the debt limit ceiling been reached probably in march, april, or may. it is hard to imagine it being done with one party alone out there on a limb, given a larger public mood. that may lead to something very difficult i want to end on an upbeat note, which is i can imagine an optimistic scenario. i can imagine a larger agreement on the budgeting and economic stimulus that would include an infrastructure package and may be in the form of an infrastructure bank combined with tax cuts that would include possibly a payroll tax holiday and some of the other breaks for businesses that would be accepted as a stimulus and it might get some bipartisan support. along with possibly the promise

of more sweeping tax reform a little bit further down the road. we know that the incoming chairman of the house ways and means committee, and the democrat that chaired the budget committee has engaged in some conversations over tax reform. just as we had in a very unusual situation, there is really a policy made in the second year term of the two-year president. a kind of tax reform that would either broadened the base or lower the rates, or that might move to a very different form of taxation, away from payroll and income taxes, to either a consumption tax or something else could be on the cards. that is not out of the question. but the prospects remain quite slim, and the prospects of a nasty couple of years is much

greater critical thank you very much. i assure all of you have questions it. i want to ask one question. john painter give a speech a few weeks ago talking about reorganizing the house. -- john boehner gave a speech a few weeks ago talking about reorganizing the house. >> it was a speech that said we did not run things well when we were in charge. i am determined to make it better, to open it up, to have many more amendments on the floor, to have that sunshine in the spotlight, insisting that it would not bring up and the bill that does not have 72 hours advanced notice matter how difficult. he also noted that he was not sure that his colleagues would be amenable to many of those things.

he is looking at some significant committee reforms, which are long overdue. i think it was -- it was not just some tactical maneuver, but utterly sincere. it is also important to note that when he got to the questions and answers, one of the first questions was about the health care issue, and he pledged to bring to the floor something that would appeal the billions of dollars in medicare cuts that are a part of the health-care package. that is moving in somewhat dangerous territory. if you get a broad agreement on a fiscal disaster ahead, you are basically taking medicare off the table. it is also saying i am in the fiscal conservative. that is not a good way to start a discussion about fiscal responsibility. >> thank you, norman. we will now turn to questions. >> georgetown university.

i think henry or john -- maybe henry could answer this. let's suppose the economy turned out the way obama and joe biden thought it might. let's suppose we had 7% unemployment. let's suppose there was a net gain of 2 million jobs. i know that is an impossible scenario. but suppose that had happened, would all of these shifts in public mood and opinion and the white working-class moving the other way, with that have happened? is this election really about the state of the economy and all of the factors you were talking about in respect to public opinion in public mood? the implication would be that it

would go away for two years if the economy does recover. >> i am not sure it would have been a plus 64 seat gain, but i think it would have been a significant gain. we have had examples before where large centralization in the case of a growing economy, with a rapidly growing in the mid 60s or recovering quite rapidly like in the early 1990's. the white working-class reacted in the same way even though those results were not being implemented in the background of a dramatic recession. i am sure the economy had something to do with it. >> i am a little different than henry on this. one is the national -- the natural tendency to go against the president in power. i think the economy was the

biggest component. i agree with henry that the third component is the ideological one, larger government, the obama administration moving too far, too fast, but some of those concerns might have been lessened with a better economy. i think it would have been hit a moving in the republican direction, not a tiny move, but i think the economy was the larger part of this. the point of, from now until two years from now is a long time. the conditions can change. they might not. if not, barack obama is in big trouble. >> i guess i would say that the big government component is the larger component. public opinion was turning against obama care by august 2009.

we saw protests and also the first polling showing republicans and head in the generic ballot questions. i think that the expectations that the economy would recover more than it turned out to do, and when you started the economy showing weaker signs that show up in statistics in the second quarter of 2010 and then the third quarter, that played some role. but that the people were turning against obamacare expectations for the mcconaughey or higher and more positive than they turned out to be since the middle of this year. >> i just want to add one note. after the 2008 elections, right after, we were saying 2010 would be a good republican year.

the pendulum has swung widely twice in a row, and we have not seen that two elections in a row since 1930, 1932. it was only natural that it was going to swing back. the question was, was it going to swing back like it did with ronald reagan, or whether it would be more like bill clinton? it turned out to beat bill clinton plus -- it turned out to be bill clinton plus. >> in the front. >> norm, i don't know if you know this. there are three or four senate seats that get seated prior to september -- i am sorry, prior to january.

i have illinois, colorado, west virginia, and florida. >> floor that is not on that list. colorado was going to be the same, but it is not as of now. you get one shift basically, in illinois. >> we hardly knew ya. [laughter] >> it does not make that much difference it. it could have made a significant difference if all of those seats switched to the republican side. so, you don't have enough on your own to overcome filibusters'. it is not like they are going to do stuff in that fashion and the house right after this election. it ends up not mean very much except we see a few new faces

it. >> do you think it will be able to get anything done in the lame-duck? >> logic would suggest that you do the tax issue both for tactical reasons and the policy reasons. in a fragile economy, even for a few weeks for taxes to go up dramatically and a significant number of people who will die in january and february -- i don't know if you saw the extraordinary statement of the congresswoman from wyoming last week, saying that some of her constituents said they would pull their own plug before january. [laughter] which is -- it will get your attention, let's put it that way. logic in this case does not necessarily work given the larger political dynamic. there are larger compromises you could reach that would kick the

can down the road. i think it is less likely -- i think it is more likely than not that they will do it. saying that these were people who were hijacking the policy process after the voters had spoken. if you get that kind of a drum beat, it becomes much tougher to cut a deal. >> john? >> i am looking for a lame, lame duck session. the one exception might be the start treaty. the tax cuts, yes, in some ways it would be responsible to deal with them before they expire, but if they expire, there will be some problems how we print the tax tables, but we cannot

put the genie in the bottle again and put them retroactively where they were. i think an extension for maybe two years is probably the most likely outcome. right now, the president has moved a little bit, saying temporary extensions for the lower income tax cuts. my guess is that the final resolution will be temporary for both. >> jennifer, i cannot see around the corner. are there any questions in the back? please wait for the microphone. >> thank you. i am with the american conservative magazine. what happened to the anti-war movement? it was so big in the last election. it is totally disappeared. no commentary has been made at

all about where it went or if it still exists. >> i think it still exists, and it is mostly on the democratic side of the aisle. i remember looking at the exit poll question about what you think about the war in afghanistan. the majority of democratic voters are basically against the war, against the current policy in afghanistan, and a pretty large majority of republicans are favoring it. i can envision the possibility of a coalition imagined on trade of the obama administration plus republicans and some democrats could prevail. the suggestion that we could -- could we have a challenge to barack obama in the nominating process in 2012? i always thought it as a daunting thing for anybody to

contemplate taking on the first african american president. when you have a series of democratic contests where the average african american percentage is around 20% to 25%, those are numbers that would generally the terror a clinton challenge. we have had challenges from the anti-war movement, and you have a couple people now that i think are conceivable challengers. you have the man who soon will be an ex senator, ross fine gold it pretty >>. >> 61% majority of democrats disapprove it. that was the only foreign policy question in the poll. >> senior fellow, discovery

institute. i saw an article claiming that 9% of the voters a factored into the bomb plot -- i wondered if you saw any data or percentage on that and whether it had an impact on the election. >> i don't recall seeing that question. michael, do you recall seeing that question? >> was your vote influenced by the richard was the terrorist thing? it was at the very end, i think. something like 60% said they were. those that said they were intended to be more republican than those who said they were not. i am not sure i take the responses to that question very seriously.

you could ask people if it were affected by the weather on monday and tuesday. i would not indulge in much interpretation on the basis of that question. >> i have two questions. michael, you mentioned there were 13 states where the republican power structures might be important in redistricting, and i understand the seven seats will be shifted in the house from essentially democrat state's two republican state. i wonder if you could quantify a number where it would work. you were talking about the freddy krueger family moving in a prett. are there any incoming senators that you want to warn us about? >> as i recall, my estimate is

depending on weather in new york uses two seats or one, and florida. basically, the obama 2008 states will lose six or seven house seats. interestingly, texas is projected to gain four seats. texas has been the economic leader of the united states in this decade. california is projected to gain zero seats. that will be the first time it was admitted into the union that it has not gained seats off of the census, showing the economic doldrums that california is in despite substantial emigration. those are the projections.

there are elections, those of us who remember, 10 years ago in which six the electoral votes can make a difference it. whether or not 2012 will be one of those, we do not know. >> here is a factoid that may described the shift that we see in our politics. we have a new father-son team in congress, rand and ron paul, replacing ted and patrick kennedy. that may reflect the shift in our politics. in this case, the younger one is in the senate, which is interesting, too. i think you have a couple of people who might decide that jim is their role model. i have been more skeptical about the speaker of the house in florida who i suspect is considerably more pragmatic.

there are 10 republicans up in the class of 2012. they include people like warren hatch and scott brown and olympia snowe and bob corker. they all watched very closely what happened to bob bennett, li-sao rakowski, and many of them do not have write-in provisions in their states. they are going to be very cognizant of the fact that if this turns out to be a couple of years with a cooperate -- where they cooperate, that may spell real trouble for them. i think you are going to see -- warren hatch is not going to talk much about ted kennedy.

ain't nobody going to get to my right this time around. i think you will see that magnet pulling them away from cooperation. >> there is a question in the back. then we can have the panel answer. >> henry paulson mentioned provincial conservatism. there is going to be a big push to repeal obamacare. would you recommend that? what form would you recommend it taking? the second question would be -- this is a divided government now, like in the u.k. >> let's take this question, too. >> frank fletcher. other than the housing market, it is not deflationary, but

inflation. the trade deficit, the public deficit, influencing that. the decision is whether other countries will treat the dollar as a reserve currency. all would be factors in the potential hyper inflation, which we have never experienced. the most critical factor in my view would be the behavior of the federal reserve and the promiscuous printing of money. is there an awareness of this among republicans? how do you rain in the behavior of the federal reserve? >> with respect to clark's question, i think the base is demanding a vote to repeal obamacare. this is one case where you have half of the public behind you. i think that is not something on its face that will cause problems in the short term. the more important question is can they developed a pragmatic,

conservative plan to deal with health care? republicans in congress have tried to shy away from that, and as a result, the health care reform bill that was passed. that is going to be the litmus test, whether or not we are going to have a pragmatic conservatism that tries to take advantage of this it. your second question was it? >> [inaudible] >> i think there are a lot of things going around world wide. a very interesting column was written about the abandonment -- the decline among parties worldwide and the result of the working class deserting them. in european countries, it takes different forms. you see rises in almost every

developed country of the sentiments, what we call the progressive left here. here, it is the rise of factions within the democratic party. that is the saint phenomenon working itself out in different ways. i think what we are seeing is a demand for reform but not a repeal of the welfare state, people recognizing that we cannot continue to promise things we do not produce, but at the same time there is not a strong constituency even in this country for a return to the pre- new deal system of economics. >> i should tell you that i once saw a poll that showed more americans bought the federal reserve was a fine, kentucky bourbon. >> starting off where henry was talking about, we are in a

situation where pragmatism and prudence may council what would seem to be rather radical measures. one looks at what the government in britain is doing now, which involved 25% budget cuts too many departments and a reduction of 490,000 public sector jobs. i think some states will be faced with a similar scenario. it is not something that a middle of the road with think is the best thing to do. certainly not the continuation of the status quo. as for the federal reserve, the incoming republicans are aware of the concerns about hyperinflation -- my guess is that most of them watch fox news. if you have watched it lately, you will notice there are a lot

of advertisements for gold. [laughter] it used to be about getting your home refinanced. now it is gold. i can repeat the text. i think the concerns that seem to be prompting interest in the market for gold are familiar to incoming republican members of congress. >> we are supposed to finish up at about 1:30, so we will take a few more questions, and then the panel can answer them. starting here. >two in the back. >> you have all spoken about the importance of the big government issue, ending the democrats' majority. i am wondering how big a risk this poses to the republican

majority. if you look at the house republicans pledged to america, they say their biggest goal is to reduce spending and the deficit. but if you look carefully at how they say they are going to do that, there is not much specifics, with defense and entitlements off the table. if republicans do not achieve much in the way of actually reducing spending and the deficit, how big of a risk with this be to their new majority? >> there are two questions back .ere and their critic >> how do you see the influence of the tea party candidates in the new congress, especially in the house? what do you think about kids like michelle black man who wants to run for the republican conference chairman -- what do you think aboutmichelle baucman

who wants to run for the republican conference chairman? >> do you think that there is any chance that the republican house would consider an investment in science and research differently than other funding? will investment funding be considered any different than other spending? >> let me take a crack at some of those. i am a little bit of a skeptic about substantial cutbacks in funding, in a general way. a part of it is because every time you try to pin anybody except paul ryan down on specifics, they dance completely away from it. they do a better job moving out of the corner then mohammad

alley ever could have in his prime. the focus here is on two things. it earmarks, eliminate them all, and, boy, you have probably saved 3 drops in the ocean when you look at spending. if it ever took hold, it would last only until the next hurricane or oil spill or other disaster. and, i think you are going to see a public backlash anyhow. a lot of people are thinking you could cut out that waste, fraud, and abuse, and deficits would melt away. when you get the specifics, it does not work that way. if you start by saying you are going to eliminate the cutbacks in the growth of medicare, it does not take you very far. you have to be a skeptic about that. a word or two on the tea party.

it just looking ahead as we speculate, we may be setting things upper for what could make the most interesting republican presidential contest in our lifetimes in 2012 because i can see a number of people stepping forward, starting with sarah palin, and others, who channel the anchor which has now propelled many of those candidates into office about democrats in washington, reflecting instead on the weak- spined republican establishment figures who kept them from getting all of those goals that they should have achieved and that the public had given to them over the course of this next two years, which in the practical world is not going to happen. that might be enough unless there is a radical change in the

republican nomination process, to propel somebody that does not have wide, popular support especially in the independent group ahead. that struggle is going to be a particularly interesting one. you have members of congress that have attained great fame and fortune by playing off some of those things. that will be one of the most interesting things to watch. >> i would hold out a little bit more optimism for a non it the party conservatism because of the way the system is structured. traditionally, a couple of states have backed the last conservative of candidates and has given them momentum. i would find it odd if there was not some more moderate

conservative who would take advantage of that the way john mccain did in 2000 to build a national identity for himself, given the deep party rhetoric that the media will be covering. pragmatic conservatism and needs to have an answer between accotink and maintaining -- pragmatic conservatism needs to have an answer between cutting and maintaining. the challenge of conservatism is to come up with an answer that is true to conservative principles but recognizes the need to govern seriously and make the choices that norm did and do it in a way that reinforces principles of liberty, opportunity, and family. >> i think on the tea party

movement, i imbalanced -- i think balance has been a bigger advantage of the republican party. when you get millions of people or hundreds of thousands entering into political activity, many of them will be good, solid citizens who turn out to have some political acumen. you also have a certain number of people who are or can be characterized as whackos or weirdos. i think the defeats of the share an ankle and can block in states where -- i think the defeat of

sharron angle and ken buck. christine o'donnell in delaware as well, losing by a wide margin, it may put a little bit of a damper of the insistence that you must also -- always have the most radical candidate or fire out policy solutions because they illustrate that you pay some price for that. many people in parties and in primaries, both democrats and republicans, in making choices often have to balance between getting a candidate who represents their views more closely and one who has a better chance of winning. different people make that balance differently as the voters. i think this might have those, particularly sharron angle,

it may put a damper on that. on the fiscal issues and so forth, norm is right to point out that if you want to have -- if you want to solve these fiscal problems, you are talking about major moves that paul ryan and some republicans who have endorsed him are contemplating in a serious way, which most politicians want to avoid it. that made her loss to having to face these and come up with things -- that may hurl us to having to face these and come up with things. i think that california, illinois, and new york state governments may present us with something like new york city presented us in 1975, a very

visible collapse of public finance. >> there were some other questions in the back, i think. right here. there is one in the far corner. behind the pillars. >> if jim and that faction is successful in bringing certain policies to the right, do you envision -- obviously it is hard to imagine the left sitting idly by, but do you see that as an answer to that tea party faction? the don't see that at congressional level much. if you look at the caucus now, a lot of conservative democrats have lost.

at the presidential level, i think barack obama has to worry about a challenge from the left especially regarding the anti- war movement. his decisions on afghanistan in 2011, they might work out. he might be able to go to that place where he said he would begin producing troops in 2011, please his left, things are going ok. but it might not. that is a dangerous spot for him. that is a place where you might see a challenger from the left. i don't see a lot of congressional candidates being challenged in this round. maybe down the road, there is room for growth on the left, but i think it is a couple of elections away. >> the tea party could be a gift to obama in the sense that some of the investigations against clinton rallied his base.

with what he did on crime, welfare -- it was the enemy of my enemy. it might actually help obama who has problems over afghanistan, don't ask don't tell, same-sex marriage, potentially on trade and a whole host of other issues, not getting a single payer in the public health care option plan. >> i did see a challenge in 2010 with the unions in arkansas bankrolled the challenger. he was almost successful in that primary and nearly won the runoff. then, blanche lincoln was defeated by an unambiguous margin. the lesson i would draw is that no democrat was electable to that seat.

the left may draw their conclusions, and the union movement still has a lot of money with public employee unions pumping it in and being supplied by taxpayers with that money. so they have a desire -- we may see other challenges despite the apparent futility of the arkansas challenge. >> question in the back. >> homeland security. i was wondering what do you think the results of the election are going to do it to homeland security policy in terms of budget and programs, especially given the fact that the tea party really did not have much of a homeland security platform, and that republicans are traditionally very for homeland security? >> pete king is very tough and

strong, and coming from new york, perhaps not surprisingly so. i think we are going to seek an aggressive push among other things, and i hope this is the case, to finally get some congressional oversight of the department, which congress has avoided. the fragmented jurisdiction said they could keep a whole bunch of committee chairs happy. but i also think especially after the plot, after some of these examples we are now seeing, going after cargo planes and a whole host of other places, the sentiment to provide additional funding to beef up security at ports, with shipments going by air, and may be finally also getting to do something more about chemical and nuclear plants that are potentially a vulnerable, we

will probably get some bipartisan support. it does get back to larry's question. you put a freeze on, you are going to have to start making some very tough decisions about how you act within that frees it. >> tea party members are trying to read what we did not talk about during the campaigns. i think there is a libertarian instinct there. the one area which i think it is most -- the anti-terrorism policy, some of those campaigns have expressed funding to be relatively strong in that area. >> i think norm and john are coming up with a new report on the continuity of the supreme

court. do you think you'll make any progress on that issue? >> i had a brief discussion with peking about it last week. he said -- i had a brief discussion with pete king about it last week. at the leadership level, they have shown no interest in dealing with these problems. whether we will get a different reaction before we get the terrorist attack is another question. we are losing a major champion in brian perry. >> a question in the back, right here. >> do you think unions give money to republican seats in the northwest? united made ank

big difference. i think money would have flowed into republican campaigns. people would have found a way to do it to avoid the republican national committee as some of these organizations did. they would have found another way. i think when we sift through the contributions, the lobbying community could surprisingly enough read the polls. [laughter] starting certainly in the third quarter of this year, perhaps in the second quarter, having contributed heavily and maxed out in many cases, democrats started discovering the virtues of republican candidates which was hit in to them, that tended to equalize to some considerable gap that wemoney tga were finding. some of these races show that

money is not usually decisive. if you have a situation where people are not really riled up about major issues, then you run a series of tv ads. you can run the camp -- you can win a campaign against a candidate who cannot afford to put his picture on tv or something. this year, you had a lot of situations people winning primaries with no money. i think the democratic incumbent in tennessee was i am sure adequately finance, and the republican candidate at some point i believe -- i remember reading he had virtually no money at all. he won by a significant portion. >> i think it made a very substantial difference, but it was not just citizens united.

it was the realization on the part of activists that the irs was doing nothing to actually enforce the law and regulations, that you could pretty much do anything they wanted out there and not disclose donors, and there was no federal election commission. it will be interesting to see if that continues. first of all, it made a difference at the state legislative level. one of the reasons why you see this large shift in seas, there was more money going in that we have ever seen before, and a lot of it was outside money. that makes a difference. if you travel around the country, you are seeing a substantial number of tv ads run by outside groups. i have never seen that before. at the same time, one of the reasons why you see relative

limits in the congressional swings even in the years when you get a wave in the past, this enormous in balance -- im balance. you have a challengers with nothing and nobody else filling in. when you get a large number of targets, usually what parties and others have to do is make choices. it is like having a huge whack- a-mole game with a limited number of mallets that you can use out there. this was in a much, much wider range. i would not be surprised to find that 20 of these house seats might have come out differently because nobody would have been out there spotlighting

the incumbent and slamming them at a time if it were not for the very substantial increase in funding. not so much overall, but where it ended up getting targeted. >> i think it is the last question over here. i hope you will be back in 2012 in january to start this all again. i also want to thank my colleagues for a superb presentation. >> the tea party races on the senate side are pretty high profile and will identified. i just wonder how much any of you all [no audio] identifiable tea party-backed candidates on the house side and the ratio of them prevailing. >> there is not one organized tea party group. you have one tea party movement is manipulated by sal russo who

is anything but day consultant who has gotten on the gravy train with many things pretty saying who is tea party-backed is difficult. i think norm pointed out quite correctly that mark rubio is a political neophyte. this is an experienced elected official who showed political acumen prior to becoming a candidate for the u.s. senate. i think -- political scientist who are trying to characterize and distinguish between the party and non-tea party candidates, it will be hard to find a quantifiable basis in describing who a tea party

candidate is. it is more like i know one when i see one. >> i have looked at the various web sites by candidates, and what i think you will find is that a lot of the incumbent candidates were talking about the same issues that otheres were. the soul of the tea party is coming to washington. >> it has still been a pretty positive thing. given the way in which it washed over the very conservative and didn't swing districts, i would have said it was almost universally positive, that christine o'donnell was the case that stood alone. the two seats in colorado and

nevada it does give some pause to that. i think you find people like -- republicans have thrown away that seat, and then they end up winning. i think there is quite a large number of people in the house of representatives, and generally positive. >> thank you all for coming. we will stay around for a few minutes if you have questions. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

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>> white house spokesman robert gibbs has scheduled a briefing this afternoon at 2:15 p.m. eastern, and we will have it live for you right here on c- span. president obama met with his cabinet this morning. here is a look. >>

>> hello, everybody. obviously, tuesday was a big election. i congratulated the republicans and saw some of my democratic friends about the results, and i think it was clear that voters sent us a message. they want us to focus on the economy, jobs, and moving this country forward. they are concerned about making sure that taxpayer money is not wasted, and they want to change the tone here in washington, where the two parties can come together and focused on the people rather than political points. i just had a meeting with my cabinet and key staff to let them know that we have to take that message to heart and make a

sincere and consistent effort to try to train -- to try to change how washington operates. folks around this table had done extraordinary work. i think they are interested in bipartisan ideas. they are going to be integral in helping me to root out waste in government, make our agencies more efficient, and generate more ideas so we can put the american people back to work. now, at the same time, obviously what is going to be critically important in the coming months is creating a better, working relationship between this white house and the congressional leadership that is coming in as well as the congressional leadership that carries over from the previous congress. i want everybody to know that i

have already called mitch mcconnell, john boehner, harry reid, and nancy pelosi, and i invite them to a meeting here at the white house in the first week of the lame-duck session. this is going to be a meeting where i want to hopefully it may spill over into dinner. the immediate focus will be what we get done during the lame-duck session. i mentioned yesterday, we have to act in order to ensure that middle-class families do not see a big tax spike because of how the bush tax cuts have been structured. it's very important that we extend those middle-class tax provisions. there are a range of other

economic issues that have to be addressed. unemployment insurance for folks who are still looking forwar work. business incentives. if we do not have those, we are losing a very important tool for us to be able to increase business investment and increase job growth over the coming year. we have to provide businesses with certainty on what their tax landscape will look like, and we have to provide family certainty. that is critical to maintain our recovery. i should mention that in addition to those economic issues, there are some things during the lame duck that relate to foreign policies that will be very important for us to deal with. i will make mention of one in particular. that is the start treaty. we have negotiated with the russians significant reductions in our nuclear arms. this is something that

traditionally has received strong bipartisan support. we have people like george shultz. this is not a traditionally democratic or republican issue, but rather an issue of american national security. i'm hopeful that we can get that done before we leave and sent a strong signal to russia that we are serious about reducing nuclear arsenals, but also send a signal to the world that we're serious about reducing nonproliferation. we made great progress when it comes to sending a message to iran that they are isolated internationally, in part because the blessing that we are serious about taking our responsibilities when it comes to nonproliferation. that has to continue.

there will be a whole range of works that needs to be done in a relatively short period of time. i'm looking for to having conversations with the leadership about agenda items that they may be concerned about. the last point i will make, i also invited the newly elected democratic and republican governors to the white house on dec. 2. i think it's a great opportunity to hear from them, people who are working at the state and local levels about what ideas they think washington needs to be paying more attention to. a lot of times, things are a lot less ideological when you get governors together because they have very practical problems that they have to sell in terms of how to make sure that roads and bridges are funded. how do they make sure the schools stay open and teachers stay on the job?

the kind of nuts and bolts stuff often yields the kind of common sense approach that i think the american people are looking for right now. we have a lot of work to do. people are still catching their breath from the election. the one thing i am absolutely certain of is that the american people do not want us standing still. they do not want us engaged in gridlock. they want us to do the people's business. partly because they understand that the world is not standing still. i will be leaving tomorrow for india. the primary purpose is to open up markets so that we can sell in asia, and some of the fastest-growing markets in the world, and we can create jobs here in the united states. my hope is that we have specific

announcements to show the connection between what we are doing overseas and what happens here at home when it comes to job growth and economic growth. the bottom line is that all around the world, countries are moving. they're serious about competing. they are serious about competing with us, not just on manufacturing, but on services. they are competing with us when it comes to educational attainment, when it comes to scientific discovery, so we cannot afford two years. we need to make sure that everyone is pulling together, democrats and republicans, an independents. people at the federal level and the state level -- to make sure that american retains its competitiveness, retains its leadership world, and that is something i'm very much looking forward to helping to be part

of. thank you very much, everybody. >> earlier today, we have a live simulcast of bill bennett's radio show. we'll show you a portion of the program. >> reformer speaker of the house -- here is the former speaker of the house, newt gingrich. >> good morning. >> what about this one compared to that one? >> when you look at the size of the victories, we picked up 18

chambers, zero from the democrats of the legislative level. we took a couple key governorships. in a funny way, it builds on the virginia and new jersey elections almost exactly the way that 1994 did. people need to remember that there were a lot more republican seats this year. when the cycle began, people thought republicans would be lucky to get out 40 seats. the way that we have gained strength and you have 21 democrats and 10 republicans, there's a very high likelihood republicans will finish the job and take the senate. we're making progress on every front. >> let's talk about what to do. i approach this at the philosophical level. you can do that, too.

people say compromise, don't compromise, and the example we were using was the 1099 -- the reporting of the health care. if you can get rid of that, get rid of that. even if you cannot get rid of the whole health care bill. you're the expert. >> i do not think it is either o/or. if you take everything he gives you and come back for more -- reagan used to say, if i can get 80% on this negotiation, and come back next time and get another 80%, at some point, you have 100%. if they want to repeal the 1099 section in the lame-duck, that would be a reasonable step in the right direction. i think the republicans in the house have an obligation to hold hearings on obamacare for 6 to 8 weeks, and then send it to the

senate. and then put pressure on the senate democrats. as the republican pollster pointed out, 75 percent of people who voted said they wanted to vote to repeal -- 45% said they were motivated to vote because it wanted to repeal obamacare. >> do you think you can get those senators? >> if you started a drive in every state where senators were up for election in 2012, and there were hundreds of people -- yes, it gets expensive in places like montana, va., neb., just to take three examples. some people would be thinking

-- am i prepared to end my career, or do i want to go along with people who elected me? >> you do not need that many. one thinks of other democratic senators that came close yesterday. >> there's a move to recognize the bill is flawed. 2600 bad pages, maybe 10% good ideas. passing these freestanding bills out in the open. it least three days so people can go read it. the problem for the economy, more important, the first thing the house republicans should do is pass a no tax increase on any american during a recession bill

out of ways and means. second, pass it out of the house. put pressure on the senate to get down to the white house. and then the president gets to choose. does he want to wage class warfare, or does he want to help the american people get back to work? >> yes, that is the first order of business. >> absolutely. they should be able to do it before the state of the union. is it going to be someone who heard the voice of the american people, or is it going to be a defined leftist who will use words to mask the fact that he's going to change it. >> does that bill passed the senate? >> i think it does. given 9.6% unemployment, i think

people in every state are putting pressure on the senate to do something. a number of senators have started moving towards agreeing with the republicans. >> right. i think i counted 20 times the other night on cnn -- people talk about what is going to happen. they're going to have a government shutdown. course, your name is always brought up with this. >> first of all, from a historic standpoint, the government shut down worked. we became the first reelected republicans since 1928. we got a balanced budget for four straight years. we kept spending down to a 2.9% 3 year, the lowest rate since calvin coolidge.

i think we ought to say, first of all, sometimes negotiations get tough. the question is, is it the republicans duty to cave in, or should the republicans side with the people who elected them this november? i do not think they should pick a fight. i think they should firmly say, this is who we are and this is what we were elected to do. we are cooperating with the president. i think john boehner's statements were perfect. he said, we are here to recognize the agenda of the american people. this is the largest one party swings since 1932 in the house. that there's some real merit to think that maybe the american people spoke on tuesday. >> with the benefit of you being the man who was there, don't you think it is possible -- do not

even think this is a question. didn't bill clinton listen better? >> it took him six months. >> not right away. right. >> you have to stop and say, what does this election tell us about our performance? what does it tell us about our limits for the next few years? they might have those conversations. in the case of clinton, it involves a fundamental change in stance. it involved very antagonizing internal activity. it involved dick morris, who was equally at odds with all of the liberals. whether obama will go down the road of that scale of change, i have no idea. the president's prerogative -- he is the president of the united states. he has to decide how he has to deal with what has to be a very sobering and unpleasant reality. >> he has not had a lot of those

in his political career. i wonder if this is a guy kid will of that kind of self doubt. >> i have no idea. he's about to go to india and spend $2 million of our tax money per day on this trip. that kind of spectacle is not the kind of thing that leads you to contemplate and think that you have lost. that leads you to think that you can rise above it, and if enough staff tell you that they love you, you'll be fine no matter what happens. >> what are your plans? >> we are launching a new book next tuesday called "valley forge." is a second novel about george washington. then we will see what we do next year. >> is always a pleasure. thank you very much. newt gingrich, former speaker of the house, one of the deep

thinkers of the movement. some cautionary tales. and we will be back. congressman meehan will join us and we will get your calls. >> i'm not going to listen to that kind of silliness. >> good morning. congratulations.

we are on a commercial break right now. we will be with you in just a few minutes. all right. thank you, again, sir. >> did you get me my numbers on him? >> i have them right now. she can clear out several. i think we are fine. open up a line. >> sure. [inaudible] >> no, i can not.

>> i eat my candybar.

>> hey, man. >> as you can see, we are in a break with the bill bennett radio show from earlier today. we are waiting for press secretary robert gibbs to start his daily white house briefing. that is scheduled to start at 2:30 and we will bring that to you live. >> i am sorry. i will pass your question on. we cannot right now. we have pat meehan. i can pass it on for you. i'm sorry about that. >> i will go to line two.

>> go ahead. go ahead. [inaudible] got to openn we've ait up. >> i think they may be having a party in pennsylvania. we talked to candidate pat meehan some time back. he is now a congressman elect pat meehan. good morning. >> thank you. thank you for giving me a chance to be on again. let me just say thank you on behalf of our colleagues, who gave us an opportunity on many

mornings to talk about not just the issues in our own backyards, but the remarkable consistency across the country. i think it was reflected in the results that came across on election night. >> you are entirely welcome. you did all the hard work. congratulations. it was a pretty big win, 55-43. what does that tell you? >> this is the kind of place where barack obama won big. estak was running for the senate. this was his home turf. it was a nice win. >> the people are curious, when did you know that you won? >> we started to see results and some of the areas that were the

main line. we began to see that we were going to get good numbers. we knew early that they were not where they needed to be. >> how late were you up on tuesday night? >> i stayed up late because i sat with my wife. we had a quiet glass of wine and reflected on the last year. we knew the results by about 9:45 p.m. i received a gracious call from my opponent conceding. we had it wrapped up before the 11:00 p.m. news. i stayed uncirculated and a lot of the ground troops. it was so degrading to go in the office and see the enthusiasm. -- it was so uplifting to go in the office and see the enthusiasm.

>> top priorities? >> get america back to work. that was the message sent loud and clear. people are also worried about the long-term debt. the job killing regulations and taxes. the way we know we create jobs is in the private sector. i talked to the small business people who were scared about what was coming out of washington. it hopefully creates an environment now where there's more certainty. people will not be afraid to take risks again. >> that's terrific. when are you coming into town? >> on the 14th. we will first begin to meet and they will give us the indoctrination in terms of how things will operate on the day to day, and then we will begin to try to contribute to the shaping the policy. >> we're thrilled. we are delighted. we are very proud and thankful. thank you for calling.

i look forward to shaking your hand, pat meehan. congressman from pennsylvania, pat meehan. this is great. on sorry for crowding you these calls today. we did invite the people who wanted to call in. i do not have a lot of time, but here's another guy i promised. i'm sorry. you have about a minute. >> how're you doing? >> good. how are things in denton? >> very good. three quick things. he did not take any responsibility yesterday in his top. he said, we made progress, but they have not seen it, talking about the public. it is not taking responsibility. he did expose something. he exposed his emergency strategy or philosophy.

he said bigger government was an illusion. he said that we have had emergencies to deal with that the public did not understand. that is the geithner stuff. crisis gives you an opportunity to get things done that you normally cannot. the other question, does he get it? no, he does not get it. four million americans are out of their homes. he is going to take 3000 people on the 10-day trip that will cost $2 million per day. >> he does not get it. thank you very much. call us next week. thank you, coach ken. we'll be back. it is "morning in america." >> hey, john, can you call us

next week? we are jam packed full. sure, real quick. ok, great. great point. >> these have to be done tomorrow. >> ok. >> the other ones can wait until next week. >> morning in america. >> someone called me. >> you do not agree? >> not at all. >> hey, i just got a call to my

phone. >> i better do them tomorrow. i am in new york on monday. >> yeah. yeah. phoenix, new york, back here. [inaudible] >> no problem. thank you. morning in america. sure. can you do me a favor? can you call on monday or tuesday? we have guests the rest of the show. sure, real quick. real quick. >> we will do nick.

ok. wow. i got it for you. thanks. >> nick was stuck in traffic. he will be there, but he might be a minute late. >> ok. >> morning in america. hey, dave, can you give us a shout on monday or tuesday? we are jammed packed for the end of the show. yeah, give us a shout monday, but ddy. sure. ok. great point. thanks, bud. >> you sure? >> [inaudible]

>> we have to do it quick. >> hey, we're coming back from break. we have a ton of calls. all right. thank you very much. you want to talk about rubio? thank you very much for your patience. hang on. thank you. >> let's do it. >> sure. >> he is going to be late? does he know i want to talk about state legislatures. >> when i e-mailed him, i said state make ups.

there's an interesting profile on him. 27 years old. >> i know. he is very good. >> caller is watching on c- span -- >> you hear that? >> a caller watching c-span as ked what you're eating all the time, and remaining slim? [laughter]

>> are you ready to grab five or six? >> ok. >> morning in america. >> nick, thank you 4 stay with us. we are going live in -- >> [inaudible] >> say wait a minute. >> we have to handle one caller and then we will be right with you. thanks. don't rock the jukebox i wanna hear some jones ♪ >> we're going to get to nick jones in a minute. i promised a quick call.

joan, thank you for your patience, dear. >> thank you for having me on. i'm sorry, but i disagree with you. i loved rubio. i want him in the senate. we've already gone that route with one president. >> ok, ok, ok. >> i am being somewhat lighthearted. you have to admit that we have some talent now. >> we need a-senate. him in the senate. >> remember what happened to barack obama. he was a flashy star. he had charisma. he got out there and he campaigned for two years. >> yeah. >> i just do not want the

republicans to go down the same road. let him do what he can do, and that is in the senate. >> ok. good caution. thank you, joan. , the executivek director of the republican governors association. >> i agree with joan. how dare you think a united states senator should go back in the white house? guy.m more a governor i'd been there are real jobs. >> hayley always says that senators talk about doing things and governors do things. >> you had a big day tuesday. >> we have a big day. we could not have been more thrilled with the results. we still have three races

pending in minnesota, connecticut, and illinois. we have gone from 22 republican governors to 29 republican governors over the past few years. but he is where we -- key is where we pick these races up. on tuesday, we had 10 states that are presidential swing states. we went into tuesday only having republicans in two of those states. we came out with having republicans in nine of those states. the map for barack obama's reelection campaign just got very difficult by picking up places like florida, ohio, pennsylvania, iowa, and michigan . it is incredible, what happened. to the point about where leadership comes from, we now have over 20 new republican governors that will provide a bench of leadership for our party for a decade.

if your listeners like christie and jindal, they will love this new crop of talent. >> i want to come back to that. first of all, people forget about the governor's, but talk about the state legislatures. i know that's not your job, but it affects your job. we had a big night for that. >> we did, and we were proud of the investments that we made in places like new england and the northwest, places that have been neglected by national party is for a long time. we have worked in partnership with the republican state leadership committee. i'm hearing that something similar between 16 and 20 state legislatures flipped. we were proud to win the main governor's race. we thought that was a big deal in itself. and then when we talked

yesterday -- we cannot believe it. we're going to have a republican governor in a republican house in maine. >> the semi-official word in the media and from democrats is that this was an anti-incumbent election. one could make the point more sharply and more accurately, correct? >> hardly. we had six republican governors running for reelection in all -- and all six got reelected. seven of them were running for reelection, and we defeated two of them. and the media wants to call this an anti-incumbent year. this is an anti-tax, anti spending, and by adding to the deficit year. -- and anti-adding to the deficit year.

the fiscal policies that are similar the white house white -- they had a difficult night. >> give us a little inside baseball. the question, generally, is the interaction of the new leadership with the governors. i'm delighted to see the great presence, the great figure of haley barbour, looking like i will look, like security. my big night on cnn with my suit -- a woman says, can you get my bags? plumpy chic.it >> i know what he calls it. he stole it from me. bulky chic. haley remembers, he

was chairman of the rnc the last time we elected a bunch of new governors. it was haley who said, instead of creating new policies out of washington, we have all these smart governors. why don't we check with them to see what is working in their states? let them be the laboratories of our democracy. when something starts working, let's steal their idea and do it for the country. that's how welfare reform, one of the greatest realignments of the social program in our lifetime, that is how it came about. tommy thompson and john taylor had been battling each other about who could do it better. haley, bob dole, and newt gingrich brokered an idea out of his office.

it was not by accident that he and john boehner and mitch mcconnell talked about that. if this year is as good as we hope it is, let's make sure there's not any disconnect between washington and the state's. let the new governor's do what they're doing, and if it works, let's do it for the country. is the same thing that worked well in the mid 1990's. >> there's a specific issue where we can expect some coordination between house and the governors, and that is on the health-care issue. this is a state and federal issue. >> the white house is going to find of most of their democratic candidates for governor were campaigning on -- if i get elected governor, i will oppose obamacare. you have a democratic candidate

for governor in oregon who is a doctor. he is campaigning that obama did not pass the health care bill, he passed an insurance reform bill, and if i'm elected governor, we're going to have to work with him to fix it. on a bipartisan basis, the governors agreed that the state cannot handle the cost. it will reduce our access. you will see us opposing this bill, to repeal it, to block the funding, and to come up with something that does improve health care in america. >> we will let you go. we hope to see you in san diego. >> yes, we will have a big celebration. the celebration will be short- lived. then we have to get to work. we have to talk about how we will partner with congress to get this country back on track.

>> let me ask you for help with a reading assignment for me and our listeners. >> as promised, live coverage of the daily white house press briefing with spokesman robert gibbs. >> in the time since the gavel, mitch mcconnell has given a speech. he said if administration wants cooperation, you have to move. is that a direction the president can work with? >> let me say this first and foremost. the message of tuesday's election was that the american people want both political parties to work together. there will be time for another political campaign, but we just finished one. the candidates were not elected

to have more fighting in washington, or to read fight the battles of the past two years. again, what the president has said today in and fighting senator mcconnell and other leaders to the white house on november 18 is to sit down, work together, and find common ground. i think that is what the election was about. that is what the president is intending to do. >> with the remarks from mcconnell, do you get the impression that the republicans walked away with the same message that you got? >> i think that if you look at candidates -- a lot of candidates ran against washington. and typically did not perjury washington as a place where people listen and work together -- and typically did not

portray washington as a place where people listen and work together. look, the president signaled yesterday and again today his intention to work with republicans on extending tax cuts. our first priority, obviously, is the middle class. to work with republicans on things like education policy, improving our schools, and to work with them on energy independence. i hope that senator mcconnell comes to the white house with that in mind. >> the president is open to a possible compromise in extending the upper income tax cuts? >> i do not want to do the negotiations here, but we are certainly open to listening to their position, talking about

it, and working together to find a compromise that will move this issue forward. our biggest concern is -- if this congress does not act by the end of the year, taxes for middle-class families will go up. we cannot and we should not let that happen. we have the power to change that. the power is sitting together and coming up with a plan that works for both sides. the president is confident that we can do that. >> is the white house hold full that the actions the fed took yesterday will help the economy grow? >> there is a council meeting. i do not want to go crossways -- i think one of the things that the election told us was that people are rightly concerned and frustrated by the pace of our economic recovery, even as we are pointed in the right direction. i think you will see that is the

focus of the president's trip abroad, and broadening our ability to sell in markets like india, south korea, and throughout asia. that is what we will be focused on. >> are you concerned at all that there are countries that you will be meeting at the g-20, saying that it will hurt your ability -- >> i do not want to get into commenting on the actions of the fed. >> you mentioned this morning, and the president mentioned that taxes will be a priority during the lame-duck session. what other priorities would you list in the next couple of months? >> the president listed this, and i think this is very important. that is, ratifying the new reductions in our nuclear arsenal with russia by approving the start treaty. i think this is a place where

bipartisan traditions have always held. the very first start treaty -- the most recent was 1995 to nothing. there was a strong bipartisan vote out of the foreign relations committee on this. that is why people from the democratic side to the republican side -- henry kissinger on the republican side, george shultz on the republican side -- believe that reducing our nuclear arsenal is a good thing. i think there are some other pieces of legislation that are close that we did not finish at the end, things like child nutrition, which is obviously a huge priority for the first lady and there's no doubt we want to get our budget director confirmed. our fiscal situation is something that this administration, the fiscal

commission, and congress will spend a lot of time on. it makes sense to have a budget director in order to do that. >> do you think that this election, the results, could have any effect on the viability of the start agreement? >> i also want to follow up with a story coming out of india, allegedly costing $3 million per day. >> we have set the record straight with you. i'm not going to get into how much it costs to protect the president. it is comparable to when president clinton and president bush traveled abroad. the same report you are referring to said there were 34 warships off the coast. i understand the department of defense has said, as we have, that is simply not true. when it comes to the s.t.a.r.t.

treaty, i do not think that the election should change to the bipartisan history of arms reductions. it was, after all, i think the last president to call for a world without nuclear weapons before president obama did that in 2009 was ronald reagan. this is an issue that has enjoyed support well across the political spectrum and across party lines. i think it would be a good message to send both the american people and the world that we can work together on issues of mutual interest and concern, like reducing nuclear

weapons in this world, and demonstrating that we're serious. the president also mentioned today that our actions of reducing our nuclear weapons, our nuclear stockpile, and russia's nuclear stockpiles, is sending a powerful message around the world, as we seek to hold iran responsible for the commitment that it has made. i think that's an important message to carry through. >> you have said, and the president also suggested that the message of tuesday's election is that the american people want the party to work together. where do you get that from? >> if you look at -- both parties in the exit poll were not held in tremendously high regard. i think washington, at large, was not held in high regard. i think people disapproved of the way congress works.

if you were to look at how to fix that, it is working together. i think that is what most people took. >> the majority of the american people think that the president's policies will do long-term harm. i know the president said that if unemployment were lower, they would have more confidence in the policies. if you're going by the exit polls, the message from tuesday is that they do not like what this administration is doing. therefore, when the republicans say they were elected to stop what the president was doing, based on the same exit polls that you cite, they have a case to make. >> let's take the issue of health care, which is what senator mcconnell's speech was on. most of the people that cited

health care, the issue -- almost evenly split were keeping what we have versus repealed. we have seen independents in the last three election cycles side with different political parties. that is the message that we took from this campaign. >> mcconnell said republicans would be pressing repeatedly to repeal the health care bill. and to repeal the financial bill. he also suggested the financial regulation reform. will the president veto any effort to do either of those? >> i honestly do not think it will come to that. let's take financial reform. i just mentioned health care reform.

there is certainly nothing in the message, i think, that came out of tuesday that suggests that going back to the health care system that allow insurance companies to control whether or not patients think they have policies when they get six -- i do not think any data suggest that is what people want to see. as it relates to the financial reform, rules were put in place to change the behavior of wall street and to prevent what happened in september 2008 from ever happening again. i think that's what -- i think those are common sense policies that the american people strongly believe in. whether it is protecting consumers, ensuring that people are not hoodwinked into bad loans, making sure that trading

things like derivatives are done in the light of day on an exchange, rather than not -- that is what people want. >> mcconnell said he will try -- if he cannot repeal of the bill because of the president being in the white house, they will at least try to starve the health care bill by depriving it of funding. is that what's -- with the president veto those types of efforts? >> i do not think we would get to that. >> the president indicated an openness to the repeal of the 1099 aspect of the health care law. are there other provisions the white house has identified that you guys think could go or be revised? >> i think the president looks forward to hearing from

republicans and what is on their minds as it relates to that. the issue of 1099 was something that many have talked about changing. as the president said, the burden on business does not make a lot of sense. i do not want to speak to what aspects of that they would like to see changed. i think the president believes that it is dangerous to go back to a system where insurance companies make decisions, rather than doctors and patients. and some of the protections like family being able to keep somebody up to the age of 26, or not being denied coverage because of so-called pre- existing conditions. >> are there any redline provisions that you think are deal breakers -- things that

absolutely have to stay? >> i outlined them. i do not want to speak to what the republicans have in mind. i think the president believes many of the protections he has talked about over the past many months are important. >> obviously, you and the pentagon have spoke about the india story. are you surprised that there are these stories about lots of protection or more than usual? are there -- is there something about this trip that's different than usual? >> whenever you move any president in a foreign country, you take certain precautions, not surprisingly. the first stop on our trip is at a memorial for victims of a terrorist attack, november 26, 2009, at the hotel we are staying.

obviously, the secret service takes the duty of protecting this and any president seriously. they do an amazing job. they will continue to do so. >> just trying to make sense -- he has traveled overseas before. why are there articles this time about this trip being different than others? >> that's a good question for whatever media is writing the stories. >> are you guys reopening health care? >> no >>. -- no. >> you believe the issue is settled? >> again, i think the president mentioned something specific yesterday. i think democrats and republicans want to change the paperwork requirements. i do not know what their list is.

i think senator mcconnell said today that we should listen to the american people. the exit poll we cited was evenly split. i do not know what he heard that the others did not. >> the the exit poll is evenly split -- that does mean half of the country, or half the folks who voted, do not like it at all. is there any -- do you feel that you should open up this for some discussion for more additional things? >> we look forward to having meetings, and people bringing constructive ideas. >> reading the exit polls, a couple of things stand out. one is that there was clearly a

-- turnout was down compared to 2006. why do think that is? >> i've not talked to the political focus on that -- political folks on that. i do not know what among those different regions might have impacted it. we saw, in some places, democratic enthusiasm and turnout varies from state to state. >> do you take from this election that you have a policy problem or a communication problem? >> i think we have economic problems. we have 8.5 million people who lost their jobs. i think what the american people want both political parties to do is stop the squabbling and start working together. that is what we took. that is what the president has offered democrats and

republicans in coming to the white house and continuing that conversation. i think that's what you will see over the next many months. >> should we expect golf outings between the speaker to be and the president? >> i think mr. boehner looks like a pretty good golfer. i think he might take some money from the president on that. i will get in trouble for saying that. >> the talks yesterday and today of thrall the top of today and yesterday and working together, but the president has not focused on the congress and what they were saying. providing 67% of the people focused on the economy. i did the president said this yesterday the -- i think the

president said this yesterday and has said it before, that the pace of the economy has frustrated many people. >> yes, but many people believe the economy is in the state that is in because of his policies. >> i do not think there are many economists that would -- again, if you look at where we were when the president took the oath of office and the jobs report for that month when and where we have been, we are obviously in a different direction. >> has the president spent any time studying the history around president clinton has a history when he faced a similar situation? >> he was reading to branson. i know he mentioned that in peters interview, other than that, i do not know.

>> has he said anything to that effect? >> i can talk to him, but i do not know. >> when the president says he wants to work on the people's business, which people is he talking about? the people that elected rand paul and marco rubio, or the people that elected nancy pelosi and harry reid? >> well, what they have in common is that they are americans. >> they have in reserve -- [laughter] >> they have irreconcilable differences, don't they? >> we put people in boxes and all of that sort of stuff on television and everybody disagrees on this and everybody disagrees on that. i think i have not been in a room with those leaders per se,

but if you work -- having worked with them long enough, the findings that they can -- defined as things that they can't agree on. is this a solution that we're all going to walk out with it? probably not. it will take some give and take on both sides. we will have to be some progress. i do not think there is anything in this country that would have you believe that the message that people took away from this campaign was gridlock, more arguing, more bickering, more partisanship, more not working together. i think to go back to the way it has always operated it would be

the wrong message. >> on the republican side, it seems they ran against give-and- take, compromise. they do not want gridlock eater. they want you to surrender. thend isn't that largely message -- isn't that what drove them to run for office because that happened on the other side? again, i think that is maybe a subtlety that is lost during the back-and-forth of a political campaign. but you are certainly not going to make progress in a divided government saying, "my way or the highway." you will end up with a lot more of what drove people away from having faith in both parties and in their government. i do not think that is what the american people want to see. i do not think they want to see an endless repetition of last

week's battles. we have problems that we have not faced and that we have not dealt with and if we do not, it will put us at an economic advantage as it relates to the rest of the world. i know the president does not want to see that. i think you have a good number of republicans that believe that, too. >> earlier, we mentioned that the president would like to see [unintelligible] you have any details? >> not yet, there have been some discussions, but no details beyond that. >> [unintelligible] >> we have had a series of ceo's for several years. i think we will continue to talk about that on wednesday in terms of business.

>> and what about the free-trade agreement with korea ahead of the president's trip? >> the president outlined the concerns that he had during the campaign of 2008. and just recently, with what he thinks hohas to be improved in n support --e can't that he can support and the party to. we know that we have got to make some progress and we think that both sides are going to sit down and make some progress. if we can make enough progress to where the president feels, for instance, on autos, there is a better deal for our auto makers and auto workers, then it will be something that we can support. if not, then we will have to keep trying. >> [unintelligible]

>> i think it depends on the negotiations. i think it depends on the progress that is made in changing the agreement that was tilted against auto companies and autoworkers in this country. >> is there any plan to create some sort of structural bipartisan -- something going forward to address things in washington? >> i'm sorry, i'm not sure of familiar crittendon >> is there going to be some kind of bipartisan event -- and not sure i'm a familiar -- >> is there going to be some kind of bipartisan event? >> i know the president is, as you heard him say in the cabinet room, this house to be and will be more than just a photo opportunity. we have some business to work

through and issues we have to make progress on. i anticipate the first of many. >> is there anything in the legislative affairs or the white house counsel's office of something down the road? >> not that i am her -- that i'm aware of. >> last year, the influential democratic leader james carvel's new book was entitled "40 more years: how the democrats will rule the next- generation." have you and the president read this book and what is your reaction? >> i have not read the book and i do not know if the president has either, so it is hard for me to comment. >> could you specify which

trips the president ever took that cost $200 million per day? >> the district does not cost $200 million per day. >> that is what was reported. >> lester, you subscribe to the veracity of everything you read in the press, right? >> no, not everything. but several things. >> just the things that you previously agreed on that you agree with? >> are you denying $200 million per day? >> for about the third time, yes. >> how much is it then? >> i will not get into cost to protect the president, but at the same time, lester, if you do not believe me, which i can understand -- >> i would like to believe you. i enjoy you very much.

>> well, i appreciate that, lester. hong [laughter] with a sloppy and a twisted straw. again, the president said that there were 32 warships. again, the pentagon said that was not true. we now seem to have come almost full circle on a circular argument, haven't we? if i found somewhere else that it was a different cost, would it be true? >> this came from a number of different sources, robert. >> you talked to them? >> no, i've read them. >> again, if you read that the cost was different other places, how would you reconcile those differences?

i'll just have to questions on that. >> thank you very much. [laughter] >> [unintelligible] [laughter] >> now that is news. in the spirit of bipartisan cooperation. and you believe everything that is intended. >> no, i would not say that. you have to be selective. >> the selectivity is based on what? >> on what seems to be accurate. and what seems to be inaccurate. >> how is that determined? >> by using your judgment.

>> that is interesting. i thought this was barely fascinating. >> your making a distinction between temporary and permanent tax cuts. i thought the president was talking about permanently extending the upper income tax cuts. >> the president believes, and i think there was common agreement on extending permanently the middle class tax cut. and as i said earlier, i think is important to understand what happens if we do not act by the end of the year. those tax rates will go back up. i think there is common ground to be found in how to move forward. the president does not believe, and i think would not accept,

permanently extending the upper end tax cuts, which we know the cost of that is borrowing $700 billion over 10 years. but that being said, i think there is something that can become too between that. the courts but he is ready to negotiate. something he is not willing to negotiate on is the other hand. >> -- >> but he said he is ready to negotiate. something he is not willing to negotiate on is the other end. >> [inaudible] and he said all also that he is for [unintelligible] the president is governing from the far left and that he needs to come to the center. >> i think the consensus is,

again, not going to be 100% of what anybody wants. i guess the question for mr. steele would be, does he believe consensus is 100% of what he wanted? >> will the president grant mr. steele -- >> i have not heard from scheduling that there is a pending request. >> [unintelligible] >> i will not speak for scheduling on that. i assume the arguments the chairman of the for republican party is going to make is going to be those by the republican leadership in the house and senate. >> would it be redundant for them to ask? >> i assume his statements are mostly in line with what the leaders have said.

obviously, there has been some divergence on some issues. >> the president has been accused of investing too much time in bipartisan outrage while waiting for the republicans to come along. is there a time now where the president might see that republicans are willing to meet him halfway, and if they don't, then he may decide that time is not well spent and bipartisan cooperation is just not going to happen? >> this morning, i think we now have -- and let's be honest, republicans now control and have the responsibility for governing half of congress. there are certainly responsibilities that will go along with something like that. i think the president is eager to sit down, eager to listen, and eager to work together. i have not heard him or others

discussed what or if. i think there messages that we took from the selection -- from this election were to give. >> [unintelligible] >> look, we have talked about in each of the g-20's is the need to find strategies for bonds to grow. and the president has discussed throughout this the fear that what we have seen that has driven economic growth in the past sort of -- in the past, sort of bubble and bust economies that made short-term drive demand but have consequences on the back and

that were detrimental. we certainly cannot continue to do that on a worldwide basis. the american consumer cannot drive worldwide demand, which is part of the reason we have to open up other markets around the world for the sale of our goods. secretary geithner @ p.g.-20 finance ministers' meeting -- at ministers finance meeting talked about the growth in that effort. >> it has been said "i do not want the president to fail. i want him to change." do you believe that he really does not want the president to fail? >> i will let he and his spokespeople speak for him.

but i do not think the american people two days after a contentious election believe that the next election should start the next day. i think there is a time frame in which we will have for that election and a time frame to address those problems. >> i think he said that he wants president obama to be a one term president. >> i think that is the single most important job that he has. the thing that the president and the american people want to work on are strengthening jobs and the economy. >> a couple of questions. pohick couple of weeks ago there was the presence of outstanding request of one.

[unintelligible] >> i would point you over to usda in terms of what was listed in sight of that settlement in terms of things like that. >> what would be the accountability? >> but again, i've not read the judgment of the settlement. i would point you over to them. >> what you think of where the request for 1.2 $5 billion stands with congress? -- for $1.2 5 billion stands with congress? >> i do not have an update on whether it would be in any

spending bills that would be done by the end of the year. >> would control of the senate possibly go through because republicans could hold the senate? >> i do not have an update on the settlement. >> do you think the climate is more conducive for it to come through the white house and the president if he wanted to go through congress? >> i do not have a legislative update on that. >> how quickly we do expect the president to name a new director of the economic council? and it should the american people anticipate there will be changes in the president's cabinet between now and next year? >> obviously, there are and have been organizational meetings that have gone on through here through the chief of staff and the process he is overseeing. we are in the preliminary stages of selecting a new nec director.

i do anticipate that in the next couple of weeks we will make announcements on that. i know nothing in terms of the cabinet. again, i think there is a natural cycle of people coming to -- coming into the administration and pledging to stay for a couple of years and then returning back to the seat that they had, or going back to doing what they did before they came here. >> i know the currency interest -- the currency issue is a high priority for the president in asia. [unintelligible] >> it was a concern of this administration and has been made by card -- bipartisan concern even before this election.

i do not think that concern in any way is lessened. the president and secretary has said that china has to make steps and we will watch what they do. i have no doubt this will be a topic talked about at the g-20 at the apec meetings and directly with the chinese. >> there is a report that says the senior director is seeking to rebalance -- >> let me check in on that. i do not second-guess jeff on what he says, and -- did you

write the story? let me check with jeff. >> on the possibility of middle ground on health care reform, i hear you say that the president is open to other ideas that they may come up with. >> let me be clear. i think i said that i do not think the president is going to prejudge what republicans want to talk to him about. that is what getting together and talking about things is. i think the president is obviously a big supporter of his health-care plan. >> but we do hear from john boehner and mr. mcconnell very clearly, repeal, repeal. is that where it starts? but i do not think that is what the american people -- >> i do not think that is what the

american people set out of this election they want to see. >> but where is the middle ground? >> i do not want to get ahead of what some of these discussions and meetings might be about. i think both sides might agree that this provision that is overly burdensome for business makes sense to change. i think there was an effort to try to do that before the election that got held up. the president, i think common things that the -- the president, i think, thinks that the focus needs to be on the economy. the focus is on what happens at the end of the year if we do not act. >> just to clarify, you said you anticipate the president would veto. if it comes to that, what you

think the president will do? >> i do not think is going to make it through both houses. >> the republicans obviously will not stop talking while you are gone. you have a plan in place to deal with what they are saying while you are gone? >> nad de "how to stop republicans talking" plan. [laughter] i cannot confirm that we have one of those. it is on one of those warships. [laughter] look, i think the president will on several occasions on the trip meet with the traveling press. likely asks you will a about what is going on there and here. that is expected and part of it.

>> yesterday's press conference with the president, he is knowledge that in least in the short term we are not likely to see a bill proposed for carbon emissions. how you explain that to other leaders were looking for the u.s. to get action on global warming? >> there are certainly bipartisan proposals that would reduce the amount of greenhouse gases, but not necessarily have to be done through what is commonly referred to as a cat and trade -- cap and trade system. for instance, you could do, as many states have done throughout the system, have a renewable standard that says a certain amount of your power will be generated by renewable sources. that would obviously cut down on greenhouse gases.

i think in this case, there is more than one way to skin a cat. i think the president has -- and i mentioned this this morning, the president has changed a policy that had been -- had not seen a loan guarantee on the construction of a nuclear plant in three decades. we entered into one of those just late last year. again, that generating power will by definition reduce greenhouse gases. look, i think people are still concerned, both about climate change as well as our ever- growing dependence on foreign oil. but there is more than one way to fix that.

one way is working with car companies to increase fuel efficiency standards, not just on cars and make that happen faster than the legislation requires, but also, for the first time on trucks. again, it is not a legislative thing. it is working with business to bring about change in energy. >> of like to follow up on the question that sam asked. do you believe that the era of not attacking the president when he leaves our shores is over? do you feel that given this climate -- >> [unintelligible] >> reducing the republicans will honor -- i do not even know if it still exists, the protocol,

and keep the attacks at a minimum? >> certainly, in previous times that has been what most in washington followed. i think the president, again, goes overseas on this trip on behalf of not one political party, but on behalf of the country to improve our relationship with a very important region of the world, a fast-growing place where, at the beginning of the trip, again, i think you will see working with american businesses and ceo's to open up jobs and markets to this country. again, what the republicans do,

i stopped getting a long time ago. thanks, guys. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> joined us a little later today for more live programming. the woodrow wilson international center for scholars is hosting an event for the chief palestinian negotiator about the middle east peace process. that starts at 5:00 p.m. eastern, again, that is live on c-span. >> changes need to occur in congress, and it is only going to occur if the people of our country really get to -- begin to get involved in our political system and begin to run for congress and come here to make the changes necessary.

>> whether it was john vader and the new members roundtable in 1990 or coverage of him since, you can learn more about the presumptive speaker of the house in his own words in over -- john pinera and the new members roundtable in 1990 or coverage of him since, you can learn more about the productive speaker of the house in his own words in over 800 speeches. >> upload your videos before the deadline of january 20 for your chance to win the grand prize of $5,000. there is $50,000 in total prices. the competition is open to middle and high school students in grades 6 through 12. go online for all of the rules and instructions fdot studentcam.org. >> saturday, supreme court landmark cases from c-span

radio. this week in part ttwo of abington pennsylvania school this traverses edward champ, saturday at 6:00 p.m. eastern on c-span radio. >> next, a discussion on the challenges facing governors following the 2010 midterm elections. this week, midterm elections included 37 governors' races, and notable and speakers include the lieutenant governor of new york, and the executive director of the national governors association. the urban institute hosts this hour and 50 minute discussion in washington d.c.

>> good morning, i'd like to encourage every two grass your lunch, come in and sit down. i think we are going to go ahead and start because we have a long and rich panel and i want to be sure that we have plenty of time for discussion. it welcome to the urban institute. i am margery turner, vice president of research. but we are delighted you could join us here, whether in person or you are listening in on the web cast. by the end of the day today, many neat -- many states will have new governors. they will face many challenges like economic recovery, persistently high unemployment in many, many markets, and beleaguered state budgets. a lot of the conversation here

in washington and much of the urban institute's work focuses on federal policy. but state governments, obviously, played a critical in economic recovery and in the lives of families and kids. across the country, states face a very different challenges depending on their economies, their demographics, and our fiscal history. over the coming months, we will be returning repeatedly to the question about how different states around the country are fairing and house state governments are responding to the challenges they face. -- how state governments are responding to the challenges they face. today, we have a terrific panel for you. i believe none of these experts have any intention to make predictions about the outcome of voting today, but they also are not going to shy away from talking very frankly and

specifically about the challenges facing tomorrow's new governors. kicking off the panel today will be kim rueben, who directs the state and local program at the urban working tax policy where she is a senior fellow. her policy -- her specialties are finance and special education. the next presenter will be raymond scheppach, the director of the national governors association since 1983, and also former deputy director of the congressional budget office. at the national governors association, ray helps define priorities for the nation's governors. he may not be going to bed tonight. [laughter] he will be followed by bob lerman, an expert on how education, employment, family

structure all work together to affect family well-being. ed montgomery is the director of the family policy institute. he recently served on president obama task force and was the director for the council of autoworkers. he was also the deputy secretary for the u.s. department of labor during the clinton administration. the last presenter will be richard ravitch, new york's lieutenant governor. he is a partner in a law firm and was appointed lieutenant governor by governor paterson in 2009. back in the mid-1970s, richard helped resolve nyc's default negotiations and served as an intermediary between the city and an invisible unions and their pension funds. moderating this terrific panel

will be margaret simms, an assistant fellow at the urban institute, and director of our low income working families project. with that, i will turn this over to margaret. thank you for being here today. >> thank you. i expect this will be if -- and informative and lively a conversation. 37 states today will elect governors, some of home will be new to office. in nine or 10 of the states, the unemployment rate was in the double digits at the start of the fall campaign season. in 15 or more of the states, housing markets have been in decline, and across the nation, state budgets, while rebounding, have yet to go back to their 2008 levels. will these newly elected or reelected governors need to bridge their teeth and get through the next two years, or do they have longer-term problems that need to be dealt with now? today's panel will address these

and other questions as they see fit. call following that, we'll have some discussion among the panelists, and then i will open it up to questions from the audience. >> it is not really clear why people want to be governor right now. as you all know, the current recession has been the longest since the great depression. most states have had revenue decline in recent years. they have had increased demands on them for more spending, and they have been facing shortfalls over a long time. while they started fairly large redefines in 2007 and in 2008, that money largely is a clear -- disappeared rather quickly. as shown in figure one, an

amount that you have in your hand out, 18 states face shortfalls of 20% or more, many have shortfall but it's going into the 2011 fiscal year. basically, the one way to guarantee that you do not have a shortfall is to be lucky and have a lot of natural resources underneath where you govern. unless you can find some mineral or natural gas supplies under need connecticut or new jersey, it is not clear whether there are some easy answers for the other governors going forward. the number of states that have budget shortfalls of 20% was actually higher in 2010, 34 states. another 10 states are expected to have shortfalls at that level or greater in 2012. this is a problem that we have

going forward that we have had for a while. part of the budget shortfall is the fact that states have not necessarily made the tough choices to balance their how budgets. part of it has been pushed forward to attend to deal with the problem in the next year. and hoping that it will be easier once the economy gets better. you can tell on the maps a lot of the states that have had big shortfalls are calif. -- california, arizona, and nevada, states that were hard hit by the housing decline and foreclosure problem. also, midwestern states that ine had a hinta hit manufacturing and they have not necessarily gotten back on their feet in terms of having a balanced budget. if we look at how they balance their budgets and how they manage to raise revenue, they

raised taxes and also cut some spending. in figure two, it shows how big the budget shortfall would have been without the federal stimulus. for state and local governments, that really was a lifeline that helped to make things and not as fast as it could have been. we are still expecting a $160 billion shortfall without counting the federal money for this year's. of that, $60 billion will be covered. going into 2012, it looks like there will still be a 140 budget shortfall -- $140 billion budget shortfall. we are carefully polling places to see what their budgets are on a real-time basis.

is there any good news? if you look at the federal government numbers, you will see that state revenues are actually up compared to last year. there has been an increase over 2009 in state revenues, but they are still 15% lower than they were in 2008. we have not totally recovered. something to keep in mind is that a lot of the increase in revenues that the states have seen have come because they have increased taxes. it is not necessarily that they have increased their revenues coming in because the economy has recovered. they actually have not seen much in terms of economic growth leading them to more revenues coming in. they have had to make some hard choices going forward. local government is doing a little bit better and their property tax revenues have been maintaining over this time frame. although, part of that also due to the fact that they are backward-looking and the fact that they have increased their tax base.

in figure three, if they have to make cuts, where will they cut? one thing that comes up is, if they can just cut all that waste and fraud. and you know, we do not really need all thathe state workers. if you look at where the states spend their money, about half of it goes to education and medicaid. total spending, includes things like transportation, so that will include some of the stimulus money and some of the infrastructure. if we actually turned to the general fund money, it is even starker. if you look at the budgets that have to be balanced each year, about 60% of the money goes for education and medicaid. really tough decisions need to

be made if we're going to balance these things and get through the short-term problem. what does this mean going forward? even if the economy recovers and we actually manage to get rid of the short-term problem, there is a longer-term problem. i think the speakers are going to talk about medicaid and the fact that home health care is going to be a problem for states i will spend a little bit of time focusing on pensions. part of that is due to declines in the market, but part of that is due to the fact that because of the inability to balance the budget, a lot of states have not made contributions to their pension funds. you can do that for a short time, but over a longer time, you will have to pay that money back. given what is happening, the center for retirement research has actually estimated that for

most states, there is going to have to be an increase of the share of the state and local budgets and going from about 2% to about 4%. but the states that are in the worst shape -- california, new jersey and illinois -- they are now putting in about 3.5%. in a state like illinois, which has stopped making its contributions, that number could go up to 12% or 13% or even as much as 18%. what else do the governors need to think about, besides these long-term considerations? well, something double either help or hinder them once they are elected is, what is down the ballot from where they are? there are some issues that will make it easier and some more difficult. in colorado and massachusetts, if voters has restrictions oit

will make it tougher going forward. in washington state, there are things that will help, like an increase in taxes on the wallet -- the wealthy. that is on the ballot. but there is also something to take the tax off of sugar. in california, there are nine vella measures that will work to ease the restrictions on the ballot. these will increase vehicle license fees or make it that much tougher to increase vehicle license fees going forward. what is the game changer? no, i'm not talking about legalizing marijuana, which would actually maybe make it more pleasant in california to bounce the budget if you could

use the drugs. [laughter] this world would say that you would only need a majority to pass the budget instead of a super majority. if that passes, instead of the open primaries, then we might see a game changer. a balanced budget passed on time, we can only hope for next year. thank you. >> let me first say that states have had long run and struck -- structural problems for a long time and that is primarily due to the fact they have tax systems built to the economy of the 1950's, not for a high-tech, service-oriented economy in the 21st century.

there are almost no taxes on services or goods sold over the internet or downloaded and so on. it's pretty much, if something is growing, states do not tax it on the sales side. it is a combination of growth on the one side and this burden the tax system on the other that increase -- that creates this structural imbalance. you lay on top of that effect of this so-called great recession. and just to give you a sense of the magnitude of it, if you travel back to 1983, that's the last time i think we had a decline in state revenues. it was less than 1% of that particular year. if you come forward and you look at what has happened in the recent decline, our revenues were down 3% in the final quarter of 2008, but then the next four quarters, 11.4, 16.4,

if you were to take away the tax increases, though still would have been negative. revenue just sort of fell quite thdramatically. it is also true that the states over a two-year time frame, 2008-2010, actually made $1 billion worth of cuts. that is pretty significant. and that is not from an artificial cbo baseline. that is from an actual relative to actual. they also increased taxes by about $24 billion. swinga pretty major of about $100 billion over a two-year time frame. and i agree with him that it was

about $135 billion of flexible money. it was medicaid and education money. medicaid money is flexible because you basically withdraw the money you had planned to spend. new substitute for the federal money and it becomes entirely flexible for the state. that is quite a bit of flexible money. of course, i've got another extension of $16 billion, which pushes the total up to about $150 billion at the end of the year. we are seeing a cliff at the end of fiscal 2011 that will be pretty significant. i came to talk about the downturn in terms of -- really, it was so deep and so broad that it will send repercussions throughout state government for virtually a decade. we know from all the previous

downturns that the biggest impact on states is generally one, too, and three years after the recession is declared over. -- one, two, and three years after the recession is declared over. as i remember, we declared it over in june of 2009. it is normally very, very bad because that is when you get the explosion of medicaid. over the three-year time frame it will be up about 20%. the unemployment rate peaks very late in the cycle and that is when we will lose the maximum amount of revenues. that is why i think it is 2012. if you'll get most economic , state revenue really

does not come back until 2013 or 2014. we've got a time of pretty sluggish revenue growth. then we are into 2015, 2016, and 2017, which if we get any revenue at all, we have got to use it to pay back everything we stole and borrow from the previous time frame. information management has not been of great. they have not done of dates on buildings and fleets and that type of things. -- updates on buildings and fleets and that type of thing. now the whole pension liability is around $1 trillion going forward. and that is not only that they did not put money in. a lot of states also barred from the trust funds. -- borrowed from the trust funds. when you add it together, you get a time of impact after the

recession is over, and then the jobless recovery, and then trying to go back and meet the one that needs that you have not met before. unmet needs that you had not met before. then you have what you have taken from medicaid. that will be a significant drain. even if you accept those, one thing that is pretty much true, over the last decade we had a revenue growth of about 6.5%. a lot of that is due to concern -- consumers leveraging up the whole economy and when we did that, we got good sales tax and revenue. the we are probably in about a 4% range rather than the 6.5%

range of revenues. therefore, it will be difficult to support medicaid. i think they are rarely caught in a bind between seoul revenue growth and trying to pay about the pensions. one of two things are going to happen. they're going to have to make huge cuts in and -- in education infrastructure and everything else they do, which will have long-term impact on productivity, competitiveness, and economic growth. or the federal army is going to have to come back as they did in 2002 and in 2008 and in 2009 and build a state out. thank you. at -- and bail the state out. that is a very positive note from the first two speakers. i will talk about -- >> that is a very positive note from the first two speakers. i will talk about jobs. i will try to do it from an

upbeat note. of course, today, we have very high unemployment. long-term unemployment, which is of special concern, is now 30% of the unemployed aren't annette -- have been unemployed for a year or longer. this is relatively new in the u.s. could has been common in europe for years. -- it has been common in europe for years. about one-third experienced about only 8 percent -- a three percentage point increase. and their unemployment rates are up to about 7%. the middle third has increased about five points, of 29 percentage point unemployment rate -- up to a 9 percentage point unemployment rate. and the top third has increased of two about 11% today.

even -- up to about 11% today. even the healthiest states, unemployment is almost 7%. this is a little surprising in that the gdp, you might say, well, we are only about 1% down from the peak of three years ago. you might say, well, it is a bit surprising. on the other hand, you might say relative to your potential growth, we are 89 -- 8% or 9% bdown. overall we are about 6%. again, if you look at job losses in the very difficult states, almost 9% decline in jobs. these states very in terms of the unemployment rate. of course, it is arizona, california, florida, and nevada.

but a number of states -- alabama, south carolina, oregon, tennessee. and as we have seen and has been discussed, a lot of this is driven by job losses in housing and construction and manufacturing. if you go from mid 2007 to mid 2010, again, u.s. jobs are down about 5%, 6%, and construction is down by about 30%. manufacturing jobs are down by 17%. and in the states that have experienced the biggest drops in jobs and in the biggest increases in unemployment, construction jobs are down even more, by 35%. that is one out of three jobs. this is an unprecedented decline.

and if you try to use the data to see how much of this is manufacturing and construction jobs, that accounts for about 80% in a variation of unemployment increases over this time frame. people have often remarked about the decline in house prices, and that is often a correlation between increased unemployment and declines in house prices on a -0.75%. a very, high correlation -- a very, very high correlation in that timeframe. some states have a very high unemployment rate and have not had much of a decline in house prices. for example, alabama, prices have only gone down by 3.5%, but

their unemployment rate went up by 7.5%. in indiana, house prices only fell by 3% and they are still at an unemployment rate of 11%. a lot of this has to do with manufacturing. and these housing and construction jobs and manufacturing jobs are very often cyclical sectors. you do see big increases and decreases depending on the big midsized-business cycle. this is a much deeper dip in the sign -- in the cycle, so we see much bigger job losses. but they tend to come back as the jobs return. and we are seeing that in manufacturing, but not construction. in manufacturing, output is only a couple of percentage points down from what it was in

mid 2007. but jobs are still down substantially. in construction, there is no good news. you see a continuing decline, output and construction down about 25% to 30%. manufacturing in the last year has seen increasing output. in construction, we have not. the international monetary fund has done a paper to look at the role of skilled mismatches and other structural factors in today's unemployment. i know it is a controversial issue. they always say, always a small amount, but a non-trivial amount is due to these factors. something on the order of one put five percentage points out of our increase of about four

points or five points. it is not the majority, but it is not trivial either. in my opinion, governors could do something that would move us both toward more jobs and more skills in terms of reducing the mismatch. my favorite option is to try to expand apprenticeship training that would get people into employment. the training they would get would be linked to the jobs today and to jobs in the future. one to provide a sensible set of subsidies. because we have a relatively small french a program today, most subsidies -- small french ship program today, most subsidies -- small french friendship program today, most

subsidies would not be directed to that. i have time in the future to expand exactly on how to do that. but i think it is an excellent option. from a government point of view, it is also a big cost-saving option relative to spending very large sums on community colleges and even in the work force investment act where almost all the training dollars -- the training costs are borne by the government. i think this is a cost-effective strategy that we ought to move toward, especially as the economy starts coming back. thank you.

>> i think the landscape has been laid out pretty well by the previous speakers. if you look at the labor market side, we have lost about 7.5 million jobs since the recession started. as bob correctly pointed out, the big losers -- the sectors were those job losses occurred were two million lost manufacturing jobs, two million in construction. if you look a professional and business services, which is often the sector where manufacturing has changed their production process to use these guys at an incredible rate where there are temporary supplies are not, the account for about 1 million people or

so. this should not make you feel uncomfortable because these are sickly sensitive sectors. if we go into a cycle and we go down quickly, perhaps there is a reason for optimism that we could come back quickly because, again, the typical cyclical nature of this series. the financial crisis made credit dried up, which made those industries where credit availability is really important very -- take a big shock. where the two big purchases people make on credit to? it is their house and their cars? who took the biggest hits? auto and manufacturing by extension and homes.

if we solve the financial crisis, some say, we think we could be optimistic of a recovery. what is the -- what is abundantly clear is that economists do not know what they're talking about anymore. [laughter] they all missed the boat on this. we have to be humble about are forecasting and are forecasting ability. when it came to the size of the crisis on the financial sector, most economists missed the boat. when it came to whether we could stave off, most missed the boat. when it came the auto industry, most economists missed the boat on whether we could rearrange the auto industry. there is some reason for optimism. if you think this will be a run- of-the-mill cycle, that is. carmen reinhardt, who has done a lot of papers on financial crisis, would take that life and set it right out of view because

she says that, at in this financial crisis, you'd be lucky if you recover in 10 years. if you look at the japanese and swedish experience and other financial crises, she says it takes eight years to 10 years to recover. that is the outside. that is the pessimists' view about how long it might take. if i wanted to give you the optimistic view, this recession is a little bit worse than the 1982 recession, but not demonstrably worse in terms of how unemployment went. if we simply grow employment at the same rate that we grew employment over the decade of the 1970's-to-1980's, we will recover in a little over one year and a half. there are your extremes. the world between those, a

figure like we did in the 1990's, it would take about two 0.5 years to three years. 2.5 yearsld take 0. to three years. it depends on how you think we have changed and this economy structurally and how much you think this is just a cycle we have seen before. i think the evidence is very mixed. on the labor market side, certainly long-term unemployment is far worse than it has been before. it is not really talked about, but minority unemployment is far worse than it was before. and that -- if you compound there drop, overall, we lost six percentage drops. for that population in particular, their growth over the recent time has been dramatically slower than the overall population growth. if we revert back to previous

experience, it will take typically around nine years to 10 years for an african-american unemployment to recover whereas, for the overall economy, it will be about 4.5 years. it is about twice as bad. the governors will have to deal with pockets of the population for whom the labor market prospects will be dismal for a long time. if you think construction is simply cyclical, in terms of these pockets, almost all of the drop in a poem for hispanics can be blamed on drop of construction employment. if you think construction will come back, that population, while disproportionately hit, could come back quickly. but there is no reason to be optimistic about construction coming back. a lot of construction jobs are driven by residential construction employment. the states where you have high default rates, that is where you have lots of growth in residential construction,

nevada, florida, and so forth. i think something will be fundamentally different about how we think about home buying and credit for homeowners will be different. i do not see construction coming back in the same way. those are reasons to be not as sanguine about how the economy is going on. let me give another one. while manufacturing has a big cyclical component of the course of the last decade, even though we had an expansion of employment through five years to six years in the 2000's, manufacturing has been dropping. something structural has been going on, big productivity changes in manufacturing. there is reason to be pessimistic whether manufacturing, even given the cycle, will come back as unemployment soars, not as a sector for -- and an as employment -- as an employment source, not as a sector.

in terms for governors, they said that something like 80% of the public thinks that states have an excess of revenues and they could cut spending with no effect whatsoever on services. this was done surveying people in states like arizona and california and a variety different states. 80% of the public believes the governors can give them what they are want, services, without -- even in the face of big budget cuts, you have an uphill battle to convince the public. when you ask the public if they are willing to pay additional taxes to protect vital services, the good news was that, when it came to education, they said yes. but when you ask them whose taxes they would increase, they said somebody else's. if they want to tax smokers. that one last smoker will pay all the taxes.

[laughter] >> it is certainly clear that, if the last smoker is not at thport at the beginning, they certainly will be at the end. [laughter] >> i am not sure it is the inside story. compared to me, you have heard from a group of optimists. [laughter] let me say that i do not pretend to have any prescience of an economist or a forecaster. i do not find any generalized statistics to be meaningful in the world that i have it. inhabit.i in have i our economy has been in decline

for 20 years. we have manufactured less and less every year. when the credit bubble burst in 2008, it merely a exposed the reality that had been going along. people were buying things, whether it was homes or basic consumer goods or basic necessities of life, with borrowed money. i respectfully suggest that the numbers about state budgets are misleading in that very few states use a system of accounting, any generally accounting principles or any kind of accrual accounting system. when somebody uses a budget number, that does not have anything whatsoever to do with whether they were recurring revenues or recurring expenses or matching. i can tell you, for a fact, in new york state, i have learned anecdotally in other states as well, that states have balanced budgets by which they mean that

they have enough cash to pay their bills next month, by selling assets and borrowing money. new york used at least $27 billion of long shots, asset sales or borrowings, to balance its budget. let's look at a couple of statistics. kim talked about pensions, about . steadstudy the precise value of the underfunding or the amount of underfunding is a function of the discount rate we use. but it is clearly over $1 trillion. you probably know the members better than i do. but my guess is that most state unemployment insurance funds are broke. my guess is that, collectively, the federal unemployment insurance fund is well over $60 billion. i would respectfully suggest

that states, particularly the larger states, are running out of assets to sell and running out of revenue streams to hypothecate. all of this is predicated on the assumption that either the dog will talk or we will be out of recession and revenue growth will resume. there are several problems with that assumption. again, i do not know the case in every state, but, in new york, in the last 20 years, there were two points in time where the prosperity was very flush and the tax system was generating a lot of revenues. in fact, there were two years were generated more revenues than were actually budgeted for. in both cases, the governor's at the time, two separate governors, one democrat and one

republican, and legislature, one branch of which was democrat and one was republican, were delighted to cut the taxes. let me tell you a few other things that, in this brief period of time, what is that the congress has increasingly been willing to enact laws that limit states' ability to tax. as reyes said quite accurately, these state tax systems were created in what was a very different kind of economy than we have today. second of all, what states are doing now is pushing governmental programs and governmental expenditures down from the state level to the local level.

local governments, cities, and counties, they are now struggling with the same set of choices. how can they borrow money and what assets to they have to sell in order to balance their budget? throughout this whole time, states have been borrowing money, not so much through the general credit of the state's, but barring many in any way that wall street has been able to get an investment-grade rating for, by hypothecating revenues, by borrowing money against a promise that a state will appropriate the debt service in the future, even though there is no syllable right to make the state make those payments. i would respectfully suggest that we do not really have good numbers about how bad the state situation is. when i was told that california

sold most, if not all, of the state occupied realistic to lease it back, the arizona sold its capitalistic back, both to get the cash to pay next month bills, of the fact that the credit markets are willing to extend credit means two things. one, in those cases where revenues are trusteed i, where revenues are put in a locked box and the lead holder has a lien on, they are credit were the instruments. but, to the extent that states are hawking their income tax revenues and their sales tax revenues, which new york and california certainly are, then i remind you that, every year that more and more of those revenues of concerneconsumed in the payt

debt service, less and less of those revenues flow to pay for general governmental expenditures. if you believe that the rate of growth of our economy will be what the average rate of growth was in the prior two decades, then there is arguably some justification for kicking the can forward and using borrowed money to cover today's expenses. if you do not believe that growth rate will be that great, then you have to ask yourself some very fundamental questions. what is our federal system really all about? people forget that, basically, under our constitutional system, states have the primary responsibility public safety for the public ever structure, for education, for health, in the

sense that they licensed doctors and nurses in nursing homes, they pay for them, and we have lost your perspective. medicaid expenditures have grown so exponentially and they will in the next three years before the possibility of funding the obama health care bill is placed before the congress of the immense states. because of increased eligibility and higher unemployment, because, under the obama health care bill, the state can reduce the eligibility requirements that existed as of the date of enactment of the obama health care bill, and because of the falloff in the stimulus money, everybody is quite correct, it helped enormously, but it also built a

cliff a lot higher offer of which the state will fall when that money comes to an end in the first six months of 2011. i respectfully submit to you that, whereas i have no political forecasting skill, quite to the contrary actually, i do not think it is reasonable to assume that stimulus will be extended when we are sitting, reading everyday that the federal deficit reduction commission cannot seem to put together 14 votes to do with the federal deficit and have increasing concern to people in a rapidly changing world. certainly, for people of my generation, these facts require a totally changed paradigm to

try to figure out what will happen in the future. i think it requires questioning every assumption we made about what is good and worthy in public expenditures and the relative entitlements or costs of paying debt, paying benefits, words that i never would have heard myself say 10 years ago, 20 years ago, or 30 years ago. but you have to question whether or not everyone in this whole economic system will have to put some skin in the game in order to avoid a real catastrophe for our federal system. >> thank you. thank you to all of the panelists. assuming that the governor does not resign, what the you advise

and to do first to deal with the budget problem? >> i think that we do not know that the fact that we do not know how -- a think that affected we do not know how big the problem is is fundamental. even if they do not release it, having some idea of how big the ditches will at least late in think about what -- will at least let you think about how to come to the table and take a wage freezes and increases in contributions to their pensions. >> when you said "maybe not tell them," the sec issued a cease

and desist order against the state of new jersey for failing to disclose all material facts in there are memoranda. where all the statistics were available was from the governor's furnished ratings agency, one may find that it will meet the test that are securities will require forever. >> they really have to take the delivery system to reach one of the major components and redesign the delivery system. that means prisons, which is probably one of the fastest- growing. we do just about everything wrong when it comes to prisons. prisons -- because we went

through the three strikes and you're out period, they have become homes for the elderly. to keep people there is about two hundred thousand dollars a year. we have to redesign a way we deliver a primary and secondary education. we will have to move to use much more technology in it. it means higher education will have to be changed similarly. you can only do politically one of these a year. but it is better to pick one, do the complete rework of the delivery system, and then move on. all of these have to be cut and redone in order to reach another level of sustainability to in long run. >> speaking of redesign and so forth, the two of our panelists talked about structural unemployment. what would you suggest that governors might do about

addressing that. how can they move or start to rebuild jobs within their economy? >> i began by a talking about more resources and apprentice ships. in other countries, where you have a higher share of young people getting their post- secondary training through apprenticeships, sometimes going to college after the fact and sometimes getting a valid credentials in that program. i think one of the good things, from governors stamp went, is that you should be able to attract some support from both labor and business. those companies that have

apprenticeship programs today are very satisfied with them. right now, we're doing everything in the opposite direction. we are making the post-secondary training a secondary program. a british ship does have courses that are linked to the professions that you are training in. a whole lot of the learning takes place on the job, in a job, getting paid, no foregone earnings, no long-term debt for students, a much greater transparency about what kind of job ladders they are looking at. i would believe that, if you move in that direction, you could have a great impact on these structural problems. there was a person who had a chamber of commerce group in texas that was telling me a

story about the demand for high level machines in texas, where they are producing high-level aircraft. they could not find any. as a good labor economist -- as a labor economist -- [laughter] i said, what are you paying? they were paying something like $80,000 to $90,000 a year for this job. there would to the community colleges and could not find a program. he went to the employment act community and could not find one person. it is not by far the majority of our unemployment, but it is a segment and you could do something there constructively. >> the two biggest lovers that governors traditionally would

push on for economic development of that governors traditionally would push on for economic development, they're likely to be places where they will be able to invest significantly. k through 12 is obviously the biggest source of expenditures. if anything, that is likely to go in a downward direction, although there is substantial support to hold the line there, whether you can get a lot of action at of the reform movements that the feds are trying to pay for and that the state to trying to embark on on their own is an open question. the work efforts, apprenticeships efforts, they can help with targeted populations. on the higher education, which i think is both community colleges and four-year colleges, it is essential. states are going in the wrong

direction. they are shrinking their funding. i think the va. -- the university of virginia gets 12% of the dollars from the state. i think the university of maryland is 25%. that is a pretty consistent model. state universities are only state universities in name only. infrastructure, again, the feds are talking about an infrastructure bank. that may be a source of economic growth and both short-term and long-term. again, those are expensive. they are already borrowing to pay their bills and are not likely to borrow for infrastructure projects. what can they do? some states do it pretty good job of trying to attract foreign capital. it is a very untapped resource. we are so used to attracting

domestic capital. it is the corollary of the president's initiative on exports, which is how do you get foreign companies to grow here? the money, a lot of the money that the department of energy put out for wind turbines and other types of green manufacturing actually attracted foreign companies to locate in an states instead of their facilities. the whole southern auto strategy is about attracting foreign auto companies. you heard about south carolina attracting a big bmw plant. that is a relatively untapped resource. i think it is interesting that bmw put this big facility here, pay workers a wage here which is about half of what they're paying them in germany. in some parts of our country, there is a low-cost labor alternative. we have to be careful to not engage in war is where you are begging your neighbor.

ohio has come to michigan and michigan has come to ohio. stealing companies' back and forth only ends up costing taxpayers. but if we could steal them from foreign companies, that is a different thing. [laughter] >> thank you. >> i agree with you fully that it is infrastructure and higher education that is suffering most by these cutbacks. nowhere near attention is paid enough to the things that rate is talking about. -- that ray is talking about. states are under enormous pressure on the issue of economic growth. the tax expenditure budgets of states are increasing and they are giving up an enormous amount

of revenue. new york gives tax credits that to have more movies made in new york. it probably cost us in terms of lost tax revenue $400 million to $500 million a year. that is a lot of money. the more you look to ever state to tax its way out of this terrible dilemma, the more you create differentials from state inefficientt cause vocational decisions -- inefficient locational decisions. to think that the federal government is not going to be able to solve these problems, if you look at the cost and the

allocation of burden between taxing people at the local level and taxing people nationally, i think that is a very different perspective than people are traditionally looking at. to me, when you have 41 million americans on food stamps and a 10% unemployment and i forget how many people below the poverty level at this point, you have a very serious national problem. i do not think you can solve it differently in 50 different ways. >> thank you. i have one more question while gearolks with microphone >>s up. some who signed up for the webcast, i have modified the question somewhat. the questioner will get it that

it is their question. in the midst of these adverse circumstances, is there space for governors to talk about or develop a children's agenda? i do not just mean education, but a broader children's agenda which may include early childhood development. that is for anyone appear. >> i would say that the head start is doing this. they had been before we hit the recession. they went into early education. trying to tie what goes on in schools with what goes on in the household, i think there's some research being done on it and has shown how ported it is to tie all these parts together. -- how important is to tie all these parts together. it seems like a lot of people are trying really hard to have their part of the budget not cut. something like a children's

agenda would actually require thinking about the trade-offs between should we spend that extra dollar on early education vs. health care. i think it is tough, but it is a direction we should go in. it seems like a place to go for innovation. you have to remember that the children's area is one with enormous fragmentation. just coordinating getting a better handle on what is available can be -- there is a lot that can be done in this particular area. at think it will be tough to get additional investment, but this is an area where a lot can be done through people really coordinating effectively in these programs. >> in this country, we still have four out of 10 children born to unmarried parents.

and there are some services that are done routinely at the state level. for example, the child support system is very state-centered. that system could do more preventive war, working with couples, working with families. the evidence seems to indicate that, as the relationship between the couple, between the parents, is at least as important as any parenting skills that they have in terms of the parent relating to the child. that is a huge area. people do not like to talk about perhaps. it is a little sensitive. but i think it is critical that we face up to the particular issue in terms of childbearing, in terms of how couples do or do not stay together, in terms of

maintaining a long-term presence with their children. >> we will turn to the audience. if you're either a behind the camera person or behind the pillar, you might want to get up and move around a little so that you can be seen. do not speak before a person with a microphone community. question back in the back there. >> i would like to direct this to the lieutenant governor. what would happen if the dollar was allowed to reevaluate through high inflation? >> 12 -- one [laughter] >> -- well, [laughter]

a hope that the politics of this country would permit irrational -- i know this sounds a low 90 -- but a rational process by which -- i know this sounds a little naive -- the rational process by which it could be relieved. by taking the debt holders to take a hair cut, by getting the public employee unions to agree on all new sets of pension

benefits, on wage freezes, in new york, we did a lot of things to make government more efficient. everybody partook, it that is the right word, of the composition of a set of obligations that we had subsumed because of excessively optimistic views and sloppy fiscal practices. i think states must go to some accountingrueleaccrual processes use and manage recurring revenues and recurring expenses. if we do not use our bonding capacity to rebuild our infrastructure, and we are in

even deeper trouble because this is infrastructure built in a totally different era with buildings and subways and roads and bridges are like us. they do not last forever. >> inflation does not necessarily solve the problem. there is a lot of cost of living factors built into things. for example, social security has cost of living bill then. bailout of the debt we are currently asia and europe now, federal it, is -- a lot of the debt we are currently issuing right now, federally, is the short-term debt. it will not necessarily solve the problem, but it would be a fair amount of dislocation. >> also, remember we are a massive international debtor. of the started to have big u.s. domestic inflation, we run the

risk that the u.s. dollar no longer becomes the currency of the nomination. i think the cost of that would be catastrophic, massive, whatever is the right adjective. i would strongly urge against thinking that inflation is the way out of the picture. i think it would be a lot of unintended consequences. >> i am bob from the tax policy center. my question is about why state spending up? how much of its is federal government returning it to the states and how much of it is states overspending in boom times? >> both. [laughter]

ray said earlier. our tax and budget system was predicated, was essentially established before medicaid was the biggest driver state budget. one of the things that has been fascinating for me to observe in new york in the last two years is that nobody's behavior changed. everybody assumed that the fairy godmother would descend with a solution somewhere. we have 650 school districts in the state of new york, everyone of whom has a transportation commission, some of which do not even have a school bus. [laughter] the reason we have that this, all politics being relatively local, everybody wants their boy jimmy to get on the basketball team were star in the school play and nobody wants to give up the power to confer

jurisdiction to a broader authority. it is the most inefficient system in the world. we cannot afford it anymore. >> we have a question over here in the front row. >> a lot of the changes in terms of structure have happened. i was a public official in the state of ohio. public employees did not receive raises. in the last budget, state employees were forced to take 10 unpaid furlough days, which will probably increase when the new budget is constructed. as i talk to my peers around the country, is happening there, too. with respect to higher education, which is a real problem, because of the mandates another state spending, higher education is generally the largest discretionary part of every state budget. as these mandates continue to eat up more and more the state

budget costs, what is left over tends to get allocated between higher education and other kinds of areas. but i wanted to ask if there's any state governor or particular state that is administering best practices, that is actually starting to look at the function of government, the operation, how things have changed -- is there anybody that we can look to for any kind of leadership for other places? >> yes. it really depends on the category. 22 states, for example, in the pension area, they have made changes in the last year. there is a lot in prisons. oddly enough, texas is a leader in prison reform. we had a publication out that points to various state and what they have done in these five areas or six years. however, no state has been the leader across the board. but individual components, there is a lot that is going on that is very positive.

>> do have a title for that so that people can look for it on a website? [laughter] >> no, i do not. i can send it to you, though. >> in the future, should people give their name and affiliation when they ask that question, there's one person here. >> i am with the d.c. crisis center. could you please adjust the counter argument that the job losses across all sectors and is probably not structural? i heard this argument made at a briefing at new america foundation. >> i thought i was pretty careful to say that most of it is not. but the imf studies are very careful studies. i think there indications show that it is a point or 1.5 is structural. it would be interesting if it

weren't not somewhat structural in the sense that you have these two sectors that have borne very big burdens of the job losses. many of the workers in those sectors have very specific skills. many of them to go on and get other jobs, but many of them have long periods of unemployment. the unemployment rate of construction workers is about 70% to 18%. -- about 17% to 18%. it seems to me that those are structural dimensions. when you say "structural," what we mean? it means that the worker is adaptable and is the work being produced as similar as a could be? are we seeing huge drops? we have seen a drop of 30% in construction production.

if the production mix were more balanced, the production shortfall, we probably would have a somewhat better employment experience. would it be going from 9% to 5%? no. would it be going from 9% to 7.8%? probably. >> let me point out that we're all talking about the same thing when we talk about structural unemployment. these are jobs that probably will not come back because of changes in the composition of output or least changes in the composition of employment needs. i think ed suggested that maybe manufacturing might come back in production, but not in employment. it is really about, if the nature of the economy is changing even in recovered or even in expansion, there will be

workers who will not fit the jobs that are created in the recovery. is that a fair way of kind of bringing this into focus? i think that, in one point, we are getting out of cyclical and structural. >> right. i think we have a big cyclical recovery. actually, some of the structural barriers may go down. some of the structural barriers involve things like housing and location, where you have very high rates of unemployment in certain states and some of the middle parts of the country you do not. but people are under water in their mortgages. they're reluctant to move. so we have a big element there. if i could mention one other thing, one of the things we have seen in the housing market that is quite striking is that rents have really not gone down.

so what you see is a very big change in the relationship between the monthly cost of renting and the carrying cost of a lot of homes in many of these very much down communities. if people are spending so much more per month for rent than they would have to spend to buy, why do they not just by? part of the answer -- just buy? part of the answer is financing, that banks made a mistake in over landing earlier and they are fighting the last war. of course, when they made that mistake earlier, the relationship between rents and house prices was a totally different situation. house prices were relatively high compared to rents. i would call this not exactly the instructional employment

barrier, but it does have implications, thattion vies box we are in visa th housing is obstructing the recovery. >> if nationally, 1% of the houses are in foreclosure, in the state of nevada, it is 3.3%. in florida, it is 2%. if you think that what has happened is a shakeout that needed to happen, we got overheated in these two states, but they will come back and start growing at their old rate, construction will then pick up and i think the amount of structural unemployment may be relatively modest. i still think manufacturing has

two things going on, both the cycle and changing how we will make manufacturing goods. i think there will be something going on in manufacturing. but housing, the real big question is was it a temporary hiccup or a permanent structural shift? if ownership rates will go back to historical levels, about 56% or so or the 60% we were at, then you have a different dynamic. it will reduce the demand and make people not change how we are making a house, but changed the demand for those skills. >> there was a question over here in the second row. >> tracy gordon, univ. of maryland. i have been thinking about innovation lightly. we here in washington that the

1000 flowers have $1,00 bloom, but you have to administer different programs and monitor progress. on the other hand, there is not much at the federal level for a bailout. another way to help states is by just getting out of the way. you mentioned the $150 billion the went to the states through the recovery act and another $3 billion that came with significant strings attached. i wonder if, looking for, there are specific ways that the feds could help the state by just getting out of the way. [laughter] >> i will take a crack at that. >> you are the man. >> every one of the mandates or procedural requirements were all by peopleplace of

of goodwill with important public services to be served. if one tried to calculate what the environmental reviews cost, in terms of delayed construction, loss of employment, at best a deferral of it, it is a staggering amount of money. but if anybody were to suggest in politics that you shortcut that process, i suspect that you would be treated as a first- rate neanderthal. [laughter] there are so many mandates and so many requirements. some of them exist for the protection of the public. it has to do with public safety, security. if the federal government will subsidize housing, they want to make sure that the subsidy is to the benefit of the people they

are intending to help. therefore, they have a lot of prophylactic processes put into federal applications, all of which will be at the cost of discouraging private investment. we have to make some very tough choices in this society. the likes of which we have never had to make before because austerity is now so compelling a factor in every micro-decision that government makes. i can begin to tell you how this process will work out. but i can tell you, if it does not, there will be some terrible things happening. at some point, someone will run out of cash. >> one of the areas that i think you could get a lot of innovation is if there is a lot about two hundred individual

grants that come to state and local government, some of which are matched and others are not, that have very specific uses. even if you were to do it through a waiver, all the states combining these grants or in certain areas where cities could combine with the state and move towards performance contracts in canada where you give penalties and oand/or bonuses for output - contracts in areas where you give penalties and/or bonuses for output. but the pendulum has just swan increasingly every single year toward more and more restrictions on this money. you cannot even get -- you used to be able to get waivers on medicaid and do some

demonstrations. we have moved very much in the wrong direction. >> there is one significant illustration. somebody on medicaid, if they were in managed care, the cost is substantially less than if they are done with managed care. because of the provision in the medicare law that gives everyone the right to pick their own doctor, you cannot get roughly 40% of the people on medicaid also on medicare -- you cannot put them into managed care because of the federal requirement not intended for the effect that it created, but intended probably to do what the medical profession wanted, to make sure nobody could be

prescribed -- nobody's choice physician would be federally prescribed. it is a very significant factor in new york's medicaid expenses which will exceed $52 billion this year. >> daniel. >> i am from the urban institute. i was surprised by the content of the talks. it was not until the question time that margaret could prod people into talking about employment. is it even on the table in the governor's offices to earth about this as a demand management problem rather than just -- bosses and to talk about this as a demand management problem rather than just a

management problem. >> the demand side of politics -- >> i do think that, if you talk to governors, they are trying to encourage job growth. they are mainly doing it through saying they will cut taxes and give tax expenditures to places. but governors are really interested in these two things. there is this tension. how do you do things if you do not have the money to go forward? i was going to try to get an optimistic note to tracy. at least in california, i think there has been, with some of the declines in state funding to local governments, a freeing of resources. california actually cut the demand for state school districts to spend their money

in categorical programs and actually come by any number of those programs into one block grant. so they gave some flexibility, which was an upside to the fact that they cut the amount of money the schools were getting by a significant amount. but at least it gave them some flexibility locally to decide how to best spend their money rather than making sure that all the boxes were checked. >> there is a question here and then i will move across. >> medicaid spending has come up frequently. with 45 responses. are there any -- with horrifying responses. are there any states with restructuring programs or ways that states could restructure this area they are spending in order to curb the constantly growing state expenditures?

it is it complicated at all but