the national debt is going to amount to 70% of gdp for the next 10 years. and in looking to find sources of revenue, the loopholes that we find in the system now allow multinational companies, and an example that is fresh in our minds is bp, not to receive tax credits -- to receive tax credits that were intended not for oil companies but for manufacturing companies.

do you think that from a policy standpoint -- i will not ask you the political question -- that closing tax loopholes should be a priority in the debt reduction efforts? >> that kind of policy choice has to be with you in your colleagues, senator. the specific tax provisions will have positive or negative attacks on economic outcomes, depending on the provision. i do not want to be generically about them. but i will repeat that a wide consensus of analysts would agree that a tax code with broader-based in come would be more efficient than a test code with a narrow base and higher rates. but the specific provisions that one would change move from one

to the other and we have to look at it on a financial basis. >> before i go on to the next question, i will opine that another example of a loophole is that the tax payers are actually giving tax money to oil companies to encourage them to drill in deepwater. something the oil companies vigorously want to do because of the oil reserves, and yet royalties -- royalty relief, those payments normally paid to the u.s. government when u.s. federal lands are utilized, that those royalty payments were forgiven to oil companies over a

technicality. i do not think a lot of people in america realized that tax dollars -- their tax dollars -- are actually being used to pay oil companies to drill in deep water. i want to ask you about exports, and i want to ask you about the potential for u.s. exports to partially fill this void of the deficit. give us your ideas about the impact of increased exports as a means of production -- of reduction of our trade deficit which would help our overall fiscal outlook. >> i think that if our exports

could increase, that would certainly -- that extra demand for u.s. goods would lead to more production and more employment with firms. that strengthens the economy -- that strengthen the economy would be good for the federal budget. the challenge would be what forces in the world or what policies you might enact would boost exports. that is harder. as you know, much of the rest of the world that import our goods are suffering from weakness in their economies. if they had stronger economies, that would help us, too. we do not control that. the actions that firms have taken over the last few years to raise productivity in this country have been in the short term back for employment, but over time, can make us more

competitive that can be good for exports and employment in other ways. but there are not a lot of policy levers that have an effect on the total amount of exports over the short term period. our projections are looking at what is happening on the world and the weakness in other economies implies that only so " and demand for products. -- only slow growth in demand for our product. >> some states, mine included, the economy is so down in the us because of the housing market. i was curious when talking to senators from wyoming that they are hovering around a 6% unemployment rate. compare that to other states, mine included, which has been in

the range of 12%. and maybe down in the 11% range now. a 11.5%. for the record, i want you to writes how we're going to our deficit situation -- right our deficit situation without stabilizing the housing market. gigot this shows unemployment rates across august. one considers some of the states with the highest unemployment rates are exactly those that have the largest housing booms and busts. one of yours -- your state is one of them, senator. the persistent weakness in the housing market is ongoing and the drag on the economy. the number of houses that started so far this year on a per month basis, much lower than

would be required on a regular basis to help our growing population. the proximate cause of that is a lot of unoccupied houses today. that stems both from the overbuilding that happened earlier and also from the weakness in the economy. people who do not have jobs, who were afraid of losing jobs, who are working part-time jobs, they are much less likely to form their own household then it would they were confident and a full-time job. there is a reinforcing pattern of weak economies and stronger economies. the weak economy his limousine the demand for housing. -- is limiting the demand for

housing. they're not going out and looking for new homes. that weakness in the housing market is then reducing the number of people employed building houses, keeping house prices lower, making people phil porter, and that reinforces the weakness in employment and spending. there some policies discussed to strengthen the housing market. one particular policy getting a lot of discussion in the last few months and that we have an looking into his ways to change what fannie mae and freddie mac do and allow people to refinance their mortgage. there are a significant share of people who owe more on their homes than they are worth. that prevents them from refinancing in a way that they might otherwise refinance, given how far mortgage rates have fallen. another proposal floated by

analysts and advocates to relax their rule that fannie and freddie impose on the refinancing of mortgages. we're looking at this now and our work is in a preliminary stage, but one could improve the cash flow of homeowners by tens of billions of dollars per year for relaxation of these rules of refinancing. letting people take advantage of the decline in irates. there might be some consequences of that for the federal budget, but there are reasons to think it is up fairly effective piece of stimulus, working through the housing sector. >> a corollary to that -- i just recently had a major car dealer to get in touch with me. it is typical of what is happening in the housing market as well, only in this case it is

small business. the bank has revalued properties upon which the car dealer has mortgages. the bank is unyielding. they are saying, says the value of your property and real estate, in this case the dealerships, has come down, and your mortgages here, you have got to pay off. in this economy, car dealers are not doing particularly well, although it is getting better. they do not have a lot of cash hanging around. here, they are looking at the possibility of a foreclosure on a major good business that has never missed a mortgage payment and but for the uniqueness of this, in the state up there,

those dark colored states, where the property values have dropped out of the bottom, but for that uniqueness, this would be a taxpayer paying the bills and paying the mortgages. your comments. just right to're note that there are a lot of small businesses that are facing trouble obtaining the credit that they need to continue. senator warner mentioned that he large businesses are healthy financially. they are sitting on assets and not spending. much different for small businesses. one looks at the patterns of layoffs and hiring across large and small businesses and large businesses have resumed hiring, and small businesses have not. the lack of credit and also uncertainty about the state of

the economy, and i would put that first in the list, the uncertainty and the difficulty of getting credit, that has restrained the hiring small businesses are doing pretty and i come back into the labor market looking for workers the way that large businesses have. i do not have a magic wand for the uncertainty and weak demand. >> could you comment on the fact that we have just passed and sent to the president and major small-business lending bill? it had a series of tax credits for small business, but it says about $30 billion lending facility, and under the terms of legislation, that has to go through help the community banks to the in be let's -- to then be lent, and it is defined

in the legislation, to small businesses. you have any prognostication on how low will affect the future? >> i do not think i really do. we think that the money will be up.en the healthy banks will come to the federal government for this capital. in that sense, we think the program will encourage the banks to do business with the government and then later with small borrowers. but we have not looked at the overall effects of that, particularly the extent that they will be finding ways to take credit for more lending to small businesses versus the way that they give out credit. i think that is not so clear and we have not looked at that policy. >> it must not have been cbo

that made the estimate that the $30 billion lending facility would produce $300 billion of loans to small businesses. >> well, it comes from the requirements that banks have. that $30 billion can support $300 billion of loans. that is the challenge of trying to encourage certain behavior and distinguish between things that are really confused by the legislation versus things that may have been going on anyway that are allowed to count. we have not looked to my knowledge at that part of the question carefully. we did think the money will go out and follow the small business loans. it will be an incremental effect on the economy that we have not studied. >> to -- does any of the staff

have any questions? ok. director elmendorf, we are starting a series of votes right now and the chairman has asked me to adjourn the hearing. we want you to know how much we appreciate your public service, and thank you for this testimony this morning. the meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] contentn's local vehicles are traveling the country visiting congressional districts as we look at some of most closely contested house raising living in up to the midterm elections. -- a leading up to the midterm elections. did in the second congressional

district of virginia is in the far southeast corner of the state. it takes in virginia beach, the largest city in virginia, and parts of norfolk and hampton and an area known as the eastern shore, primarily farmer -- farming and tourism. it has some manufacturing but the dominant industries of the united states navy and tourism. the oceanfront is a very vibrant tourism industry. that is a source of income. the u.s. navy and related enterprises is its largest business, i would say. probably for this reason, this particularly congressional race is of high race -- high interest to republicans and democrats. republicans tried to keep him in office and they were not successful. since his election, he has been subject to a steady stream of blogs, e-mails, reaching out to

the public and the blasting almost everything that he does. because he is a freshman, legislative expert will tell you the best time to unseat an incumbent is during the first term. they have not establish themselves in. they see him as vulnerable. the republicans want to take back the u.s. house of representatives. this is one of those districts where they think they have a place to do that. >> that clear impression is that i am absolutely confident in the capabilities of our military forces and our civilian forces to successfully run a counterinsurgency program in afghanistan. my other impression is that i have a serious concern about the fact that our success here is largely dependent on what happens on the other side of the border in pakistan, where our military forces are not really present. >> this year's congressional

race, glenn nye is facing someone running for the first time. he is a self-made multi military -- multimillionaire. there is an independent candidate who has a long career in the military. glenn nye, who is a native of the area, and he has spent part of his adult life in the military working overseas. when he took office, the democrats were control the house and they gave him a charge -- a choice spot on the armed services committee, veterans affairs, and small business. they all have a direct impact on this area, both veteran issues and the military. he is shown himself as a

moderate and congress. he voted for the stimulus plan but he voted against the health care plan and also against the cap and trade environmental legislation. he voted against the federal budget last year because he said it was too expensive. that is how he can -- campaign, but he drew some fire from democrats. scott rigell has not run for office before but he is actively involved in the republican party. is a strong donor to the party. he has the resources to do it financially and he is back many candidates. among his personal friends is the current governor of the state, who campaigned for him earlier, even in the primary. rigell had to win a primary against five other candidates. he has been campaigning since a

year ago. he set aside its dealerships, he turned them over to an executive, and that's been his job. he has his own significant wealth and he has put some of that in this. is contributed more than a million dollars to his campaign, and his staff has said that he will not be outspent by his opponent. >> we read in the primary coming up to virginia beat with everything that we owned in a u- haul trailer. that is true. i came up. as a privilege, a real privilege, to go to the university and start a business in a recession. we lay down solid principles in our business of leadership by example. it was just a way to show leadership by example. you said a servant mindset. that was the same principle learn in 1978 that coast off the

south carolina, they ever got it all planned for you for the next three months. >> rigell is that conservative, economically and socially. he opposes the health care plan. he says he would join efforts to try to repeal it if he is elected. he wants to loosen business regulations. a light tap the business community on leased from a lot of regulations. he feels that would help the economy grow. he wants to appeal and lower taxes, particularly capital gains. he is also a strong supporter of the military and veterans' issues. the third campaign is kenny golden. he was running in the primary last june, but backed out months earlier to run as an independent candidate. before he dropped out and before

he was even a candidate, he had been head of the va beach financial part of the republican party. he is running on his service record. he had decades of service in the u.s. navy. he has been very active in local politics. he does not have a lot of campaign funds but he is actively campaigning and he has a group of people working pretty hard for him. he does not have the funds but he is running full time for the office. he says he does not want to be a spoiler, he wants to win. kenny golden, by stepping away from the republican party, has upset some republicans who feel that he should not be doing this. he should back the canada. but he has his own supporters, many of them republicans who feel that he have the right to run. >> this is the last vestiges of the republican party, and i kept

this because, this is a republican symbol from south africa. my friend from south africa brought me this back. the only vestige i cap. and i did keep one of these, which is the poster we had made up for mccain and palin in 2008. these were made up for $1 apiece. the f-15 hundred of them made and they went in a couple of hours. they were gone. and we actually 14 mccain and pale and here in virginia beach. -- we actually won for mccain and palin here in virginia beach. >> it president obama carried this district, then his policies

are and joined in this debate. glenn did not vote for the health care bill, but they want to use that against them. in some way, it is viewed as a referendum on the president's policies. it may say something about obama is chances in virginia in 2012. >> our local content vehicles are traveling the country, visiting communities and congressional districts as we look at some of the most closely contested house races living up to the midterm elections. former reformation, go to -- for more information, go to c- span.org. >> coming up, a hearing before the senate hearing.

president obama holds another conversation. after that, we will look at the comments of the director elmendorf on the economic outlook. one of the washington journal," will talk about tax rates with bill pascrell. republican representative dan lungren will take your questions about the gop pledge to america. and we will talk to jaydee hanson from the center for food safety. "washington journal" is live on c-span every day at 7:00 a.m. eastern. >> this weekend, is for the reality behind science fiction, the vision of einstein, and the fundamental forces of the universe. this man is written more than six books including his latest,

"visions of the impossible." join us live sunday at noon eastern on c-span2. >> this weekend and through december, listened to landmark supreme court cases on c-span radio. >> the record indicates that no time during the interrogation and prior to his confession was he advised of his term credit right to remain silent, his right to counsel, or to consult with counsel. >> miranda v. arizona, this weekend. online at c-span radio dot or. now hearing on defense secretary gates proposal to spend the budget more efficiently. some members of the senate armed services committee were critical

about how of plant cuts were reached. jim webb was particularly concerned with the decision to eliminate the joint services command in his own state. this is a little more than two hours. >> the committee meets today to hear testimony about the efficiencies initiatives announced by the secretary of defense in his may 8, 2010 speech at the eisenhower library and his august 9, 2010 speech at the pentagon. we're pleased to date have that is secretary of defense bill lynn, undersecretary of defense for acquisitions, technology, and logistics ashton carter, and the vice-chairman of their 20s

of staff, general james cartwright here today to address the important issue and we thank you all for being here this morning. on may 8, the secretary stated that the defense department must take a hard look at every aspect of how it is organized, staffed, and operated -- even -- indeed, every aspect of how does business. in each instance we must ask, is this respectful of the american taxpayer a a time of economic and fiscal arrest? and second, is this activity or arrangement the best use of limited dollars, given the pressing needs to take care of our people, win the wars we are in, and in based in the capabilities necessary to deal with the most likely and lethal future threats? i share the secretary objectives of reducing "duplication, overhead, and excess in the prince -- defense enterprise and instilling a culture of savings and restraint across the department of defense." on august 9, the secretary

followed up by announcing a series of specific cost-cutting measures, including a reduction in funding for service support contracts by 10% per year for three years, at reason the number of osd, defense agency, and combatant commands. physicians. reason the number of general officer, flag officer, and ses positions, a review and reduction on the number of reports, studies, and it buys reports, new limits on ses positions and support contractors for dod intelligence functions, and the elimination or consolidation of several defense commands and agencies, including the assistant of such projects assistant secretary of defense for network and information integration, the business transformation agency, and the joint forces command. i agree with the secretary on the rapidly expanding force of service contractors who support the department. too often in the past, with constrained the number of dod

employees without placing any limits on the number of service contractors. as a result, we have more than doubled our spending on service contractors over the last decade, while the size of the dod civilian workforce has been largely unchanged. rather than saving money, we have lost badly needed talent, expertise, and institutional knowledge in the government and given contractors more responsibility for the performance of critical government functions than is appropriate. i believe that the acquisition efficiency initiatives announced by secretary carter are consistent with the objectives of the weapons systems acquisition reform act, and other recent acquisition legislation initiated by this committee. although i have concerns about some of the details, i am particularly pleased by secretary carter's emphasis on open systems architectures, fixed-price incentive contracts, increased focus on affordability

and program schedule, and improved management of contracts for services. i hope that he will place an equal number of -- an equal emphasis on the implementation of the acquisition or format's requirements for developmental testing and other systems engineering's. at the same time, i believe that the secretaries initiatives deserve close scrutiny from our committee. the secretary has a legitimate objective of eliminating or consolidating repetitive and overlapping organizations within the department, and his determination to cut costs and produce efficiencies is commendable. it appears that there was inadequate analysis and inadequate openness in the procedure which preceded his august announcement. for example, we need to be sure that the personnel restrictions announced by the secretary do not undermine our ongoing efforts to rebuild the department's acquisition workforce.

study after study and hearing after hearing has shown that our acquisition programs cost billions of dollars more than they should, in significant part because our acquisition workforce was dramatically cut in the 1990's, and the longer has the capacity to perform its essential functions. as the acquisition advisory committee reported four years ago, our failure to fund an adequate number of acquisition professionals has been "penny wise and pound foolish," as it seriously undermines the pursuit of good value for the expenditure of public resources. similarly, we need a detailed accounting of the functions performed by the organizations that the secretary proposes to consolidate or eliminate. for those functions that will no longer be performed, we need to understand why they are no longer needed. for those functions that are still needed, we saw -- we need

to understand who will perform them. we need to understand what resources will be transferred, what resources will be eliminated, and what the real savings are likely to be. i am disappointed that more than six weeks after the secretary's announcement of these measures we have received only the roughest and most general and permission about the department's plans. i fully understand the frustration of the senators from virginia and others about their inability to obtain a more complete rationale and a plan for the pentagon's proposed actions. the secretaries intent to reduce duplication, overhead, and excess in the department of defense is commendable, but his actions should be supported by an open process which includes detailed analysis and full consideration of opposing views. so we again think our witnesses for their presence here this morning and we look for to their testimony. and i call upon senator mccain.

>> thank you, mr. chairman and the distinguished witnesses for joining us this morning on for their service to our nation. as we know, on august, secretary gates announced a series of initiatives intended to reduce excessive overhead costs and to improve the efficiency of the department of defense. as part of his initiative, secretary gates also tasked dr. carter to improve the department's buying power through the way it acquires critical goods and services in order to stop runaway cost growth and program delays. look forward to hearing from dr. carter about the initial progress he is making within dod and with the defense industry partners in this critical area. i think that both of these initiatives are coming at important times. we have to find ways to operate government more efficiently and at a lower cost to taxpayers. if secretary gates understands the tough economic and fiscal situation facing our nation, and i support his strongly his

efforts doing everything possible to make every taxpayer dollar count. i want to emphasize that the intent of this effort is not to reduce the department's top line, but to find savings over the future years of defense programs to invest in critical force structure and modernization priorities. we obviously cannot afford to short change our military and we must maintain commitments to a defense budget that supports the full range of our national security commitments. this committee has -- consistently supported the enormous effort to reduce the massive over said -- overhead costs in order to be able to read more resources to our fighting forces and weapon modernization. the eight initiatives are clearly aimed at addressing the exploding growth in service support contracts and overhead personnel. i look forward to getting more permission on these proposals in the next few months in order to fully understand the scope of the anticipated savings and the

impact on the missions and operations of our forces. one proposal that the secretary of recommended is the elimination of joint forces command. i strongly support the proposal. on the issue of the elimination of business transformations agency, i would be interested, secretary carter and betty secretary lynn, will we ever have an audit of the defense department? i think that would be one major step forward. the secretary also challenged the services to find more than one under million dollars -- one under billion dollars in overhead savings over the next five years. if we want to make sure that those reductions are -- that do not impact long-term readiness over time. i support the secretary decision to address the personnel growth in osd, defense agencies, and combatant commands, and a freeze

at 2010 levels the number of civilian senior executives, general and flag officer and political positions. dod management deserves a rigorous review to ensure it has the proper mix of civilian and military personnel with the right ranks in the right positions. i also say i support the secretaries decision to eliminate the second engine for the joint strike fighter. on the subject, i would point out to the witnesses and my colleagues that the joint strike fighter is another example of the terrible cost overruns associated with weapons procurement, and the reasons why we not only need to make, hundred billion dollars in savings, but we need that fundamentally reformer acquisition system. correct me if i'm wrong, mr. lynn, that the joint strike fighter cost more than its original estimates? >> we cannot continue down that

path. it is not affordable for the american people and they deserve better. getting back to the subject at hand, i look for to hearing from the witnesses. i know every member of this committee looks forward to working with you to try to bring about these proposed changes and i think this is a bold initiative by the secretary of defense. banking, mr. chairman. >> secretary lynn. >> thank you, mr. chairman. distinguished members of the committee, thank you for the opportunity to prepare for you to discuss the department that efficiency efforts. i like to put the full statement in the record and summarize it here briefly in an oral statement. during his speech at the eisenhower library, secretary gates outline how to modernize america's key military capabilities at a time of war

and fiscal pressure, the department would be to finally change the way that it does business. to sustain the current force structure, which we must do, it requires the equivalent of real budget growth of up to 3%. the overall defense budget is projected to rise in real terms by about 1% based on a inflation assumptions. the department cannot and should not ask congress and the american taxpayers for more increases in any year unless we have done everything possible to make the dollars we already have account for more. the bridging that gap requires: the department's massive overhead costs and structures in detail and directing them to our fighters. this is not an effort and senator mccain indicated to reduce the defense budget. this is about shifting

resources and priorities within the existing topline. cap requires reducing the department's overhead costs by targeting unnecessary excess and duplication in the defense enterprise. when need to ensure that the department is operating as efficiently and effectively as possible for the secretary has directed us to take a hard look at how the department is organized, staffed, and operated. how we can plan and streamline the organization, reduce executive and flag officer billets, and the staff apparatus that supports them. shed overlapping command organizations, and reduce the role of support contractors. since the speech, dod has embarked on a four-track approach to a more cost

conscious way of doing business. and he briefly touched on tracks 1 to 3 and then spend more time and try four. the secretary directed that the military service by more than $100 billion in overhead savings over the next five years. the services will be heavily keep any of those savings they generate to invest in higher priority warfighting and modernization needs. if this effort is now under way and we have begun to review the services' submissions. the 2012 budget will reflect the results when it is submitted to the congress in february. on track to, the department is seeking ideas, suggestions, and proposals regarding efficiencies from outside the normal channels. we of solicited inputs from experts from think tanks, from industry, and from the department's extern boards. if we of also establish a at dod suggestion program to solicit our own employees ideas.

the department is willing to consider any reasonable suggestion to reduce our overhead. on track 3, the department is conducting a broad review of how it is organized and operated to inform president obama's 2012 budget process. this track three review focuses on the effective long-term, systemic improvements in several key areas of dod operation. dr. carter will address these in more detail in his opening statement. with regard to attract four, the secretary announced on august 9, specific areas where the department can take action now to reduce inefficiencies and overhead. these steps are intended to jump-start the reform process ahead of and separate from the normal programming and budget submission process. in particular, they represent the secretaries lead efforts to work dews headquarters and support bureaucracies, military and civilian alike, that have

swelled the cumbersome proportions, growth overall line on contractors, and become accustomed to operating with little consideration of cost. they will all result in measurable savings, but an equally important purpose is to instill a culture of cost consciousness and restraint and the department, a culture that says priorities, makes road tradeoffs, and separates unrestrained appetite from genuine requirement. there are eight initiatives in track four there reduce support contractors, headquarters personnel, senior executives, and flag in general officers. try four also includes efforts to reduce boards and commissions and intelligence organizations. finally, the end of several organizational establishments. the last decade has seen a significant growth of new offices and organizations, including tw of new combatant

commands and supply agency. the secretary concluded that joint forces command, one of the assistant secretary, but its director, and the business transformation agency no longer effectively satisfy the purpose for which they were created. some missions and tasks each performer maine bottle that can be managed effectively elsewhere. other functions that each perform our are already performed elsewhere or are no longer relevant to the operation of the department. we are mindful that the recommended actions will have economic consequences for displaced employees, their families, and their local communities. the department is committed to work with the affected communities and will devote significant attention to the challenges employees will face during this transition.

we have asked dr. clifford stanley to directorate responsibility for this part of planning to ensure that we take the steps necessary to help impacted employees with assistance and support. in closing, mr. chairman, i understand some of these reforms may be controversial and on welcome to some people both inside and outside the department. no doubt many of these changes will be stressful, even ranging from -- wrenching, for the employees involved. i was asked you to consider this reform agenda in terms of our responsibilities as leaders to set priorities, and move resources from where they are needed least to where they belong. america's fighting forces, its investment in future capabilities, and the government and women in uniform. that is what -- the need of our men and women in uniform.

that is what we're proposing and we urge your strong support. thank you for the opportunity to discuss this initiative with you today. >> which is crisis, secretary lynn. secretary carter. >> distinguished members of the committee, i am grateful for the opportunity to testify before you today. the piece of the initiative that secretary gates and tepid is secretary lynn have charged me with organizing, which concerns the $400 billion of the $700 million -- $700 billion contract which is contracted out for goods and services. the other at $300 billion is spent within walls of the department of defense, on salaries, benefits, and those who work for the apartment in the buildings and facilities within the words. the other $400 billion is contracted out. roughly equally between goods

and services. we estimate that by targeting efficiencies in the way that these goods and services are acquired, we can make a significant contribution to the overall $100 billion goal the secretary gates and secretary lynn have laid down for us over the next five years. to put it bluntly, we cannot support our troops with the capabilities they need unless we do so. our challenge is sustain a military war, take care of our troops and families, and invest in new capabilities all in an area where the defense budgets will not be growing as rapidly as after 9/11. we identified savings last year by canceling unneeded programs and we need to do more of that. now we must also find savings within programs and activities we do need.

and that we do want. the department as a chief what economists call productivity growth. what i would call, learning to do more without more. delivering the program the department needs and the war fighter need for the amount of money we are going to get. you think about a computer -- you buy a computer every year, he gets a little better and cheaper, and why is it that on the contrary, as senator mccain has noted, we come before you with exactly the same product and it cost you more? that is not productivity growth and that is what we need in the sector. we laid out workforce describing how the department can achieve better buying power and contracting activities, and on september 14, after several months of intensive work within

the department, with our program managers, systems, senior logisticians, and so forth, and with our partners in industry who accomplish this worked for us, and outside experts, i issued specific guidance on how to implement that mandate. i like to submit that guidance, the june 28 mandate as well, and all the materials that accompanies them, for the record and supplement it briefly. we are now moving vigorously into implementation mode and taking each of those 28 items that were in the guidance and making them happen. let me if i may just summarized the high points of those points of guidance in five categories. and with specific data examples, see you some idea of what we're trying to get at.