point, it is not the only thing we should do. >> what do you think washington and congress needs to do? we have these theoretical areas of agreement between different camps and different areas. is it necessary to reorient the sales pitch toward national security or agreed upon economic benefits? clearly if congress with a large democratic majority and the president cannot pass climb at legislation -- climate legislation based on environmental worries, then any realistic path forward will have to chart a different course. what might that course be? >> there are a lot of levels to engage the question. for congress to pass energy legislation or climate legislation, congress has to be able to pass legislation.

[laughter] there is a very open question as to how the next two years may work. if you look to recent history, the closest analogy that people point to is 1994, the weight of over 50 new house republican members coming in. 1995 was a disaster, angry, a government shutdown, it did not serve the interests of the american people. in 1996, clinton and gingrich said it did not look good for the country, and they did stuff. they did tax reform and welfare reform. they tried to lubricate that with the number of small proposals that got congress talking to each other in passing bills. congressman bayer ag made a number of very constructive remarks about how he would hope

to restore -- congressman boehner made a number of constructive remarks. i think the president's will find it a little more of that purple nation passion that was dominant in the campaign. there is in a question that some andthe voices coming in to was washington appear to be anti- government. some would think that some of the more aggressively hostile folks to government might actually push the republican party towards a more -- that actually can get things done. it is my view that that the worst number did for the democrats to have in the senate is 60.

it cannot go in and compromise or you are a bunch of wimps. they are locked then to progressive proposals, but you cannot pass any of them because on most issues have dozen democrats do not agree with the in stings of the majority. the alternative is just to pick and choose. i think the one direct response offer is, if it is a sales job, it will fail. it did not work for the last two years, constantly repackaging the same agenda, hoping to find a different public resonance.

there was a lot of polling that said do not talk about climate change. a lot of talk about military leadership and national security. great messaging, and the legislation really was not focused significantly on oil dependence. i think the green jobs metaphor worked very well in the areas of the country -- the middle of the country felt like it would be great for them and further in equitably jam us. once a month was an effort to repackage the bill, rebranding. we have to enunciate policy ideas. it has a very legitimate, principal goals, different from climate, that also have a climate and energy bills.

a lot of those exist, but has to be more authentic, sincere effort. >> one other driver of change in washington are unexpected outside events that suddenly come to dominate the news. there are areas of concern. we talked about the whole set of issues around reliability. you mention the possibility of blackouts and other things that could intrude upon the conversation and help focus voters, elected officials, on some of these issues. what do you see lurking out there, big possible issues like that they could have an effect? >> there are over one trillion

dollars currently in the system. it is very regional and very restricted to certain pockets from an engineering perspective as to how you move power around. there are pockets we see a places in the next four or five years where there will be a mismatch between supply and ultimate demand. there are other pockets where supply is two or three times more than it needs to be. the simple answer would be to build more transmission or to upgrade the ability to move it on a more national basis. i just think that is somewhat unrealistic. we have a system in 58 separate pact workpieces. it has gotten better, but it is still very cumbersome. you see wonderful economics on some of these short transmission lines to alleviate some of these problems. the answer to your question is, there is little getting built in

general. we are not even building gas right now. the perception is that the economy remains well. the perception is that your option is on a two-year basis to build a new gas plant rather than nuclear or something else. i am optimistic that technological, we will make a lot of improvements in some of these things. some of these things will grow the supply base, but we are not going to displace incumbents. we will have these mismatches, and i think the system will fail. the system did fail three or four years ago, and the response was quite minimal. i am not optimistic that even the shock value of that dramatically changes the way we think about using power. >> we have to have that view of economic growth.

the recovery will get us back to the point we were at, a point of high stress. just recovery will get us to the point of high stress again. we bought ourselves a period of complacency that has not changed very much. it comes back to, can we find the themes and visions that are big? we continue to spent $500 billion out side of the country. that is a big ronald reagan benefit cost some of money. that is every year. in the electricity sector, we are already spending $80 billion a year in capital upgrades and changes and improvements. over the next 10 years, that is $800 billion. if we had a good signal of how to orient that cleaner with investments that will be worth something in the future, that can change the equation.

you'll still have-dominant, which is great. this ossified market, because we have all this transposition, why don't we have a nationally competitive electricity system the way we differ cell phones, television, and cable? all these other sectors are nationally competitive, which means they have big players who can invest in really big, efficient things. we have but 200-year-old power generation system that creates this kind of situation that jeff described. the big thing is, economic growth is green. just in unleashing the capital, all of those investments as a general matter are going to be cleaner and more efficient than

that which is present. there's a huge opportunity in unleashing the flow of capital again, but you need solid bipartisan agreement. there are a lot of people just sitting on literally trillions of dollars of capital because they do not know what government is going to do next. just putting on a striped jersey and blowing the whistle and saying we are done would be one of the most professional things the republicans and democrats could do in america right now. never say never. >> i think you just outlined a wonderful transformer division of the future which might be possible with a benevolent dictatorship. a lot of the things i support we could have passed and more functional legislative moment. the bush administration's aggressive effort toward

competitive electricity markets created more backlash than people anticipated. what can we accomplish within the condors of the government whip or about to choose? we have not talk much about the interaction between epa rulemaking and congressional action. the issue being raised on reliability is in addition to the baseline challenges that jeff laid out, what would be the impact of layering on these additional rules, which many in the industry are calling a train wreck and many in the environmental community are saying are overdue health protections promise by the 1999 clean air -- clean health act. -- clean air act.

i agree that despite the fact that carter is in the cross hairs, it is not likely to be the leading mechanism for both political and structural reasons with the act. the statute is very explicit that there is a three-year window to implement these requirements. there is not a market based trading system, nor should there be for all local impact to air toxics. we had a forum last week which framed out those different views. that is an issue that has to get reconciled. it is an old school environmental discussion.

>> there are three things americans expect. they expect clean water, they expect the lights to be on all the time, and if they are off, they should be of no more than 30 seconds. third, they expect their gasoline to work. those of the three most reliable products in america right now. if you touch any of those, it is a political challenge. >> there is an expectation of health and safety there. >> whatever the epa does or the congress does in response, it will be oriented on a policy that allows those three things to continue. that has been the reality the last 40 years. whether it is water requirements for air pollution controls, it has occurred on the schedule and at reasonable cost that has

enabled the lights to stay on. now there will be this big debate over how far and how fast we get. this is an example of the problem of a five-year policy rather than 820-year policy or a 40-year policy. you always bang up against that wall. that is what creates the political problem. you and think about adding water controls if you know where you are going. we in the power sector, when we make an investment, it is there for 50 or 60 years. it would be a lot better to see what the package looks like and then let the market sort out how much cheaper you can get there. that is a classically republican thing. >> you have to be realistic here. epa has legal obligations, and it seems to me is very good to have an epa that actually

respects the law. >> the thing that gives me concern is -- i strongly supports air pollution controls and a reasonable transition on some of these other factors. the way to transition them -- the problem that ends up happening with epa is, they come up with a policy outcome, it gives litigated and not implemented for at least 10 years, and then it is substantially modified. there is a constant lag in what epa can do. the epa approach is still a challenge. we have a broad consensus on 70% cuts in air pollution. because of some french liberation --fringe litigation, it was thrown out. the rule was put in place in 2005. that is a travesty, which is

why -- you take the journey trying to hit the first few miles. if we know what we are getting, maybe we can find some ways to steer us down that path a little more firmly and more cost effectively. >> the non-political view here is, we are coming on almost two years since the incentives were passed. if they expire, they will expire 40% unused. the implication of that is that if i made an application to build a facility the day after the incentives were proposed, it probably took me 12 to 18 months to get an internal study. it probably took six months minimum for my application to get a loan guarantee to work my way through the doe and hope it would find its way to approval.

i only say that as a practical user of these, regardless of what is decided, we are to read three years away from any real impact, in my opinion. i think that is the real urgency, and is the reverse problem for the financial markets. the rules are undefined. it is a by derrick outcome -- of outcome.inary that is the real challenge as we work with clients. not only how the policy gets constructed, what the rules are, it is the timing of it. it is so far out that the discount rate is quite high. >> i want to encourage people to begin lining up. we'll take questions in a few minutes. >> the last two questions point to the high water mark aspiration for legislation over the next couple of years.

that is the power sector focused bill. many people toward the end of the last debate felt like the only possibility you had on anything like a carbon policy, and i will not go into all the rationale, but that is an effort that we tried desperately. it has not had the time to be tested. the acid rain program has been going on for 20 years. jim reilly was saying -- right lee was saying that congress could do a better job laying out real certainly -- there are ways disposal obligations and the dividend treatment for the powers sector that is about to expire. it is very important to them but has a lot to do with the bottom

line. if you wrap all those things up, as well as providing a path forward for renewable power through a divorce energy standard as opposed to clean energy standard, that is a package we could have a conversation about, i think. i think you could get some bipartisan support for its attlee's injured in to a big piece of legislation. the legislation had a lot of support. to my mind, that would be the largest constellation of issues that you might imagine congress moving forward on that would have a significant energy, technology, and climate impact. almost all the ceos of the power generation companies agreed to

80% cuts by 2050, agreeing to the president's campaign goal of substantial cuts by 2020. you have a commitment to achieve the goal, and then it came to the table with a policy designed that would significantly minimize the regional differences and the overall costs, but then have a cap that says if the costs do get out of control, then we will slow the program to that costs and get it back up again as turnover occurs. there was a consensus from almost all of the power companies, which is rare, to say please regulate us and we will solve most of your political problems for you. you never get that, and yet the effort was botched for reasons that we can go into another time.

there you have this remarkable consensus sitting there, but these things only hold for a certain period of time, and then people fall back into their conference phones. there is an opportunity there -- people fall back into their comfort zones. the centrists need to grab this and strike with it. >> the real question is, what will we have after november? i agree with the centrist way of doing things and i agree with jason that this is the best possible approach. i worry that we are not going to have any centrists. i am an observer of the politics, is maybe the way to put it. i think it will be really hard for the republicans to maintain discipline and get together,

depending on exactly who is elected. getting that caucus together is not going to be easy. the democrats have never had an easy time getting together, and after some amount of defeat, it will be even harder. that will be struggling with what they do over the next two years. much as i would love to believe we should never say never and that we should aim for this and work for this, i think we have to be realistic about what we have. we have to do the best we can with what we have, which is the market and the epa rules. >> there is no deep party energy plan. -- note tea party energy plan. >> the challenge the republicans face is what is the alternative? the traditional cavan trade is one alternative, but there are other approaches -- the traditional cap and trade.

>> if people want to get something done and can actually do it, which is an even bigger question. >> if people want to line up, we will take questions for the panel. we have a microphone here and here. a last question for the panel is, one of the things that gay people such hope and optimism that something will get through congress this session -- that gave people such hope is that the power companies were lined up. given that even the optimists don't see anything substantial coming out of congress the next few years, i am curious how businesses will make decisions. they have all this money and they are waiting on the sidelines for some sort of certainty, but it does not look as if it will be forthcoming. how do you make decisions about where to invest, given the reality we are likely to have a week from now? >> you make minimalist

decisions. you operate within all the constraints of uncertainty and you take very conservative -- make conservative choices. consolation did not make a conservative choice. we are growing to dedicate ourselves because it is a big long-term benefit to our shareholders. that is what you want to see, just like you see in telecom. the big companies can compete nationally, and they put in these big fiber optic networks. they go after the big things. you'll see a big focus on gas. the smart grid stuff works well. the regulators always want to play with how they do it. it is hard to make investments on the efficiency side without a lot of delay and a lot of extraction of profitability.

right now we are seeing all the players being very cautious. we are doing lots of renewables, but we will stop with the incentives right now because it is not profitable anymore. lots of small, incremental decisions, which is why we have this clunky system for electricity that we do not have for natural gas. >> was sort of advice do you give to clients who are seeing in these incentives about to expire? the term was a nonfunctional legislative moment that we are staring at. how do you make a decision like this? >> i spent most of my time in that realm. there are two camps, the state

and local regulator who must buy into their vision, and the regulated entities are taking more risk right now than the private entities because they have more duration in the analysis of that decision. a neighbor who is doing it without regulatory concert could not raise the capital and would not take the risk of that duration. i think it is very short term. people are playing out their short-term options. the long-term ones are very unclear. people are not putting capital at risk there. obviously, when there is this much dislocation, there are some very aggressive entrepreneur rs who will bet against the outcome. it is a very difficult

environment for board of directors or management team to figure out what is the right answer for shareholders. >> that's opened up for some questions. please just take your name and organization and who you would like to direct your question to. >> i am blake smith from george washington university's program on environmental and resource policy. turning the message around, selling smaller legislation based on the measurable economic and alternative benefits of a certain policy direction or investment, rather than taking the all at once approach. two weeks ago, i spent an entire afternoon at a conference listening to some brilliant minds in the field of climate change. basically, i was listening to them losing those brilliant minds in the face of a complete lack of common framework in

which to quantify and monetize the benefits of these various policy directives. how do we do it? how do we quantify the benefits of climate change legislation in order to try to sell it? >> that was one of the important questions from the last 18 months and we are trying and failing to sell climate change legislation. anxiety about market implosion in general undermined confidence. there was a deep distrust of big, coastal businesses and the government basically feeling that the government bailed out the banks, which is hard to justify, but that was the mood in the country. i think we lost progress on the fundamental concerns about

climate change and we chose not to really directly try to talk about the economic benefits. my point is that i don't think we are going to recover from that by next january. rather than crashing into that same wall again, there are other important legislative strategies. when we think about a national building code, which again, it in national building code is a really big deal. the idea that we will change energy policy through the energy

development authority. there are a lot of things that do pale in comparison to an economy cap and trade program, but i think we would be mistaken if we thought the work of the little items. i think if you put those efforts forward and were successful, you could have a program that generally affects the economy of carbon without the architecture of a carbon caps. it would not be as cost effective, but it would provide the beginnings of an ecological path. >> the other point i would add -- the other piece of this, if you think of the debates that led to the energy bill, it was energy security. there was the strong desire to take a run at serious competition to oil for the transportation system, and some big things were done. it was an incomplete job, because the efficiency is good, and rubles get you so far. but the big displacement is

electricity in direct competition to oil, just like gas is in competition with coal and nuclear in generating power for homes. that is the big opportunity, and there are a lot of republicans that are on board with the energy security agenda. you do not have to get them to change their mind on climate to care about that. that was not undertaken seriously. i think the last 18 months was trying to cloud a climate change the intention and conversion program and use that -- and use energy security as a level. but energy security israel. it is great to have oil. >> and so is climate change. >> that is true, and i share that view. if you have strong, overlapping goals, the energy security is substantial. but there was not a legitimate effort to work that point,

because there was not any real out reached on that within the legislative process that can occur now, but this is the challenge for republicans. they are really in front of that. how serious are they? how serious are they? i know a lot of them are who got behind the tool mandate, which is a cap and trade program, just in case you did not know. the fuel economy program is a cop and -- is a cap and trade program, and the renewable electricity standard is a cap and trade program. we already have three big cap and trade programs the republicans and democrats have supported. we can follow that a little bit. i think if we really went after energy security again for real, and thought about a competitive piece of it, that would begin changing as well, but with precaution of do not try to do everything at once. there is a lot of support for

that. >> i think it is the single biggest problem in the entire debate. there is not one person in this entire room that does not agree with the motherhood and apple pie a piece of this. we want clean air power, water, air. the problem is if you look every single race, and there are not more complicated rice -- races right now and we have seen in other election cycles, nobody is willing to pay for that at the grass-roots level. it has to be done at the policy level, just like national security, just like energy security. i do not think we are born to win at the grass-roots level until the economy is back and people have discretionary dollars to fund the social good. that is a cultural change which is occurring. if there is an optimist in me, it is that my kids are a lot smarter about this than we were. that is what we have to bet on, besides technology. >> state your name and affiliation. >> and jeff of great point.

i am at the nato foundation, sr. program manager, environmental affairs. my question is for eileen and whoever wants to weigh in on the panel. in the short time, the economics of the situation in terms of market driven renewals -- policy does not seem like this point to change much in the short term. but after things like katrina and the hurricanes of 2008, and after the bp oil spill, there always seems to be this uptick in interest. i think proponents of climate change legislation sometimes say that stinks', but in the grander picture is probably good to have john q. public see things like this, because it really brings a face to things. offshore drilling is a little bit risky. perhaps the fear of armageddon might get people to act a little differently. my question is more or less how do you feel education and

outreach is the important thing to make people see the things they normally would not see? disasters hopefully will not be the thing that cause people to take notice of this type of thing. how much is it just the fact that maybe we need two or three more major disasters to make people take notice? >> bp did not seem to do it alone. >> actually, that the sort of interesting. there were a lot of people in the environmental community who thought the oil spill would make the difference, change the mindset, and push climate legislation over the edge and into something. in fact, it did not happen at all. it actually was not something that happened. on a broader question about education and outreach, we can talk about a lot of reasons the climate bill, even a smaller one, did not pass. but one of them has to be the confusion that was so within the

pr campaign by people who did not want to see this happen. so, climategate. it snowed in washington last january. all of these things had an effect in making the public wonder whether climate was real or not. even though some of these -- none of these things, the areas in the ipcc report did not change the basic. climategate -- people feeling a lot of pressure lashed out at others. but it did not actually undermined any of the basic science. the winter -- let us look at the summer. get real, here. it is not good to be the one cold winter or one warm summer the really makes the case. i think a lot of the public were worried about the economy and

their jobs. all of this stuff seemed to question whether this was real or not. the media, in my view, play this as a huge deal when it was a deal but was not a huge deal. it did not undermine anything. >> i do not want to talk. but the effect. people do not believe in global warming. >> it is illogical. the studies in "the national journal" looked at oil -- looked at all of the republican challengers. do you support the climate science question? only one of the non-incumbent republican senators actually said -- >> see how long he holed out. >> which was ron kirk, who regretted his bout -- regreted his boat and has gone back on the science. it is this is the logical thing. there is general confusion. i think education and

explanations without hysterics, are really important here. a lot of people see these changes when the flowers bloom or do not bloom. they see lots of little things and have not really added them up. they are not asking to pay for it. they want it to happen, but they do not want to pay. >> that may be the question. america is typically more motivated by inspiration and fear. it is more back to basics. i personally believe this third time around is going to be the tipping point on the electrification of vehicles. the technology will let people know that when the refuel the vehicles overnight it is the equivalent of 60 cents of gasoline. that is phenomenal. they are going to realize just as they do at the pump, they are going to realize that it is one- fifth the current price of

gasoline. they are going to think that is kind of cool. can you package that? can you sell it? can you show it that people want at least one of their cars to be that? if i think the transition can occur. that is a lot bigger than trying to do a fear campaign off an oil spill to motivate people. >> i was not talking about a few campaign. i was talking about a logical, rational -- >> it has not motivated the body politic. people are looking for solutions, is my point. if you can give them a vision near-term that there is a reasonable economic benefit trade-off -- we are born to be building new power plants to replace the old ones. it the policy is designed on that capital cycle, you can get a lot done relatively cheap. it is only when you try to go too far too fast that you wind up with these policy debates. and that is where we find ourselves, trying to push a reasonable transition period if

we start with a reasonable transition, thing step ahead. >> i am a retired consultant. there was some touch on human behavior, the fear. how about economic incentives? you touched on this lightly. i can change my behavior if i see economic incentive. i use water, electric power, gasoline, home remodeling. a lot of decisions i make can be changed if there was an economic incentive, because most human behavior is transformed if there is economic incentive. the housing industry, you name

it. there are various ways to transform consumer behavior through economic incentive. somebody can leverage so i can make choices based upon benefit to me, savings which i can derive if i have better choices as an economic incentive. >> want bit of -- technology of energy is on a collision with communications, the i.t. sector, and biotech. on the communications side, as jim was alluding to, if you can line up pricing information and public attention, we move people. but you need all three of those things, which is what it always seems tough. we are better getting one or two out of the three and all three at once. i do think government is never going to be particularly good at that. there are some nifty efforts out there. my favorite is power companies that when they give you your

monthly bill tell you how much you're using compared to your neighbors. that seems to motivate people. you can hear these conversations between dads and a 13 year-old kids about how their sons stereo is on because it uses twice as much power. or maybe it is hair dryers. nevertheless, it motivates the conversation. the electric car companies, huge advertising efforts. look at what the car companies did with the cash for clunkers program. people knew about that. if it were up to government, 16 people would have cashed into their cars. >> that was very inefficient. >> i think that is going to be the truth of government is making sure the information is accurate. that is the government's role, to police the data accurately. >> i would like to thank the panel. we are going to take a 15 minute break and be back with another panel on how to transition to a

low carbon world. [applause] host: >> you can step next door for coffee. while you are there, the free to take a look at the display of the 787 reminder, the new highly sustainable airplane from boeing. sit in the chevy bolt, the new electric car from gm. have your photo taken and be interviewed by our roving reporter. we will be back here in 10 minutes. >> next, a conversation about emerging digital technology with industry leaders from a three- day innovation summit hosted in new orleans by "the daily beast." this portion is about 45 minutes. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> let us go and see one more video if we can.

>> we are waiting for the -- there it is. >> people want to go to the internet and check out their friends. why not go to a website that offers that. they are talking about taking the entire social experience of college and putting it on line. >> 2200 hits within two hours? >> 22,000. we do not know what it can be. we do not know what it will be. we know it is cool. >> if you made facebii ook -- >> we have groupies. >> $1 million is not cool. how about $1 billion? >> that character is supposedly planning sean at parker. justin timberlake is brilliant

in the movie. that is not shown parker. this is sean parker. let me begin with a question for each of you, which is we all live in this digital revolution now, and to simplify there are two types of people who respond to the digital revolution. there are those who lean back and say "woe is me, and is in the internet terrible," and all these things. they tend to get drowned by the way. then there are those who lean forward and say this is an opportunity, not the proper -- not a problem. to each of you, what are you doing in your company, simply put and shortly put, to write the digital wave? michael? >> i will start with h-p. one of the things we are doing is providing the infrastructure.

you would not have many of the services you are seeing without servers, without storage, with the networking capabilities, without software platforms that actually allow it to take place. we are sort of the engine behind a lot of the creativity that is taking place on the front end that are all of the applications, the software applications and software that are actually creating these environments. they are using the technology from h-p that is the foundation. what we are seeing that we are very optimistic about is a more connected world. for us, when you look at the ability not to scale -- the ability now to scale globally, and the opportunities you have for commerce, collectivity, and engage consumers around the world, it is something incredibly exciting. for instance, what was once barriers to distribution and geographically are not taken away.

i think what technology has done is democratize all of that content. it has created an enormous amount of conversation, an enormous amount of engagement. it is about how you manage that information in a way that will benefit your company, your you will not be using one device, but conductivity is incredibly important. >> i thought your question would be "we think is going to play each of us in a movie. >> , bonnie hammer is going to play you. >> i was thinking anjelica huston. that is what i am going for. to your point, in every country -- every company, there are the

lean becks and dealing forwards. if you are lucky, that exists in the same person. there is something to be said for recognizing the attention of a new device, new technology, new audience segment. the world wakes up every day, and there is something new. when you fall off the cliff every day, you're not going to win. if you give back 300 yards every day, you are not going to win. if we look for people who have the right sense of distance from jumping too early vs staying back forever end the wave hits you in the back of the head. >> what are you doing leaning forward that is innovative? >> there is nothing we are doing that is not innovative. you know, my company is nbc universal. we backed a thing called who loot. that is counter to the thing we make most of our profits from today, but it is a leap toward the future that we are not fully embracing or able to embrace economically yet. in my small world, i took on a

behemoth property called iv illage. it is the largest digital community for women on the web. it has to have and is already yielding tremendous value of around thousands of hours of original content for women and lifestyle audiences in my other businesses. most importantly, the actual devices, whether it is probably being the first digital partner of twitter -- whether is bravo being the first pitch to partner of the twister witter, groupon. do not make your mind as a vision problem your customers' problem. we are ever where they are, content, shielding our problems from the consumer. >> our job is to essentially help our clients and win the war

for attention for their brands. when we listen to our clients, they generally say to us the cost of waiting has gone up. we need our brand to move more quickly. they also say we need to stand out more. some of the things we have been doing is we have created a way of thinking and doing which is called a beat the genius, which allows us to rethink the processes that typically take a long time and innovate them in a way that we can get to insights, get to ideas, create ideas and get them into the marketplace in time for clients to have a competitive advantage. another thing we are doing a lot of is something we call a test kitchen, where we have a lot of the newest technologies and gadgets that are available. we work in partnership with "popular science" on that to call the but the most interesting ways to engage with the consumer. we are constantly working on ideas that are going to be interesting, useful, and highly

engaging. >> among the things you do is you invest in new companies. tell us about what you are doing. >> as you guys may know, i was one of the founders of maxtor -- of napster, which 10 years ago unleashed consequences which were somewhat unintended. we sort of believed that the record industry was run by a bunch of rational minded business people who would see the clear reason in our arguments and would recognize that if maxtor -- if napster were never shut down, given that we had this wonderful central control of virtually every music listener in the world, which could transition the user base over to a legitimate service. it would be a fairly painless transition. we were wrong. they shut down napaster,

and it was like what the mole for the next 10 years, shutting down every piracy site that popped up. a big part of what i am trying to do with spotify is continue what i started with napster. the distribution model for music is broken. numbers are down. numbers were flat on itunes when it came to years of music, and it looks like it might now be down. the music industry is on the second phase of its decline. i should say the record business. touring is extremely healthy. record sales as we know it is down. it has gone from a $45 billion yearly industry to roughly and a dollar billion yearly industry. those figures may be a little bit off. -- to roughly an $8 billion yearly industry. those figures may be a little bit off. i broke it.

those numbers seem to need to be figured out. the seven affected in various ways by the move to digital distribution. we have to come up with a novel model. i do not think it is one size fits all. i do not think the same answers were publishing, broadcast, and music. that makes it challenging. >> what is the answer you came up with with spotify? >> the ultimate answer for spotify -- i do not know how much of this has been explained publicly. i will dance around it. the ultimate answer is that you have to accept that the war on piracy is a failure. you have to be willing to believe -- you look at the data. somewhere between $4 to it -- summer before -- somewhere between four trillion and 10 trillion songs are downloaded a year and we are looking at almost 1 billion legal, it's a year. it is orders of magnitude. people are learning about music

through their friends and going to pursue networks and downloading and trading in on hard drugs or private networks. -- trading it on hard drives or private networks. what are people willing to pay for? i think the answer is convenience and accessibility. the model where you have unlimited streaming on your desktop but the contact -- but the content is locked on the desktop, and cannot be moved to any other mobile device, but is unlimited streaming within the closed environment on the desktop -- the get addicted to it. you get the song stuck in your head. you end up building a music library that is 100 times bigger than anything you have ever had. at that point, you have no choice. if you want the content, you are going to have to pay for it. you are going to have to become a subscriber. that is the hope. it is something the music industry has been afraid to do. i think they are about to take

the plunge. i hope that in a year spotify will launch in the u.s. and be able to execute the model. i think it will be a destructive event. >> let me pick on something the previous discussion touched on. one of the interesting things about the digital revolution we are living through is the question of who becomes a super flows middleman. -- superfluous middleman. if i named some industry, in a response of a little more than 140 characters, if i said a major movie studios, a dinosaur or not to, you would say what in the future? >> i would say not. >> because? >> i think having spent many years there that content -- that there will always be a need and a warrant for contact -- for content. the structure of how they finance movies and go to market may change. how they are distributed and

modified may change. i think there will always be want and a need for great content. >> as a member of a major studio? >> a card-carrying member. i say look at sports. that is every answer. look at sports. look at sex, look at sports. it is what people pay for. sports is a perfect example. technology has gotten better. radio was terrific. tv was okay. hd was amazing. 3d is going to be awesome. people go to baseball stadiums, football stadiums, hockey rinks. the light to go together and drink beer and see people even from the top row, doing what they do. that is a similar experience to movies. >> i would say it is here to stay. i agree with michael that content is incredibly important. people are craving more and more content. if the quality is good, it is

going to be useful and the label. what they will need to do is find new ways to distribute it and monetize it in good ways. if there is a way for people to be able to see it at the same time as it being released in theaters, or new way to access it, it will be important. >> are you in chorus on this? >> basically. i saw a great talk by james cameron. he said i know everybody is buzzing about twitter. he says avatar is the anti twitter. that struck me. wait a second. this is years of production and hundreds of millions of dollars invested for a one time event that is massive and culturally influential. it really is the anti it social media in a lot of ways, yet it still works. anybody who is sounding the death knell on the movie industry is either completely wrong are premature, because that model still works. i do not think theatrical is going away. i think you'll find a new

distribution models as the d.v.d. business shrinks. >> what if i change the industry and i said advertising agency stac? >> creative shops or media buyers? >> both. let us say advertising or marketing agencies that have both. >> it is interesting that you can reach 600 million people on facebook. you can micro target them and pick up literally billions of impressions, billions. that is for less than a million dollars. there is something destructive about that, the number of businesses that have been built entirely off of advertising on facebook, big businesses like zinga. it is food for thought. you look at any economic

recession or depression and ad budgets are the first thing to go. it is the fact. it is superfluous spending. >> that are in your view a challenged industry? >> i think it is a little too soon to say, but my prediction would be that the ad agency goes to another contraction over the next five years. >> given it is my business, i am going to have to say that it lives. but it is definitely going through tremendous transformation. and i think a lot of what we are doing today is less about messaging and more about making things. you know, creating utilities and creating products for clients that are actually really useful for consumers. so i think the kinds of things we are putting our creativity into are definitely changing, and that is what we really have to be conscious of is where will the ideas add value to consumers and within the process. >> newspapers?

>> newspapers. newspapers is communication of entertainment, information, and journalism about events on paper, but i think the format may morrph. but the need is similar. you need people who are experts at things, who are much better than other people at things. if you think people in marketing who understand consumers, who like research, who like to stand in the rain and shoot a car commercial -- they are better at that than just a person who buys an audi. if you think that is an area of expertise, those people are going to stay as expert. maybe not at the same quality agency. in the same way, people who are better at delivering news and information might be very important for us to hear from somebody in a war-torn country in 140 characters or less. they are not particularly good

at it, but they are there. that is important and we should accept that. but newspapers -- we need information for consumers. that will stay. >> let me move on and ask another question. i just arranged an appointment for you with one of the major advertisers in the world. i want you to pitch michael as to why he should hire your creative shops for h-p. [laughter] >> i think because we have a digital backbone that runs through our agency, we are able to basically gather insights more efficiently. we are able to listen to social media. we are able to take behavioral data. we are able to use techniques that are much quicker so that we can find out what consumers want. we are able to follow their behavior through the digital space so that we understand where they are in the purchase

cycle. are they just in a shopping mall? are they ready to convert and by? my understanding of where the mind-set of these consumers is and being able to market the right message to them at the right time, we are able to create action more efficiently and effectively than others. we also have the ability to produce everything and to end digitally as well, so there are no pass sauce and handoffs that end up taking more time and complexity. i believe that our fully digitally integrated model and process allows us to get messages that are more relevant, interesting, engaging to the market's very quickly. >> the she engage with that pitch? >> i think what is important, some of the pieces she said, is what we know of mass communication has been redefined. what was once a model of one to many has become the model of the 121, many too many, many to

one. it is understanding that environment and understanding that you are not in a destructive mode. you are in an engagement mode. that behavior of data on your customer's becomes incredibly important. and knowing and understanding them and being relevant real time dynamically becomes important. what has happened, which is why i like the point about integration, is many of the marketing and communication departments in companies are silent. you have the commerce guys. you have the retail store guys. you have the mobile guy who is maybe just doing apps because it is the latest thing. none of those environments are integrated or fluid. as a customer comes into facebook, into h-p, you're changing environments. when he goes to the commerce -- ecommerce, it looks like another company. we want to make that fluid at h-

p. we are seeing an enormous trend, and it is a credit to facebook. people are coming in horizontal it. they are coming into blogs, to social networks. to understand the digital environment, building a fluid experience between your retail stores, mobility, your web capability, and you're go to market becomes incredibly important. most people are silenced and disenfranchised. the customer becomes lost in the process, you have abandoned a brand. we believe the center of a brand to day lives in the web. it is not the 32nd spot. >> i agree with that completely. that is why it is important to figure out your buyer, what their level of learning is, what their interest is, so you can

speak to them at a level that is most engaging. >> i would go one step further and say the web is the beginnings of a new hub, but that have already has spokes. the one thing nbc universal has done a good job at is putting our own particles into this giant horizontal, where you can come to the 47 brands of nbc universal, which includes the studio, the theme points, digital. what i am getting to is the hubbub may be the thing called online, but there is no brand without new media and social media that can activate its consumers in this new hub. i would agree it is transformative. >> michael, what percentage of h p's budget is still going to 32nd spots? >> i will reverse that. i will say 40% of our marketing and communications is spent

digitally now. that is the entire marketing portfolio of h p worldwide. >> so 60% is traditional advertising? >> and sponsorships, events, etc.. there is a multitude of channels there that we would use. i would not say it is all traditional. >> let me ask you, sean. 10 years ago, when you code- founded -- co-founded napster, you were opposed by the music industry and a lot of folks in the copyright business. you were defeated by them, as you mentioned. have you changed your view about copyright? >> you know, i do not think my view was ever hostile toward copyright. >> you did say that the emperor -- the content industry -- has no clothes. >> that much is clear.

but that was more or less -- that was a statement about the fact that, you know, it was not that there is anything inherently wrong with copyright. we need to protect the artistic and creative incentive that is the purpose of copyright, and giving artists economic incentive to create in a way to generate money, creating their art, which is good for them and also good for society. you have to protect that. but if you are reactionary and are sort of unable to deal with a changing landscape, you are going to throw the baby out with the bathwater. that is essentially what happened in the record business. i would not say my view on copyright has changed. i think copyright is actually important. i just think that the industry has been slow to raise the kind of experimentation and new models that are going to be necessary to figure this out.

the music case is the hardest case. i think it is more clear what you do with them. i think it is somewhat more clear what you do in publishing. there is going to be, as we have seen, a big decline in publishing. but the music case is really tricky. you have a leaky ship is really what you need. you cannot have an air tight environment where all content is secured, because it creates barriers and obstacles for the user will like these drm models. they were just too cumbersome. you cannot execute them on the most important player in the industry, the ipod. the interesting question is what do you do about the ipod monopoly? that is the interesting question. it is tricky. if you look at every prescription -- every u.s.,iption system in the

the cannot move content to the ipod. where is apple's real monopoly? it is not the iphone. people claim it is a restrictive platform, they are controlling everything. that does not matter. that is 3% of the market. that is tiny. the ipod is the dominant music player in music consumption. if you want to operate a music service in the u.s. and cannot directly port your music to the ipod and you believe the thesis that people are playing for accessibility and not necessarily the underlying content -- if you believe that thesis and cannot move content to the ipod, you are screwed. >> you mentioned earlier that hulu is against the basic business of cable, and broadcast arguably as well. it is a free internet service that three networks are now

participating in. you are about to be subsumed, nbc is, by a cable company, comcast. >> it does not carry fox right now. >> do you worry about the napsterization of television? >> meaning? >> everything is free and the paid model goes out the window, which is the cable model. >> sure. we all worry about tremendous equity that has been built up, a tremendous fees for consumers who have been paid -- have been trained to pay a certain amount of money in month. i think it is kind of to your original question. there is a great tension right at this moment. we are in brackish water. tremendous crosscurrent.

it is hard to move forward, let alone keep afloat. that said, things tend to move, things that are viewed as watershed. they tend to take a while to build up pressure and then release. >> but if you were -- if brian roberts came to you, the ceo of comcast, and he said to you, "i know nbc initiated hulu, but it violates my basic business promise. what should i do?" >> i do not think he would have come to create a deal if he did not believe that increasing by i think tenfold or whatever the numbers are the amount of original content they are producing to build a better company, i do not think there would be doing this deal. i think they may have fears about the way television is consumed, or the content that is currently forced through the pipe of cable and satellite. that may change over the course

of the next 10, 20, 50 years. but i do not think it would have done the deal if there were afraid to own all the content. there has to be a plan. they are not going to do it the hard way. they are hedging their bets for the poll of content. >> do you see it -- the ability to stream television schools -- television shows on their schedule, not yours, do you think basic television is threatened by the digital revolution? >> you mean television as a medium, or the producers behind them? >> as a business. >> i want to jump in and say it is not coming. it is here. three years ago, we acknowledged the dvr. two years ago, in a tremendously dis-beneficial thing to

television creators -- it may have -- it may as well have been 3 million years ago. dvr means you are no longer pay for everyone who watches your television show. that is the simple fact. two years ago, the thing called the commercial break and was implemented, which means that we place a value and proof of purchase back to the advertiser on the product that is not even hours. it is on someone else's commercial, not our content. the recession of this last two years was the last crash of margin creativity and of compensation that is commensurate with the amount of people who are viewing. >> but the technology you describe with dvr, which allows me to skip through the ads you are producing at your agency -- what do you do about that? >> the most important thing in

evaluating any media is making sure that you can see a clear return on marketing investment. as long as you have measuring systems in place for any medium you choose, where you feel you are getting a reasonable return on investments, that is acceptable. but i think it is why a lot of shifts are going to digital media. it is easier to measure the impact. you can really see what kind of responses, what kind of activity, what kind of behavior you are driving more clearly in that sort of medium then you can with a push medium like television. >> the difference with the tv world is they have created inadequate responses -- they have created adequate responses to the changing landscape, where as music is not. my friends are on the vanguard of content consumption. my friends are hackers. a look at how they consume. in the music space, but are still mostly using parts services because they are more

convenient. with tv, they are using on demand and things like apple tv. >> that are paying for it? >> they are paying for it. the tv industry has provided an adequate response to the challenges. it is an industry in transition, absolutely. that transition looks like it is going to be more civil. >> let me pick on something that you said earlier that ties into something lowry said a moment ago around digital and advertising. why is it that one of the coolest companies in the world, apple -- if you look at their advertising, their marketing, it is almost all traditional media -- full-page ads in newspapers, traditional spots. it seems to work pretty good. >> i think if you look at what you are doing online and what they do with itunes and their strategies around product introduction using the digital space, i think you are going to find that are probably equally

equipped there. >> i think as we look forward, there is going to be a bullring between the products that companies make, the services they offer, the content they create, and the utilities to provide. i think apple is probably one of the best examples of that. the products themselves are advertising because they are designed so well and have so much social currency to them. their stores themselves are very much advertising, in that they offer you solutions like the genius bar. every action they take, from the design of the product to -- we talked a minute ago about the ipod. everybody uses the ipod. how do you get out of that model? the fact that they have itunes makes it so easy. the service connects to the product so seamlessly that people want to use that hardware as well. i think you can say they are advertising on television, but

they are actually advertising on a product level, at stores on the retail level, through a service called itunes. >> they are very prolific digitally, relative to how they use the digital environment to know your customer, to understand them. that saves time. if you think about the knowledge that apple has a, each of every one of you that is injured -- each and every one of you that is interfacing with their website, the knowledge they have of your behaviors and how dynamically -- when you think about knowledge, whether you are out there or not, we can see what you are going to, what you are shopping for. you start to build preferences' around that. >> what do you do with that? >> that is kept at h-p. i think privacy is a huge thing, and security is a very big thing. we would not sell that. but we know you and can respond

to you. as you opt in, we know you even better and can get you to the information that you are looking for rapidly. every one of them does that. apple is probably one of the best examples. >> this relates to you, sean. one of the things advertisers crave is more information. in the digital world you can target your advertising. one of the issues you raise is the privacy issue. what is the line you would draw, and you would say, "even though i would love this information, i should not have access to this information." what is the line you would drawbacks >> we should never know the identity of the person we are dealing with. >> but you know the identity. >> we can't. >> but you won't share it. >> it is important to understand behavior. for example, with a weight-loss site, if somebody was coming

they're from, say, a beauty site you might want to make a message that speaks more to a vanity plate of losing weight. if you see somebody is coming from a medical site, you may want to address them with more of a medical plate and why losing weight is more important from a medical point of view. it is more understanding the insights and the behavior, but not the identity of the individual. >> if you know i was being treated for cancer, without knowing my name, you would have that information. you can now shoot ads to me for free? >> not necessarily. >> what do you mean necessarily? >> with every client, we have guidelines in terms of how much information is appropriate. with most of our clients, if the line of the law is here and want to be well to the safe side of that. >> look at it on the in verse.

if you come to ivillage health and have just been on the pregnancy and parenting page and searched "separation anxiety" for a kindergarten, and we know the profile of the person, we know it is a mom who has a four or five year old who is looking for help. we will surround her with ever -- with whatever information we have heard from our clients to serve the right content, the right text content, the right photo content, and the right add content. if that same mom had come to the health portion of the site and we know she is searching that isr's and aricef, the equivalent of a cancer thing. we are going to serve that. we will have a community of like-minded people who are going through the same thing. we will have a committee of experts. will have text, video, photos.

i think it is extremely tied together. but in essence, banking companies have had the most primal information for years and years. all our medical records are on line. i.t. security versus privacy settings versus marketing lists, which have been sold for however long they have been around -- those are all ongoing issues with technology as new inputs. >> quickly, before last question for each of you, what is the last line you would draw where you would say, "i would not do this with advertising privately"? >> i am no longer with facebook. but i think it is really -- i would echo the comments the other panelists are making. you have to respect the personally identifiable information. you have to be careful about

which partners you are disclosing what information to. and ultimately i think a lot of the concern around privacy and facebook is less a concern about advertising and more a concern about control. it gets to the basic desire that everyone has to control what and to whom they are publishing. the ability to granular elite segment -- granularly segment your list of friends and publish to those lists or groups. that is coming down the pike with facebook. those capabilities exist, but they are not widely accepted yet. a lot of questions about privacy are a very negative way of framing it. really, it is more about broadcast and selected publication. as those tools become richer, i

think some of the concern that has been raised about facebook and privacy actually becomes kind of -- it is not just that the problem gets solved. it is that the whole question gets dissolved. >> this is a conference about innovation. i remember back in 1998 i was interviewing bill gates. i said to him, "what is your business nightmare?" i thought he would name competitors he was worried about. instead, what he said was, "i worry about someone in a garage inventing something i have never thought about." in 1998, the google guys were in a garage, and they have become bill gates' nightmare. what is your business nightmare? >> i think it is what you just said. will we know today is that anyone can start a business. the brand can be started overnight. traditionally, big companies would look at other big

companies. we would look at an ibm, a dell, a lenovo. but the internet has democratized all of that. it has brought the cost of capital down to get in and start a business, to scale it and to mediaa brand vaia social very quickly and very rapidly. you are in a highly dynamic marketplace. you cannot just look at who you would traditionally see as our competitors. there are other people there who are creating things out of their grosz -- garage, like hp was started as. having a sophistication in the digital space to be able to watch and see early, very early, becomes important. >> i think nightmare is a strong word. i think a terrifying saturation

-- situation the word nightmare brings up is kind of what you are referring to through the napster experience, to be seeing smoke on the horizon and saying, "i think there is a buyer over there, but getting closer i feel hot. how come no one else is?" your whole life's work, the industry your passionate about, being a conduit for real creativity to billions of consumers, is threatened by inaction, fear, and the reconciliation of the attention being out of your personal business or company's control. that is the nightmare. >> i think what we have seen in recent years is an incredible proliferation of the ways that consumers can engage. they just continue to add more mediums and engagements to their days. what we all view as the

challenge is figuring out how to be able to break through with all of those choices, and how to really make a connection with that increasing speed and preparation of options that consumers have, in which they are really taking control. >> i come from the perspective of that guy in the garage. the moment i find myself trying to protect some established business, i think it is time for me to retire. so as that guy in the garage, i am sort of thinking where are their weaknesses i can exploit? where are there cracks in the armor? what is the biggest possible problem i can be solving that may not even be formulated as a problem? it is basic. if you are a very good operator of the business, you are probably very smart.

you are extremely good at problem-solving. great operators can be given a problem that is well scope. they can discover a fantastic solution to that problem. that is not the question of large-scale disruptive change. the question is what is the right problem to solve. you literally have to generate as many possibilities. you're asking yourself how they get leverage. how do i shoehorn myself into the market, get some leverage, build on that, and then kind of have to reinvent the model from there? it is a very different thought process. what i worry mostly is that at some point, you know, i am not sure if the kind of creative problem selection continues, you know, long into my career.

i wonder if i am going to have some idea of the future that is actionable in five or 10 years. i worry mostly about getting assimilated into the establishment. [laughter] if i am not challenging some entrenched power structure, i do not know how i am going to get myself up in the morning. >> i want to thank our panel and thank you. [applause] this is public affairs programming. next, president obama talks about the october unemployment rate. then remarks by ben bernanke. after that, a forum on the .idterm elections professiona now, president obama on the october unemployment numbers. the labor department reports the

biggest increase in private sector jobs in five months with the biggest increases in education and health care. the unemployment rate remains at 9.6%, and the same for august and september. >> good morning, everybody. we are in the middle of a tough fight to get our economy growing so businesses can open and expand, so that people can find good jobs, and so that we can repair the damage that was done by the worst recession in our lifetimes. today we received encouraging news. we have now seen private sector job growth for 10 straight months. that means since january, the private sector has added 1.1

million jobs. let me repeat that. over the past several months, we have seen over 1 million jobs added to the american economy. in october, the private sector has added 159,000 jobs. we learn that businesses added more than 100,000 jobs in august and september as well. we have seen for months as private sector job growth above 100,000. that is the first time we have seen this increase in four years colomb. that is not good enough. the unemployment rate is unacceptably high. we have a lot of work to do. there is a great deal of hardship and millions of people are out of work. to repair this damage and create jobs, we need to produce growth and create jobs at a faster pace bu.

an encouraging job report does not make a difference if you are one of the millions of people that are looking for work. i will not be satisfied until everyone looking for a job can find one. we have to keep fighting for every opportunity to get this economy moving. as we pass this on a jobs bill based on ideas of both parties, i am open to any idea and proposal, any way we can get the economy growing faster so that people need work can find it faster. this includes tax breaks for small businesses so they have an incentive to expand and hire as less tax cuts to make it cheaper for us to start companies. this means building infrastructure for high-speed trains and internet so our economy can run faster and

smarter. it includes promoting research and innovation and creating an incentive and growth sectors like clean energy. it includes keeping tax rates low for middle-class families and extended unemployment benefits to help those hardest hit by the downturn was generating more demand in the economy. it is clear that one of the keys to creating jobs is to open market to american goods made by american workers. our prosperity depends not just on consuming things but also being the maker of things. for every $1 billion we increase in exports, thousands of jobs are saved your home. i set a goal of doubling of exports over the next five years. on the trip i am about to take, i will talk about opening markets in places like india

still american businesses can sell products abroad to create more jobs here at home. the most important competition we face will not be between democrats and republicans. our success or failure in this race will depend on whether we can come together as a nation. our future depends on putting politics and decided to stop about thend worryining next generation rather than the next election. countries like china are not standing still. we cannot stand still either. we can do that if we can work together. not only will this country recover, but we will prosper. i am looking forward to helping drive some markets open and help

american businesses put people back to work at home. thank you very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> now the federal reserve chairman ben bernanke speaks to students at jacksonville university in florida. this incomes two days after the fed policy-making panel voted to buy an additional six and a billion dollars in bonds over the next eight months to help -- $600 billion in bonds over the next eight months to help stimulate the economy. >> i do not want to spend all the time talking at each. i bet i've talked to -- i thought i would talk for a few minutes and then i will be happy to take questions after that. the federal reserve has two

brunn functions. the first one is to promote financial stability. that is what the federal reserve was founded four. there is a crisis in 19 07. -- 1907. leaders got together to figure how to structure this instability. there is another crisis in 1914. it the fedders is being created at that time -- there was another crisis in 1914. the fed was just being created at that time. the fed did not do is stop during the great depression. i will talk more about that. one of the major features of the great depression was a near collapse of the banking system which led to a collapse of the money supply.

the federal reserve has basically two tied it kills the we can use to maintain stability. -- two types of skills that we can use to maintain stability. if you think about what a baby does, they take short-term money and invest it in long-term liquid assets. there is a problem and that transformation. it depositors to lose confidence in the bank, they will demand their cash. if the bank only has long-term assets, it and not able to pay off the depositors and it will sell. with a lender can do is provide cash, taking the long-term assets. it allows the bank to

essentially make liquid the assets and pay off the depositors to stop the run. we know from several hundred years of monetary theory that the way to stop the panic is to lend freely to institutions that are temporarily liquid. the other told the fed has -- tool the ban has is that it is a regulator. there are earnings, liquidity of bank holding companies. in trying to insure that things are safe and sound, we tried to prevent financial crisis. the other main task that the fed has is the macroeconomics

task. congress has given the fed a dull mandate -- duel mandate, maximum employment and price stability. that means keeping inflation low and stable. you are all familiar with monetary policy. they will be able to manipulate the short-term interest-rate. that helps the fed keeps the economy on an even keel so that we have neither too much inflation nor too little. those are the two broad tasks that the federal reserve does. in the last three years, we have been faced with extraordinary event and have tested both sides

of that mandate to extreme degrees. on the financial stability side, we used all our tools. when the crisis began in august of 2007, some of the first problems were liquidity problems in the banking system. this is what we learned about in studying a book called "lombard street." they can provide the telecast to their creditors. we created an auction facility that will provide large amounts of cash and allow banks to become more liquid and more stable. the problem was that the crisis morphed into a much broader phenomenon. entire1930's, the

financial system was made for the banks. if you stop the depositors from running, you stop to the panic. -- you stopped the panic. one of our most significant runs we had in 2008 to place on money-market mutual funds. they are mutual funds with very liquid shares that their depositors put in. they invested in short-term safe assets. following the collapse of in 2008, theys who in 2008 lost money on commercial paper that it held. suddenly come if it cannot pay of the depositors -- suddenly, and they could not pay off the depositors.

that created a new run. they are major suppliers of cash to corporations. the commercial paper market rose up. the fact that our modern system has all kinds of institutions that have been quite futures and more illiquid assets meant that this iran problem -- run problem began in other contexts. the same thing happened with aig or they were funding on a short-term basis and they had a liquid -- illiquid assets. it was a panic generated by the withdrawal of cash to gi. we went through a whole series of programs to try to get the

markets working again. for money market mutual funds, we were able to lend to them so they could pay off their depositors. it is supplemented where the treasury ensure the deposits. in the commercial paper market, the allow corporations to meet their financing needs. they need the cash to pay off their creditors. we expanded it to a wide variety of institutions. working with the treasury and other banks, we helped to stop

the panic of 2008. we need to know when to make loans to provide the lenders to stop the panic. i mentioned the other part of our tool kit for dealing with financial instability, our supervisory tool kit. we were examining what was going on at other financial institutions and trying to figure out where there were problems. a very important example was in the spring of 2009 when we and the other agencies did a stress test. we took all the biggest banks and we did a simultaneous and evaluation of all their assets and losses and we publish that information for the public.

it had a great effect. investors had the information they needed about the health of the banks. any problems or taking care of. the other banks found they could go to the stock market and raise new capital. they were able to do that. we are able to help stabilize the banking system. going forward, the fed has even more expand its supervisory powers in part because of the result of the new legislation. we will be looking at a number of other kind of institutions including non-banking institutions if they are deemed "systemically critical." we have broader authority is going forward. we are working with our

counterparts in switzerland to set of new capital standards. the more painful, the saker they will be due the more they have, if the state bird they will be -- the more they have, the state for they will be. the other part of our general assignment as the macroeconomic part. when the crisis led to a deep recession, and the financial crisis in 2008 led to a very sharp global recession that lasted to 2009. they tried to provide support

for the u.s. economy. we cut interest rates sharply. we kept them before the height of the crisis. -- cut them before the height of the crisis. before december 2008, we have cut the federal fund rate than we used to target financial institutions to almost zero. with that interest-rate almost at zero, some people might say the fed to go home. there is nothing else they can do. we took additional steps. we developed a new type of policy that involves buying long-term securities such as mortgage-backed securities guaranteed by fannie mae and freddie mac for treasury securities, government debt.

we purchased those from the market and brought them in. we provided more support to the financial markets. we did some very big step along those lines in march of 2009. at that time, the economy was in bad shape. i do believe this actions did help. they brought down interest rates. shortly after, we saw the to recover.in even though we were at zero, we had an additional tool that lets as provide further support for the -- that let us provide further support for the economy. even the economy is no longer in a recession in the sense that it is expanding, it is not growing very fast. as a result, the unemployment

rate is coming down very slowly. when it the mandate is maximum unemployment -- one of the mandate is to provide maximum employment. we are showing in sufficient stimulus. to provide additional stimulus, the federal market committee voted to increase to buy additional securities in the open market with the goal of reducing interest rates, providing more stimulus, and we hope to treat a faster recovery and inflation rate consistent with long-term stability. we will review bacthat.

it has been an interesting three years. we are doing what central banks are supposed to do. the nature of the crisis means we have had to use a whole lot of approaches that have not been used before by the federal reserve. that is very important. let me just got there. that is a quick overview -- let me stop there. that was a quick overview. that me see if anyone has any questions. >> thank you for coming.

you have mentioned that the federal reserve sees an extended time of low inflation which could threaten the economy. i see commodity prices skyrocketing. a feeling that commodities such as cotton and sugar -- you look at commodities such as cotton and sugar, it seems like producers are eating most of the price increase. i think that could be trickling down to the consumer next year. do you see any possibilities to that threat for low inflation? do you think there is a possibility of higher inflation next year? >> er right. the one exception to the general

observation that is coming down is that globally traded commodities like energy and food have been going up pretty sharply. the supply and demand is determined on a global level. a emerging-market occurring quite quickly. the demand is pretty strong. that will be a contributor to inflation in the year west it will affect -- inflation for the year in the u.s. it will affect it. there is a lot of slack in the economy and excess supply. it is very difficult for producers to push through to the consumer. most of the costs the producers have our labor costs.

productivity has been growing strongly. the cost of labor per unit of production is actually falling in some cases. you have higher energy and material cost. you put that together and you do not expect to see very much inflation to final goods and services. inflation is going to stay quite low going into next year. commodity prices are an issue. i think it'll take at least some further growth and a reduction in slack before we start to see any kind of inflation pressure. then we will have to be sure to

modify our amount of stimulus to make sure we maintain stable prices in the long term. canybody else? >> good afternoon. my question lies with what you did with the "washington post." your answering the people about the six and a billion dollar purchase of securities. your company -- $600 billion purchase of securities. you said your company was confident. how will you do it? >> what the purchases do -- if you think of the balance sheet, on the asset side of the dollar sheet we get the dollar security. on the liabilities side, to

balance that, we create reserves in the banking system. what these reserves are are essentially deposits at commercial banks go with the fed. the amount of cash in circulation is not changing. banks are holding more reserves with the fed. the question arises of what happened when the economy is growing more quickly and it is time to pull back the monetary policy accommodations. there are several tools that we have. the first one is that the main thing we need to do when it is time to do it is raise interest rates. that is what we always do. even though there is a large amount of excess reserves, can we raise interest rates? the answer is yes.

we have been giving the authority by congress to pay interest to the banks. if we wanted to raise the short- 2% -- they would have no incentive to take them elsewhere. by raising that interest-rate, we could essentially raise short-term interest rates throughout the system. that is basically what the fed does one ever it tightened monetary policy. -- whenever it tightened monetary policy. and have a large amount of reserves, it could be that some will leak out even those we have raised the interest rates that we pay. we also have developed a number

of tools to drain or immobilize the reserves of the cannot go out into the economy. one way we do that by treating time deposits. inurbane he can have a regular -- creating time deposits. in the bank, he can have a regular deposit. they can hold reserves with us for three months or longer. by doing that, we freeze freezer so they can not do it. one way is to do by replacing reserves with other types of financing. we can borrow from money market mutual funds. we have a variety of ways of draining those reserves. finally, if we wanted to do

additional training, we could sell the assets that we owe. if we sell the assets, that will tighten policy in a few ways the . when you sell assets, it distinguishes the reserve. assets and liabilities will both come down to get there. we have the these three broad tools. we pay on raisers in order to tighten financial conditions. tools we have to immobilize them and sell assets. we have plenty of tools. we have done plenty of work to make sure they are tested. we have tested them successfully. we are comfortable that we will be able to do it when the time comes. >> thank you.

the university of florida. my question has to do with the decision to buy $600 billion in securities. there have been some complaints from developing nations, particularly in south america and south korea, that this decision might create some sort of influx of foreign capital that could inflate assets of bubbles. my question is not about your opinion on that and how the open market committee factors things like that into their decision making process. do they take those things into account when they are deciding to buy its assets? how big do these things factor into the decision making process? >> the first goal the we have is to meet our mandate to get price and maximum employment

and gi. a strong u.s. economy is critical for the global recovery. in that respect, it is very important that we do achieve a successful recovery in the u.s. with respect -- in the u.s. with respect to the dollar, that is where the fundamentals come from. we are certainly aware that the dollar does play a special role in the global economy in the international financial markets. there must be someone else with a question. there we go. >> mr. chairman, i am curious how you think the results of the

midterm elections will affect fiscal and monetary policy in the next six months. >> the federal reserve is totally non-partisan. we work with both parties. we work with the administration and the congress. we do not make political predictions. our basic goal is to do what we can to support the economy, to create employment opportunities and price stability. we want to work with the administration to get as much help and the policy and growth as we can for the rest of the government. we are nonpartisan. we were equally with all members of congress and the administration. ? >> my question is not on the second round a quantitative easing. i want to know about what you are facing.

when he bailed out aig, you are facing opposition. -- when he bailed out aig, you were facing opposition. why did you did it? what is your reaction? >> we took the action. i do not know where you get the idea that our advisers were against it. they were not. you know, when the lessons i've learned -- before i became chairman, alan is a professor. one of my major interest was economic history. i read a lot on the great depression. i took to lessons from the great depression. one is that monetary policy needs to be supportive of the economy. it was incredibly tight in the 1930's.

the the other lesson was that broad based financial crisis is destructive to the broader economy. this has been learned over and over again in many other contexts. it is important to try to prevent a systemically important and critically interconnected firm from collapsing in the middle of a broad panic me. the whole system was under a lot of pressure. we are doing our best to prevent a disorderly collapse of a financial firm. there is no doubt in our mind that we needed to do what we could. the tools were very limited. a very important development in the newdodd/frank reform -- willank reform

let us do it in a way it did not leave this in that kind of situation. that is critically important. in 2008, we did not have such tools. it applied only to banks and not aig or other non-banking firms. we did not have good tools. the only till we had -- tool we had was to lend money. aig was facing a run. catches flowing out. cash was flowing out -- cash was flowing out. to stop that you wind against capital.

this is one of the largest insurance companies that had attached to it in one relatively small division that was making very dangerous that the bill -- dangerous thabets. it was an ongoing viable enterprise. the company itself the become collateral for a loan. we have the act in place at that time. we knew that if the company collapsed on top of the lehman collapse that very likely the

financial system would collapse. then we would have faced a much worse economic situation. we did it because we knew if we let the company collapsed that the danger to the world economy was an enormous burden o. we did it. that is unwinding. the federal reserve will get that loan repaid. we succeeded in avoiding the financial meltdown. it is somewhat of an unpleasant experience. you asked about the bonus issue. it was a bad judgment on the

the management. when i learned about that, there is legal action we could take. i was told there was not. it is a relatively small amounts of money. it created a lot of resentment and anger among the public. that is understandable. in that respect, it was a bad event. after that happened, the treasury began to formalize its management and compensation for other companies that have received help. that has not been the fed's problem for quite some time. >> hello. how do you think the high level of growth in china will affect

the future? how will it affect the fed policy in the future? >> emerging-market are growing very quickly. that has a number of attacks. one is that it raises commodity prices. that is an issue. it serves as an engine of growth in demand for the global economy. having growth in emerging market is basically a good thing. at a fundamental level, 20 years ago we were talking about developing countries and billions of people in serious poverty. it is brought many people from abject poverty into a decent living standard.

in that respect, it is very positive but bil. more generally, it is good for the global economy. another country does well it does not mean we are worse off. the better global economy, the better opportunities we have to trade and invest. there are a lot of issues. a well functioning chinese economy is good for the united states. if it strengthens, we take that into account. our focus is under development in the united states.

this factors and to our analysis this is how we make -- analysis. this is how we make our policy decisions. >> i was wondering how the new legislation will in fact how the fed deals with acid bubble's going forward? >> there is a very important philosophical change in our regulatory system. prior to the legislation, individual agencies focused on just those market for which they were responsible. the banking industry's but at the banks.

the trading commission looked at the changes. insurance regulators look to the insurance companies. there are a couple problems with that approach that became evident. the consistency of regulation as very and even. while some -- of any eveuneven. some were falling between the cracks. this is a much broader and bent been a single institution prevent it requires great complex interaction. there is nobody looking at the system as a whole. subprime mortgages were a problem for a wide variety of

institutions. they are looking at it for a system wide perspective. a very important element d dodd/frank is to create a macro prudential approach. it is try to look at the system as a whole. there a number of ways that can happen. when it the most basic is that the legislation creates a new council. it will have the major agencies including the fed and treasury. it will meet regularly and tried to talk to each other and identify the problems like a housing bubble.

by comparing notes and working together, we should be better able to identify the problems. we cannot guarantee that we can see everything that will happen. it is very important that legislation takes a lot of steps to strengthen the system. i mentioned the basel capital rules. it is a two-pronged approach. the federal reserve is doing is within our own approach to the get the system as a whole and identify risks that are emerging. on the other side we want to do everything we can to strengthen the system so it can withstand better than it did the past few

years. >> university of north florida. my question is about your 2002 speech and making sure deflation does not happen here. you stated japan's economy faced significant barriers to growth. you mentioned included massive financial problems and the banking sector and a large overhang of government debt. in a policy makers reluctant to use fiscal policy. he felt the u.s. did not share the problems. do you still kill the way? -- feel that way? >> i think japan has a number of strengths. it is still a very rich economy. one of the main problems that japan has is demographics. japan is getting older.

to the extent it has worked for us and is on the brink of shrinking. that is one major problem that japan has the we do not have. it is close to 200%. thatis offset by the fact the zero most of their own debt. in the u.s., the ratio of debt to gdp is much less that has been rising produced the get me. in addition, we have some long- term issues that we need to address. i'm glad you read my speeches. i am impressed.

recently, i've given some testimonies that address the need that we have. i think everyone understands that we need to do with our alarm term fiscal issues. we are not yet to the 200% level. we need to take action to bring our long-term fiscal and balances into better alignment. otherwise, it could lead to very severe problems. >> thank you give as yet seen the commodity prices rise, it seems a lot of people move into gold because of fears of possible over inflation. it seems a lot of these investors still quantitative easing may be too over inflation.

is there anything to minimize this over inflation? >> absolutely. we are absolutely committed to keeping inflation low and stable. we have the tools and wind and tighten -- and unwind as the time comes. there is the question that we will be able to manage that. it is important to understand that inflation expectations remain really quite low. one example would be the inflation rate evens, the different between the yield on regular nominal treasury bond and inflation indexed bonds.

it is an indication of the amount of inflation that investors expect over the next five or 10 years. that is still below 2%. investors think that inflation will stay low. if you look at the surveys for consumers and businesses, you do not see any contradictions. with a pet owners to try to predicted overlong times -- we also look at business owners who try to predict it over a long amount of time. if that in both directions. they also protect against further declining inflation. it is important for the fed to

keep inflation expectations will anchored in stable. i think a are stable. we will work to keep them there. >> good afternoon. my question regards the housing market. what kind of timeline to you think the united states is looking at in order for the housing market to recover where property owners and start to see some appreciation in the property? >> that is very difficult to know. right now, construction is basically lower than any time since world war ii, even during times of our population is lower than it is today. we have a growing population.

we have households being formed. you would expect to see house prices normalizing. the problem is that we still have some steps to go before we get there. we still have a lot of foreclosures in the process. that takes time for the market to adjust to that. when you have a lot of foreclosed homes, that makes it more difficult for new construction to be marketed. we do have some important problems before we can get out of the current problems in the housing market. eventually, we will. we have to. our population is growing but from natural increase and immigration and the 1e places for people to be housed. >> i know we want this session

to keep going on and on. we have to put an end to this. i am sure everyone agrees with me that this class is so special. it is a wonderful opportunity and experience for all of us. let's think chairman bernanke for coming over here and being with us. [applause] >> thank you. >> next, the weekly standard and washington times form on the midterm elections. then a discussion on the impact that tuesday's elections will have on state legislatures. after that, president obama talked about the october unemployment rate the ths. tomorrow on "washington journal" the executive director of families usa talked about how progressive groups like his see the future of health care.

associated press correspondent steve hurst talks about president obama's approach to foreign policy. and james martin, president of the 60 plus association, discusses the hope that house republicans will repeal the health care law. "washington journal" live at 7:00 a.m. eastern on c-span for th. >> it is harmless if one is making a star out of [unintelligible] when one takes this notion of stardom into the national security round, then lives are at stake. americans get why is that the stars and the wizards in dream what they arebe cracked up to be. in that time, may he may come to rain. may -- mayhem reign come

to reign. nancy pelosi says she may run for the minority leader prev. >> we are with politico. we heard that nancy pelosi will seek to remain the democratic leader. how did to come to this decision? >> since tuesday's defeat, as yet been talking to members of our caucus. a number of them are her closest allies. they have been taking the temperature of other members. and now she feels she has sufficient support to do this. >> who might challenge her? >> i do not know of anyone will

run against her. if they do, mib symbolic. it might -- be -- it mmighighte symbolic. i do not think there will be any serious challenge to her. i think it is pretty much a done deal. she would not have announced that she did not have the votes. i think the policy is extremely strong inside the democratic caucus, especially those who feel she was unfairly demonized in this campaign. the loss is not her fault. >> who is running for minority? white sticker majority leader, -- >> of the majority leader, steny hoyer, is running. you have the majority whip --

jim clyburn of south carolina. in books that they will be facing off each other. >> what about the democratic chair? >> right now it is john marston of connecticut. he announced he is running. it is not surprising that he is running again. as far as i am aware, there is not in the opponent to him right now. i think there is a possibility he could see someone running against them. i would get him the upper hand. pelosi.lose to speaker polo i would probably give the upper hand to him. there may be other people jumping into that race begins i think you could see additional candidates. right now, i do not think there

is anybody that is a threat to larsen. >> thank you for your time. >> thank you for having me. >> reporters and analysts take an in-depth look at the result of this week's elections. the discussion is moderated by william kristol. this is about an hour and 25 minutes. >> i'm the editor of the "weekly standard." is my pleasure to welcome you here. we will quickly discuss what happened and then move onto the implications for the next few weeks and months in congress.

let me welcome you on behalf of "the weekly standard" and "the washington standard." where cousins. where do we are cousins. it is a pleasure to collaborate on this and then. we are top-of-the-line publications. there are a fact sheet in this publication. most of it is true. it is all true. let me introduce my fellow panelists.

[unintelligible] he is the author of a terrific book, the best on american history. bioassay needs to be updated. updated, so people should nag him to update. my colleague fred barnes, who helped me start "the weekly standard". obviously, one of the leading political journalists of our day. he is the author of an important book on the bush presidency, also a stallworth on fox news. byron york of "the washington examiner," before that at the

"national review." he is now at "the washington examiner," and has a platform he deserves. he is a leading reporter and commentator on elections and politics in general. and to my immediate left is susan ferrechio, the chief congressional correspondent for "the washington examiner." before that, susan was that cq and "the miami herald." she is a first-rate, careful, penetrating congressional correspondent, and she has been a great asset to "the examiner"

as well. i will throw a few questions at them and then we will have a discussion and have time for discussions and your questions at the end. i thought we would begin quickly, i assume everyone on the panel has now written about the election, analyzed the result, said everything they want about the findings. let me summarize what happened. and then let me ask each of our panelists, what strikes and the most about what happened, is there anything that is not as noticed as it should have been. let's begin with bair newark. what strikes you most about last tuesday? >> i spent the week before the election covering the senate races in illinois, wisconsin, and finally in the nevada. what struck me is the atmosphere for republicans was so favorable, and we know in 2006

broke forncts democrats, and this time the numbers were reversed. the atmosphere was reversed. ron johnson in wisconsin could knock off a legendary figure and ross frankel in wisconsin. if you ran a pretty good campaign in illinois, but were troubled, suffering from allegations that he embellished his resonate in ways that did not bring him any benefit. he has a good resonate anyway. but this brought him a lot of grief. you had to run a pretty undistinguished campaign as sharron angle did to lose, so much so that the number that struck me in nevada exit polls was pollsters ask, you approve

or disapprove of the job harry reid did as senator? 55% disapproved of harry reid's job performance. 44% approved, and yet he still won because of his incredible organizational skills, strength out there, and the clout of the casino industry. the thing that struck me over all was victories were out there you ran aen, and yoif pretty good campaign as a republican, you could win. >> most polls -- the one debate that ankle did pretty well, she was a problematic candidate, but you were out there a day or two before the race. did you expect her to win? >> the stuff i saw on the ground

track perfectly with the polls. the six prior polls for the election had angle up, everywhere you went, people would be splitting accept one or two for angle against harry reid. my reporting experience out there seemed to perfectly lined up with the polls, which were wrong. >> the ground game? >> we should give credit to the reporter who covers nevada politics, who predicted before the race for the election that harry reid was going to win. the level of organization in the early voting was incredible, and harry reid was -- harry reid's campaigned worked with casinos. i worked -- i went to michelle onma's appearance for reid

monday. everybody was handed number sheets, the numbers to call it. harry reid did not miss any opportunity to work the polls, and that is what happened. >> ed, what struck you? >> i was surprised by a few of the outcomes. republicans had not targeted some races, and were surprised when there to candidates won. oberstar was beaten in minnesota, and that was a lot -- and that was a surprise. one of the house members that targeted over the years was a representative in illinois . she was a moderate democrat, and

did joe walsh actually won. it has not been declared, but it looks like he is ahead. the race in north carolina now etherege, essman where he allegedly put somebody in a headlock on capitol hill -- >> he was asking the congressman a question. >> he lost to a nurse, who republicans have not figured they were going to win that. there are about six actual conservative democrats in the house, and five of them are gone. i counted them this way. it did not seem to help them that they voted in most cases against cap and trade, obama care, and they still lost.

jim marshall in georgia. the only one that survived was the representative in oklahoma. his father was governor, and he is president of the university of oklahoma right now. republicans did not target him. i do not think they targeted gene taylor. were wiped out. the survey did not say that the republicans would expel the democrats from the south. three seats in virginia, four in florida, one in alabama, one in louisiana. in most of the states that also won senate seats. the south is gone for the democratic party for the time being.

>> what struck me about that -- we will go to michael and a second. even if the republicans had not won a seat in the sow they still -- in the south, they still would have won the house. the damage in virginia was considerable. michael, what struck you? you are from michigan. >> yes, i grew up in canada, and grew up in detroit. i struck historic numbers. we have had two historic elections in a row. he used the metric of the house of representatives. the state of california takes five weeks to count its votes, so we do not have the full popular vote get. they had elections in sunday on

brazile, and they counted and hours. i in five in any case -- and it looks like if you go back to years in 2008, democrats won by 54%, the popular vote for the house. there is a little bit of wiggle about how you tabulate votes for people who are unopposed. that was an historic high. back in 1986, they were winning the south 60%-40%. of course they did not do that anymore. if you take the 36 non-southern states, democrats two years ago got 57% of the bed. that is the highest in history that never before was achieved. that was a high point for the democratic party. this popular vote looks like it is going to be 53%-44, for

republicans. that is equal to republicans in 1994 were little better. before that you have to go back to 1946, when it was 54%-44%. one should add in the 1920's this out cast very few popular votes. the democratic primary was tantamount to election. in fact republicans, if you could somehow virtual allies the southern vote for the preceding -- in some respect this was tied for the best republican performance in the house pvote for history. it is unusual for american history. he did not find many times we see a party lose 10 points or

gained 10 points in an election. i brought obama's election was an historic first and so forth. the performance of the democratic party in house elections during the first two years of his presidency is maybe a historic first as well. republicans perform even better when you go down the ballot. senate seats, they lost a couple senate seats with problematic candidates, in my view. they lost a heartbreakingly close what in the state of washington. when you go down to the state legislatures, republicans seemed to have gained about 150 seats in state senates and more than -- in state houses. this is more than any time in the 1920's. they gained control of redistricting. i am going to be writing about

this for "the examiner," and others have mentioned it. in texas, pennsylvania, ohio, michigan, and also among other states, wisconsin and north carolina, where the legislature -- the governor does not have a veto and the republicans gain both houses of legislature. in state after state of those i mentioned, republicans outperformed what the insiders expected. in my home state of michigan, republicans gained 13 seats at a 110 to take over the house. the political insiders were take tests were saying that was impossible. just before the election, there was a report that said they had the chance to win them all. they won 20. this is a deep thing. two small points.

one possible relevance to 2012, when it is possible that we could have a third-party presidential candidate or a third presidential candidate, which raises the question of, could the presidential election go to the house of representatives? this question was raised in 2000. if so, it is voted on by state delegations. if you have a majority of members of the state delegation, your state's vote goes to your party's candidate. going into this election, democrats had a big had a majority of state delegations. more than 26. now republicans have 33 state delegations. that may change before the next congress, but it probably will not change a lot and gives the republicans a backstop. finally, i saw the ambassador from finland last night and it

occurred to me that we saw a major swing in the distance of large numbers of finnish- americans. bart stupak retired. we have a republican winning in northern wisconsin. david obey retired. in the minister that 8, jim oberstar lost to republican, a former northwest pilot who was described as a stay at home dad. lake superior is bounded by republican congressional districts. >> the editor of "the examiner" will have an article in monday's

issue on the importance of the finnish-american votes. >> i do not think it is that voters report -- voters were embracing republican positions. they would say i feel it is time for a change. we need something to be different in washington. it occurred to me that a lot of the expectations have been built up in 2008, that they saw that congress would function differently this time around, that they would work together and get the economy going. by the time the election rolls around and the economy is still in the dumps and, chris -- and congress is as partisan as it ever has been. voters were truly exasperated.

one case that was clearly an example of that was in west virginia, where governor mansiochin won. he was headed for a loss, and he had approval ratings in the and they did not want him to go to washington, because they thought he was got to follow the democratic agenda. he saved himself by firing a bullet to them markey legislation of the democrats, the cap and trcde lettuce -- trade legislation. things turned around for him shortly after that. he really got the message. throughout this date i traveled and the people i talk to, or folks who democrats,

independents, republicans, saying vote the bombs out. you can see in the polling, fascinating polling that came out. 85% of respondents said they would like to toss everybody out in congress and start over. there is an intense level of disgust in the electorate right now. republicans are keenly aware of that, and said there is going to be pressure on them to try to change the image of congress or the next time there is an election they are going to be the bums that will get thrown out. the question is what they can turn the ship around to improve their image. that is the most significant thing i saw on the campaign trail, the urge to start a new in congress. >> the challenge that john bair

and harry reid faces and the administration faces. i was at a panel in the kennedy school -- can you imagine a republican shooting and had -- shooting a gun in an an? the examiner was shrewd about this of a couple levels. senator robert byrd died, and governor manchin appointed a replacement, and then said he would run for the seat. you can be a popular governor but they may now want to send you to washington if your and the wrong party.

the president of your party. three or four weeks later polls showed that the race was manchin ahead, and voters did not seem like it wanted him in washington. he is an intelligent guy, and he pivoted very sharply and decided that in politics you cannot be too subtle some time, and i am not going to be -- president obama shopped the cap and trade bill on the air. manchin shooting a gun, and it turned out to be a very shrewd tactic.

he ran an excellent campaign to survive in west virginia. now he is the senator from west virginia, and fred wrote a piece about this on thursday. we have democrats who survived the on flight, several of them from distancing themselves from the administration. we should talk about the democrats, their challenges, and the republicans, who had theirs. >> there are a lot more democratic senators up in 2012. there is a target-rich environment for republicans. it gives them a pretty good chance of winning the senate in 2012. right now the pressure is on a number of these -- manchin being one, incumbent democratic senators up for reelection in 2012 who are either in fairly

conservative state or states that trend it in a republican and conservative direction this year. you can think of both nelsons , nebraska and florida, clare macaskill in missouri, one of the most smashing victories was by roy blunt, who won by 19 percentage points. some of the things that did not hurt candidates, the connection to the bush administration did not hurt anybody. the most successful candidate in in country was roab portman ohio. there was nobody you had a stronger connection to the bush administration. he won by 20 percentage points as well. i am trying to give the other states -- virginia, where you

have jim webb, and republicans have already started to talk to these democrats, and what is going to happen is there will be republican senators plus some democratic senators will give republicans operational control of the senate. you can think of spending issues, tax issues, many other issues, even health care issues, on which you will have 55 senators forming a majority, most of them republicans, and eight or nine been democrats. that is certainly something that i look to see, expected to see, and will not make kerry reid happy. >> already, there is a group of

moderates in the senate, the faction that harry reid has already had to deal with. even last year, you had people like ben nelson running the show in the senate. things will come down to ben nelson because they needed that one vote, and just with that type margin. now with the senate, forget it. 46-54, whenever they have. you will see these coalitions building between the republicans and these moderate democrats, who are up for elections. everyone does not want to happen what happened to blanche lincoln. that is the warning for democrats that they need to moderate what they did. it will become a difficult thing for the senate not to swing right, and i think that will happen. >> the house passes legislation that comes first of the senate, the house will define the parameters, there will be pressure on the moderates to the

house legislation, which puts republicans and house in a better position. if it dies in the senate, it dies in a senate controlled by the democrats. if it passes, it becomes bipartisan legislation. >> this is a good dynamic for republicans because they can pass whenever they want in the senate. they have a 30-seat margin. democrats -- this is exactly what the democrats did to them years ago, and they can blame it on the president. it is a good dynamic. it will be hard to see harry reid -- for instance, the house will pass a bill seemed let's repeal the health care law. can you see harry reid taken that up in the senate? no. then he will be blamed for not

getting it done. >> how about we should talk about republicans in the house who have their management problems, and the obama administration? what the fink, byron? -- what do you think, byron? >> house republicans take the pledge to america seriously. the big features are cutting spending to pre-bailout levels with the common sense exceptions with seniors, veterans, and our troops. cuts on discretionary spending, cutting congress' budget, and repealing obama care. in wisconsin, ron johnson, had not run for anything before,

went around the state and every time he appeared he said i got two things on my platform -- i want to repeal the health care long and i want to cut the deficit. all he said. he actually means that. for a white house, just go back to the fund-raiser that the president attended in massachusetts not too long before the election in which he said the country is afraid and that when people are afraid we are hard wired not to think clearly. he clearly believes that the country made a wrongheaded decision and everything that he has said both in his post- election news conference and in the '60s -- "60 minutes" interview says that he will put the blame on -- in spite of the

fact that he gave 50-plus i think you have a recipe for irreconcilable differences because republicans, a lot of these new lawmakers really believe what they are saying. ron johnson said the health care bill was the single greatest assault on the economy in my lifetime. the president cannot back down and say, i guess you are right, i spent a year on the wrong thing. i see irreconcilable conflict. >> michael, you see that? he received some natural legislation being passed? some things do have to get past, right? there has to be a budget and tax code, right? >> that is right. the initial subject before the plane that congress would be the bush tax cuts. -- before the lame-duck congress

would be the bush tax cuts. speaker nancy pelosi did not have it in the house to review all of the tax cuts except for those -- to redo the tax cuts except for those over 215 -- $250,000. it is customary for the speaker not to vote unless it is important issues. she would have to cast a vote herself. i would think they are in a weaker position now on that issue, and in listening to mitch mcconnell yesterday, and john boehner, they are insisting on having all the tax cuts, and by the way, we will not go along with reducing the tax cut on the high earners for just a year, and the others permanently or for a longer time frame, because you will send up -- such as of 4

a drain on capital later. -- set us up for a drain on. there are some areas -- the house does have this leverage that the vote, and the government needs appropriations. and we need to have tax laws and we need to have the alternative minimum tax fixed every year, which affects mainly democratic constituencies. it is a cut that the democrats need every year and the republicans can make them pay for it in some way, shape, or form. i see some of those things going along. a couple of things, the republicans are more in line with the president's the stated position on free trade treatment with colombia, panama and south korea.

support for free trade has diminished sharply among democrats from 1993 when the nafta treaty, the trade agreement with mexico and canada was passed with support of the clinton administration and a coalition of approximately 135 republicans and 100 democrats. you do not have 25 democrats for that kind of measure any more. and you may have some republicans against it, but that is a possibility of cooperation. the other thing in the exit poll, on the president's course in afghanistan, he has the support of most republican voters and most republican members of congress. he has opposition from most democratic voters and most democratic members of congress. and i would guess, for the moment, nancy pelosi would be included in that moment. she is not an enthusiastic person. looking ahead, will the

president be challenged? there is still the possibility of challenging him in the primary. >> let me hold off on that for a minute. >> ok. >> let's build some suspense. [laughter] on taxes, what will the tax rates be in 2011 and in 2012? the current tax rate? the republicans win? >> i foresee a two-year extension of all the cuts. >> republicans wanted for four years, which would actually serve obama better. the question is weather obama's ideology stand for him politically, and it may. obviously, he hates tax cuts. it feels like handouts, but those are not tax cuts. they are great cuts. we will see how difficult

republicans are to get on a two- year extension because they are really in me an-- really aiming for four four. >> i agree with fred. i think he was hinting, that a temporary extension might work, and obama dropped a few hints about that when he spoke the other day, meaning, just look at all the options. but if he wants a real stand off, it will be whether or not these are permanent. i do not think there will be in the middle ground on that between the two sides. >> but at the end of the day, two years, for years, -- four years, ironically, there was a bit of economic uncertainty for a couple of years and i think that might actually help the president's reelection prospects. >> that is one reason why speaker nancy pelosi la support. a lot of democratic house

members said, -- lost support. a lot of democratic house member said, raising taxes in a sluggish economy is not a great idea. i think the interesting thing to me is that if speaker nancy pelosi could have gotten the democrats' health care in the spring, but they had to do with health care in the spring. why? because they had to deal with cap and trade, which she pushed through the house in june. in retrospect, i think that was a mistake in tactics from the point of view of achieving maximite -- from maximizing democratic achievements. >> two obvious issues they have to fear, and john boehner you have me thinking hard about. the two -- the tea party inspired members and the caucus

is going to be new. as a pure management challenge, you have people integrated into the current structure. a third, that could be a challenge for boehner. it seems the two most immediate versions of that i challenge would be taxes and then the debt ceiling vote. then the republicans do have to unveil a budget. if you control the house, then you control the house budget committee. and paul ryan will throw down a budget around april 1, which wilson be the official budget on february 1. it seems to me there will be a huge amount of pressure on republicans both ways. you cannot just put it on the president after the campaigning about how obama is spending us into destitution. on the other hand, when you start doing the numbers, it is hard to bring the numbers down

too fast on the debt. all the spending cuts when you get into big numbers are politically risky. the tea party guys did not think that they got elected to raise the debt ceiling. i'm curious to see how the debt ceiling raised -- plays out and/or the republican budget. >> the tea party caucus, they could be great numbers because you are to get 52 existing members and many more are coming. they could say, we are not voting for raising the debt ceiling. we will have to stop spending. it could require the democrats to raise the debt ceiling and the republicans to say no and the democrats could very well say we are not going to vote for this if you are not. it could be a very -- it could very well be a standoff. , and it could be a test of the lawmakers. and the person who is going to have to handle it all is the new

speaker, john vader. what is he going to do? -- john boehner. the what is he going to do? he talked to the people on election night and said, "i will never let you down." well, you've either got to raise taxes or cut spending. >> you can raise it for less time that obama asked. there is will room on this thing. -- wiggle room on this thing. enough republicans will vote for it and they can let the tea party off the hook. they can vote against it and you can let the majority of the hook. republicans have a harder problem, i think, and that is, the things that they believe in, like extending the bush tax cuts

and may be other tax cuts and spending cuts, if president obama opted to go along with those things, they will be helping him get reelected in 2012. this was a problem in 1996 when republicans -- trent lott, actually, when he was majority leader -- gave bill clinton, who had vetoed two welfare reform bills, they gave him a third shot at it and clinton signed it. and bob dole, but republican , and wasial candidates t planning to use the welfare issue against him and it was taken a -- taken away. and i'm sure that bob dole and other republicans are still mad about that, that trent lott should not have sent bill clinton up for the third time, but they were in favor of it. they liked it. >> when you think about the

dynamics of the next six to nine months, a player in this is the chairman of the house budget committee. it is the one document that could authoritatively set forth the republican vision, and not just a vision, but the details of the size and scope of government to contrast with president obama. the budget is what trip up the republicans in 1995. they had to reduce the growth in the rate of medicare. that is what started to do you really republican revolution of 1995. ken ryan balance the tea party within his own party? is there a reasonable alternative -- kenny savidge this as a reasonable alternative to obama? -- can he salvaged this as a reasonable alternative to obama? >> i think, republicans, in effect, had a policy success. they more than us stop spending

for a year, which played a large part in sending the budget toward being balanced a few years later. nicolasa some public support -- they lost some public support, but remember, they did not lose 60 seats in the next election. they actually held control of the house. it was not a total disaster. they did not win the presidency, but they all the house for another 10 years. -- held the house for another 10 years. i think republicans are looking out to have paul ryan in there. on the one hand, he is telegenic and has a good personality, but much more important than that, he has a command of substance of public policy and is capable of arguing his position and debating it civilly, but strongly. we saw that at the so-called health care summit that president obama held.

the -- he has also addressed the republicans' biggest problem, if they should achieve the kind of success in 2012 that they would like. that is, how you deal with these entitlements? he's got his road map, which is a long-term proposal to try to bring the entitlements state into a situation of fiscal sanity. some democrats have taken to attacking it. they have not provided alternatives of their own. only a relatively small number of republicans have specifically endorsed it. the inclination of incumbent republicans has been to scare away from something that might provide fodder for attacks. it will be interesting to see if that idea is embraced by more of these new members of one-third of the republican conference.

ryan will be front row and center of any of these fights here. it is hard to imagine how the republicans could have somebody better positioned to do this. >> it seems to me, a lot of the challenge is to sort of embraced -- paul ryan is on the roadmap and explaining it and suggesting it is the way of their futurthe future for repub. i'm on c-span. i should be careful how i raise this. he said, he is very flattered by fred's piece and it shows that a lot of candidates must be reading it because suddenly on tuesday, his office got a lot of frantic calls from candidates and campaign managers saying, we hear the roadmap is great. but i did not realize there were

actual medicare cuts in it. would you explain? i do not think it is really cuts, right? i think is just reforms. and paul had to send a couple of staffers over to the congressional campaign committee. he had to get outside people to brief these candidates about the road map. there was this article that it was a great thing for the future and then they were suddenly getting attacked by their democratic counterparts as if it was in 1995. but didn't democrats lose that fight by being called scrooge medicare covers? >> i do not think so. as far as keeping the new members satisfied, the republican leadership is going to have to produce actual cuts. the new members lookin, they goo

the historic tables of the budget and in 2007, in which the deficit had been falling for three years -- the deficit in 2007 was signed -- was $160 billion and that was after the bourse tax cuts. in 2010, they are $3.7 trillion. they had never gone up like that before end of a sudden they are $1 trillion more per year than they were in 2007. these new guys will not understand how that is the new base line. they will push hard for cuts. >> in domestic discretionary spending? >> yes. they will exert a lot of pressure, especially agency by agency, to go through and say, how in the world are we spending $1 trillion more than we used

to? we understand we airport -- we are spending more on unemployment insurance, but all of these other agencies are spending like crazy. we've got to do something about that. >> do you expect to see the president to be signing some of these cuts in many aspects of discretionary spending? or do you expect another showdown like in 1995? >> if you are talking about a government shutdown, know. i do not think so. -- government shut down, no. i do not disappeared >> at the -- i do not think so. >> at the end of the day, president clinton accepted a certain amount of discretionary spending. he did not mean it, but he was saying it was a big concession. so far, president obama has not had the tone. >> that is almost a psychological issue of.

how much can he accept this, and to what degree can he say he was on the wrong course for the first two years, which he cannot go there. he has come out in favor of freezes in some areas of domestic spending but i cannot see him signing a budget without a lot of fighting back and forth before hand. >> paul ryan says meeting the obligation in year one in cutting spending of $100 billion is easy. he says he will not have any trouble finding that. he says if there are any republicans that object to that, he would like to introduce them to the freshman congressman cutting in, who probably think that cutting $100 billion out of a huge budget that is approaching $4 trillion is pretty easy. that is not a problem. what republicans are going to give -- i think the plan is to have every week, passed a spending cut. one of them mentioned to me that

it might be a cut in the federal aid for national public radio, npr. >> you can call of the one williams -- call it the juan williams bill. they always give them these hokies nagin -- hokie names these days. [laughter] >> and pass one per week and send it to the senate. and if harry reid does not like it, he cannot call it up and mitch mcconnell can use the obscure world and it will be called up and democrats will have to block it. you do that week after week and you can come up with enough popular spending cuts. but to do this for many, many weeks, sounds to me like a pretty good strategy. >> anyone else on 2011, what to watch for, before we get to my ex-president -- primary challenge against president obama? >> we have the debt commission with alan sisk -- alan the

reporting in december. if they come out with some combination of spending cuts and entitlement changes cutting costs, democrats will be resisting the entitlement changes and the republicans will be resisting the tax cuts. -- the tax increases, rather. and we are not going to see anything develop out of this. it seems to me, if you want to try to initiate change, one of the directions you might want to go is a tax reform of the 1986 type. where you eliminate preferences and so-called tax expenditures. and you lower rates. that is the obvious way to get something that will have important things that both parties want. i'm guessing the deficit

commission is not going to give us that kind of proposal, so i'm afraid i do not see much happening on this front. >> susan, anything else we should be watching for? >> certainly, this you cut proposal where people help decide what we cut, i think that was definitely paramount on the minds of voters. i think is a lot more powerful with people. maybe not cutting social security or raising the retirement age, but there are other areas where you see people willing to embrace cuts. and the fact that the president even has a debt commission and is talking about cutting it, i think the atmosphere there were you may see some success in reducing spending is here. >> michael, you were -- do you wish to jealous about the primary challenge to president obama in -- you wish to tell us about the primary challenge to president obama in 2012?

but i do not think there will be a primary challenge to president obama because i find it unlikely that the first african-american president will be challenged in his own party and with a primary electorate in which the average primary electorate is about 20% african-american. it is unlikely. it does seem to me that it is possible that there may be a basis for a challenge from the anti- war left. possible candidates, gov. howard dean, who are think was treated rather shabbily by this administration after a successful run as democratic national chairman kurra. the former senator russ feingold, as he will soon be, he was a principal opponent in to his credit, took those stands when they were not popular and made a big point of it. he is a person that might conceivably be that way. i think there is the

possibility, but i still think it is quite unlikely. >> and on the republican side? >> i think the republicans have an absolutely winning ticket that they could put together. >> let me write this down. [laughter] >> and they could rent -- and they could win pretty easily. that is with jeb bush as their presidential candidate and chris christie as the vice- presidential candidates. the problem is, neither one are going to be running. chris christie said there is a zero chance that he will be running and i personally have talked to jeb bush and he sounds not at all interested in running in 2012. he is a great governor and i think would be a great candidate, but you have got to run. and he is not. >> the one thing that you get when talking to republicans -- and they basically put a lot of their 2012 concerns to the back of the mine to and after this

election. this -- to the back of their minds until after this election. but i do get this sense of how this extreme hunger for someone new to come in and save them. obviously, john mccain is long gone from the picture. but the people that they had, mitt romney being the best known name other than sarah palin from the 2008 race, i think is never going to get people to love him. he has had, a problem connecting with a certain part of the electorate. sarah palin reminds a divisive figure among republicans. not too long ago i talked to the head of the paul maddow family council, which is the family research council of south carolina and got a sense, that it was evenly divided, kind of half and half about people who wanted her to run the chris christie or paul ryan would run

-- who wanted her to run. maybe chris christie or paul ryan would run. somehow i do not think that someone with the name of "bush" will fill the role. >> susan? >> i get the sense that mitt romney is going to try one more time. regardless of who the star canandaigua might -- the star candidates might be, you have to deal with the fact that sarah palin and mitt romney and who knows, mike huckabee. we will have to see how that plays into it. >> it seems like it will be more like a traditional democratic primary with some people running in some people favorites and some are outsiders. and sometimes the outsiders like jimmy carter win, and others have ups and downs and people go

ahead and then mike deane and foster -- and then like carrying and foster. republicans are ludicrously boring. [laughter] mcginn if the nomination and then -- reagan wins the nomination after running the first time. reagan beats bush and then bush gets the nomination. i sort of have the instinct that in the post-obama, in his defeat of clinton, and in this post-tea party and this new era that we are in, how does not feel like republicans keep wanting to nominate the next in line. also, there is no clear next in line. is sarah palin the next in line? is mitt romney? mike huckabee?

>> mike huckabee won seven primaries. mitt romney only won one. >> he won several caucuses, though. >> sarah palin went on the weekly standard alaskan cruise, if i recall. [laughter] since the report -- the weekly standard has led the nation on the issue of e sarah palin candidacy, what are my colleagues views of the potential for that in 2012? >> colleran's district is on the lake, right? >> yes, in michigan. -- paul ryan said district is on

the lake, right? >> yes, in michigan. >> she would probably do well in iowa and south carolina. you have iowa first, and then new hampshire -- i guess you can skip new hampshire. then go to south carolina. i do not know about the nevada caucuses, but they come in there. >> it is dominated by memories of the church of jesus christ of latter-day saints in the last primary. >> if mitt romney is running there, he might do well there again. anyway, you can see people who would like to be part of a sarah palin presidential campaign arguing to her that it is just taylor made in the beginning and all you have to do is win iowa and south carolina and it will be easy from then on. i think there is a substantial chance she will run. i have no inside information, and i suspect she does not know whether she will run at this

point. >> i saw her on fox news sunday. we did a show from new york this past sunday and we were chatting before the show began. the most notable aspect of this conversation was that she was describing this thing in alaska where cbs news reporters seemingly ran tapes to cause trouble for joe miller. and she was really outraged by these reporters on the tape. and she said to me, -- i said to her, the media has been very hostile to her and she said, yes, they are corrupt bastards. and she paused for a second and said, can i say that on television? and i said, don't let me stop you. and sure enough, there she was 10 minutes later on fox news sunday. i would say that what she said struck me -- she said, look, i

want a strong, constitutional, conservative -- whatever terminology she said -- that kind of person to run. and she said, if there is not one like that, then i would consider running. it sounded like she wants to run, but i think she was actually being sincere. if someone gets out there that she likes and agrees with, she might not be so determined to run. she has had success supporting other candidates. or a lease, she has shown herself willing now to throw herself into the race if there are other good candidates. it is prole pretty hard to tell yourself, why shouldn't i take -- is probably pretty hard to tell yourself, why shouldn't i take a shot at it?

these guys -- i do not think it hurt them much to get out there. a lot of people on stage want it and there will be 20 debates. and things happen in campaigns. look at mike huckabee last time. he was a compelling debater. and he also found a niche in terms of his constituencies. good for the weekly standard. good for the washington examiner. good for the chaos and unpredictability in the news. i think it will be exciting. how strong do you think ultimately president obama is or could be? all republicans are spooked by the memory of 1995 and 1996 when clinton came back so effectively.

>> think where president obama start from. if he had been running this year, he would have lost. he's got a lot of ground to make up. and he is not as deft and nimble. he does not come from what president clinton does. he does not come from a state and a political culture that is fairly conservative, as clinton did in arkansas. clinton knew after losing in 1980, he knew how to be reelected as governor in 1982. and also, though clinton -- bill clinton was never called ideological purity and of course, president obama is a fairly -- was never called ideological. and of course, president obama is fairly ideological. it is harder for him to move to the center. he obviously does not have any natural inclination to do that. but he is going to need to do?

-- to do it. he will have to do it on issues he does not like. he is on the wrong side of it now, on taxes, spending cuts, maybe even on health care. although, whoever said it would be hard for him to do that may be right. there are a lot of different issues he will have to move to the right on if he wants to be reelected that he is not inclined to do naturally. >> but he is terribly worried about his constituency on the left. if you say to them, this man who wanted to be president has been . . the national security procedures you hated are still in place, and by the way, he extended the bush tax cuts. that is an extremely demoralizing record for a certain part of the democratic base. >> i agree with a lot of that, but i think there are some

countervailing considerations. certainly, this electric issued a very strong rebuke of the president on public policy. they were against his policies. it may not be exactly the same electric in 2012. we had low participation by young voters. we did not have the record participation by black voters we had in 2008. that may be different next time. we do not know for sure. certainly, that is a likely possibility. i feel that among many, perhaps most, americans it would be a bad thing to reject the first african-american president. i think that is a result of our history and is a feeling that is widespread. americansk generally co, have tended to indulge their favorites in terms of the president. if you look at bill clinton in

1996 or george bush in 2004, they were giving the incumbent the benefit of the doubt. maybe in this more turbulent environment, that will not be the case. but it could be the case. i do not see the kind of hatred of barack obama that we saw many conservatives have for bill clinton. and many liberals had the same for george w. bush. those people had characteristics -- both people had characteristics that the people on the other side of the cultural divide absolutely loathed. i do not think that barack obama -- the toughest jokes told against him are the teleprompter jokes. that is about the stuff he gets. it is not the stuff you heard from conservatives about clinton, or from liberals about bush. i think all those things could

be different. it could be a different issue environment in terms of where the economy is, etc. i do agree with fred -- let's put it this way. all politicians have a certain range of issues that they could possibly adopt. some have a very narrow range and some have a very broad one. bill clinton had a broad range of issues positions he could adopt. obama seems to be narrower. i think he probably will not change and i think these positions will continue to be unpopular because the obama democrats came to office with the assumption that economic distress would make americans more supportive of or amenable to be government policy. that assumption turns out to be wrong. i think that is the fundamental lesson of this election.

but there are other factors of which i can foresee the reelection of the president and some significant recovery by democrats from the position they were in in this election. >> i think you're absolutely right. what this is going to come down to in 2012 -- first, who is the republican that he is running against? obama is a charismatic figure. he is an excellent presenter and we loved to follow him around in 2008 because he is a real rock star. he attracts thousands of people. they love him. he campaigns really well. we cannot discount what that is going to generate in terms of getting people out to vote. one reason why democrats fare so poorly this year is because so many democrats just did not turn out to vote. it was the enthusiasm gap that helped republicans. obama cannot really stir up his base if he is not moving in the

direction of the liberal agenda, but on the other hand, if you look at the exit polls and results on tuesday. the independence switched this year -- the independents switched this year and really voted in favor of republicans. he has to be incredibly mindful of independent voters and they are speaking loud and clear right now that they are not in favor of what he has been doing. i think the obama administration has a challenge to figure of how to get him reelected. i think it could be in jeopardy by of looking at the results of tuesday. and >> and one of the main thing is that the independents disliked was obama care, which the white house never can -- never succeeded in convincing the majority of the public was a

good idea. and ironically, one huge problem the president obama has that president clinton did not have is that his health care passed. clinton was able -- it fell apart in 1994. by january of 1996, after politically, at least, winning the showdown, he was able to play the era of big government is over. he did not have to say that explicitly. he just made it clear he was not picking that up again. and sure enough, he was president and no one heard anything about any kind of health care reforms in the next four years. the problem with obama is that it is the law of the land and whether it is repealed or substantially reformed is a big issue. and if you want to repeal obamacare or substantially

changed it, then there is a problem. it is a matter of, he cannot move on health care because he is going to be defending it and republicans will be attacking it in 2011 and in 2012. he set up a situation where if you want the majority of americans to be ok with obama care, the only way to get rid of it is to defeat the president in 2012. that is a problem that clinton did not have because, ironically, he failed. i think it is time for maybe 10 or 15 minutes of questions. we should let people go back to work. some of us should go back to pretend to be working on it. let's take a few questions.

we have a microphone here. i cannot see because of the lights. you find someone there. good. >> my name is debora from the cato institute. there's a lot of optimism within the government, but how you reconcile that with the fact that so many voters voted democrats out of the election because there were not doing enough on the economy and getting jobs? and also the fact that many republicans are paying lip service to spending cuts, but will not privatize social security or completely repeal the medicare and medicaid? what do you have to say to that? >> how serious are republicans about cutting government opposite, i guess, is what it comes down to? >> i have not seen them be

serious about cutting anything in 10 years. there is the special monitoring service known as the tea party that is watching them. one of my tea party sources said, "republicans have the tea party support, but they are on probation as far as we are concerned. they will have to prove themselves and if they do not listen to the american people, they will find themselves in a tough election spot in two years. right now we have to make cuts. the side -- we have to make cuts." besides cutting health care. what i have seen it from the gop leadership is that they are ready to take action and they are not going to back down on this. they have got to cut the deficit and debt. >> it would be interesting to watch what is happening in the u.k., where they are cutting the budgets of many government

departments by 25% and going to lay off 490,000 public sector workers we may see some similar things like this in some of the states. we have three states that elected democratic governors and have very serious financial problems, calif., new york and illinois. gov. schwarzenegger was at one point thinking about coming to washington begging for cash so that california could pay its bills and not issue script, as it did to pay its bills at some point. if and when the private credit markets cut these state government out, there is going to be an issue. and i think the republican party will be in no mood to subsidize

these things. >> if there are, indeed, the cuts and reforms that the people in a tea party think are necessary, do you think there will be a third-party candidacy for the presidency? what will happen for the american people? if they do not like the republicans and do not like the democrats, what is the alternative? >> the underappreciated success of some republicans, was after some initial resistance, they did not have much choice because they were defeated. what people forget, 18 months ago looked like a real possibility of many third-party tea party candidates. they could have had -- you know, he could have had nine

states running as independent candidates. and they knocked off some republicans. but i think you raise a good point. it is one thing to handle a bunch of senate and congressional races when you do not have any power. you have to govern for a year- and-a-half and hold that coalition together. >> the fact would be, who would be at the head of the ticket? who would be the presidential candidates in all of this? and the people who voted tea party in this election, they could sign on to this person. you are right, district by district basis, if someone were to elect a deep -- a tea party candidate, they could be in trouble. but the republican party, as a whole, -- the tea party as a

whole, they have not elected a presidential candidates before. i do not see the tea party abandoning the republican candidate for a third-party candidate. >> i do not either because the republicans will get some spending cuts in the next couple of years and obama will have to go along with some of them. at the moment, the culture of spending in congress has changed. now there is a culture of cutting spending rather than raising spending. we had won in 1995 for a little bit. but after the election in 1996 id sort of went away. -- it sort of went away. but for now, in the short run, i think the tea party people will be satisfied with what republicans do, but not for long. >> i do think republicans have a bigger majority in the house than they enjoyed between 1994

through 2006. they got down as low as 221, with 218 being the majority. and the glue that holds it together is called money. now they will have to wonder if 40 or more members -- 240 or more members. you can let some people walk the plank. you have the possibility of exerting more pressure on the appropriators culture, so that may be a longer time frame of which pork is no longer kosher. one more question. >> i saw recently -- just now, tweeted that just twiste she will be running for minority leader. >> susie, you better get back to work.

i said, she will not run again, will she? and >> why stick around? it is much less likely that they will be able to get back in 2012? it will be a longer time as minority leader. does she really want to do that? apparently, she does. the thought of going back to san francisco and sitting in the rocking chair ending for the grandchildren did not make sense. she is a tough lady. and it makes sense that she wants to stick around in the minority. the minority can do things. and she is also a good friend raiser. she is a source for potential for democrats to try to get some

of the seat back. but most importantly, the reason she will run right now is that these elections have changed their carcase. these elections wiped out -- of their caucus. these elections wiped out her moderate faction. she got behind the cap and trade bill, the ledbetter law, all of these liberal causes that were important to them. it is not surprising that she would want to stick around and do it. >> i think most of the democrats who came out during the campaign against her -- probably bobbi brighton in alabama, and i'm sure there were others. [unintelligible] >> in congress before the

elections they made a point of that. these people were saying, she would never have the support to .tay around hal however, if they won by a slim majority, it would be virtually impossible for her to maintain her speakership because there would be just enough moderates, or there would have been another person who formed a candidacy. you would have had people like steny hoyer. the steny war era -- steny hoyer will have to wait to become the top democrat. >> steny hoyer must be having a really bad day. >> what susan was referring to was new gingrich -- newt gingrich and his bigger ship in 1998. -- and the speakership in 1998.

>> i think you could argue pretty easily that it was nancy pelosi. i do not think republicans would be unhappy to see that. >> the republican party will continue to run against harry reid and nancy pelosi. i think a lot of people predicted that harry reid will lose his own race and that knows you -- nancy pelosi would step down as hastert did in 2006 when he lost the speaker of the house position. >> they are back, but there is a lot of collateral damage. >> on that note, let me thank the panelists for an interesting discussion. thank you all for coming. [applause]

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> next a discussion on the impact that tuesday's election will have on state lars. after that, after that president obama talks about the october unemployment rate. then remarks by federal reserve board chairman ben bernanke. this weekend on book tv's in-depth, jonah goldberg and editor at large of national review online discusses the election results, the conservative movement and the next wave of leaders on the right. join our three-hour conversation sunday at noon eastern on c-span 2's book tv. now, a discussion on the impact of tuesday's elections on state legislatures from one of the country. from today's "washington journal," this is about 45 minutes. staff writer for politifact. what we will do is look at results in state legislatures.

here is the headline from a piece you wrote. historic gains for gop. give me the scope. guest: well, really, it measures up to the gains from 1994 and from 1974, the post-watergate year. we have 19 gop takeover is so far. that could grow up to 22, i believe. actually, these often take longer to resolve because he had multiple members running. it recounts and even party switches can delay things. at least 19 for the gop. one democratic chamber turned into t. zero democratic takeovers. and there are still three that are currently democratic held that you could not let to the gop. it could go up to 22. >> and the governors? guest: very volatile year. in some ways, a great showing

for the gop, particularly in some of the early key states that are fairly large and swing states. you have the gop taking over pennsylvania, you have ohio, wisconsin, iowa. as a look forward to the redistricting. they gained a total of 12 chambers. flip a total of 12 chambers. but actually the democrats did fairly well, too. they successfully flipped -- it looks like five chambers. just came in this morning -- little bit of a florida situation with some recounts. but it looks like the democrat is in a relatively good spot there. it had been a former gop state in terms of the governor. the striking thing about the election in terms of governors is if you add it up altogether, including the state of rhode island flit to a third-party candidate, and if you add it all together it works out to be a total of 18 flicked chambers out

of 37, which is more than half. i can tell you more about why it is. host: to set up the conversation and invite them to take part. i will put the numbers on the screen and our twitter address and e-mail address. if you voted or switch your boat and made a decision to support a different party at the state level, call us and talk to us about why you did that, what was behind the decision making. an analysis of what happened in your state legislature or governor's race, the time to focus in on that. and we will talk to louis jacobson about the implication of gop-controlled in the state houses. the policy front, especially fiscal policy, with some mistakes having fiscal issues, and second, redistricting, another aspect. let me, with that, returned to

you on the implications of this. guest: i think you set it up really well. in the purely protocol sense, we are looking at a redistricting year coming up. the census will be finished shortly and the state breakdown will be announced probably in december. that happens every 10 years and the redraw lines but that the state and federal level for congress. not every state is affected because some have a nonpartisan system of drawing lines and others have made a single district, or maybe two, so it is not very possible to change how the lines are drawn. but there are certainly a lot of states, particularly gaining and losing seats depending on population trends. the way it works is, if the census finds out your state is getting a larger share of the nation's population you will get additional seats, sometimes even more if it is really vast.

in the past few decades, generally speaking, the sun belt has gained and the northeast and midwest has lost. those sorts of patterns will probably hold true for this coming year as well. but it is to know for sure in a month or so. host: ed gillespie heads up something called the republican state leadership committee. if you go to their website you can see that this is something they were actively involved in targeting, raising money, soliciting members and sending money to state races. when her republican saying, especially those involved in the tea party movement and allies, we are in this for the long haul. talk about their level at the state level and the affected might have had on the races. become definitely effective. -- guest: definitely effective. a tough year for democrats given the state of the economy.

but i think the total number of seats, 600 across the country. the amazing thing is even in some of the states where there is already a strong gop leader, you saw some fairly significant shifts. texas had a fairly even legislature -- sorry, i should say house chamber, about three or four seat margin, if i recall, and that group -- grew quite dramatically. in terms of the state legislatures, it really was a broad based shift. it is striking because you don't necessarily think that a generalized anger with the federal government would necessarily translate into state contests but it certainly seems to this year. host: democrats have a similar state legislature committee. the energy level between the two -- how does a translator on the

screen, as a look different? did the democrats get outmaneuvered? guest: you know, it is hard to say for sure. i think there definitely handicapped by the situation with the economy and the fact it was the first midterm of a democratic president, and the democrats held the senate and house as well. it was always going to be a tough challenge. to put it into context a little bit, i did three different takes of a handicapping of all 50 state legislatures. i did my first one around july of this year. at that point, i had found two striking things. already at an early stage i found there were more chambers and play, largely democratic chambers, then basically more at that time than any time in the last five sake -- cycles i had taken a look at. usually in the past four cycles,

including some fairly big wave cycles like 2006 and in 2008, you would see is split roughly equal. some gop chambers were at risk, some democratic chambers. but starting in july, first time i did it, was that strongly tilted toward democratic chambers totally at risk. very few gop chambers. i think the die has been cast at least the past six months or year or two. host: state legislatures, there were seven republican house pickups. colorado, indiana the let's put that on the screen. cavallerano, indiana, iowa, michigan, montana, ohio, and pennsylvania. there were six a gop house and

senate pickups. both legislatures. alabama, maine, minnesota, new hampshire, north carolina, wisconsin. aforementioned republican state leadership committee. 16 democratic-controlled legislature. let us look at the. arkansas, california, connecticut, delaware, hawaii, illinois, kentucky, maryland, massachusetts, nevada, new york, new mexico borrowed island, vermont, washington, west virginia. ironically our first call comes from washington, d.c. carroll, a democrat. go ahead. caller: good morning. i would like to know -- this to me is a sad day in america, ok? but i would like to know how many tea party, tea baggers, or

whenever they want to be called, gained in the state level and the senate and if they are going to stand true to what they believe in -- they want to do away with education and privatize social security and they want to bring back -- do away -- or do away with state tax. what is amazing to me -- middle- class bill even have -- don't even have to estate tax. something i don't understand. poor people running around here saying what the republicans saying, do away with the estate tax. host: thank you for the call. of the 600 seats picked up by republicans, have you done analysis for tea party? guest: it is a little bit of a slippery term because some people may have not been

affiliated with the tea party, or casually. i think it is definitely fair to say that the degree of energy from the tea party helped the gop in a lot of these states. at least in certain areas. i should say there are a couple of chambers vulnerable it that the democrats were managed to save. nevada senate, washington house, the illinois house, colorado senate, delaware house. all of those i had at risk but they did pull out. a state like delaware, for instance, folks think of the christine o'donnell campaign, which was a challenge for the gop on election night -- turns out they lost it by 17 or 18 points, i think. that actually may have helped the democrats. it will cut both ways the probably on balance is was a good thing for the gop because they got large energy out of it. host:

"usa today." gop engineers historic shift. candidates sick about 650 democratically held seats -- candidates talk about 650 of the democratically held seats. a momentous year in american history. los angeles, california. republican. joe, go ahead. caller: yes. i am calling you from of the land of free and not. let me explain -- fruits and nuts. let me explain something or maybe you can explain. we had a budget that was recently submitted. in this california budget they had a provision that they will get $5 billion from the federal government. they approved the government -- budget with a 5 billion gap and a contingency plan the federal government would provide them with the $5 billion.

now that i see that the republicans have basically swept the house, where do you see california with its crazed communistic tight republic type policy. what he thinks -- when you think they would handle the $20 billion gap? there are a lot of angry unions involved in california politics. will the state senate and a lame duck session of congress provide california the bailout? host: we were showing "the new york times" this morning. california shifted and so did brown. guest: i can't speak to the details. and general, obviously you will have a new very important role for the gop in washington. they made it pretty clear that

they don't like the stimulus and a lot of the other obama policies. could we see changes on how the stimulus is done in going forward? entirely possible. of course, we still have a democratic president and senate. they certainly cannot unilaterally change it. but you could definitely see some changes coming. i should say about california in particular, that as a state where democrats did quite well. it has generally been a democratic state in the past two or three decades. going into it maybe six months ago, it looks like it would be the best chance for the gop in california and quite a long time. they had a strong gubernatorial candidates who i guess ended up spending -- cs -- she spent $160 million of our own money.

-- on her own money. and a strong statewide slate and they ended up being creamed basically. brown won by six or seven points. and i think they lost every statewide office. although it is possible the ag race is still too close to call but i think the democrat is ahead. so, we clearly have a case where it was very strong but not reach everywhere in the same strength. host: our next call is from new york. they won the governorship in the dark and what about the legislature? guest: the spill have a very strong hold on the state assembly but they don't know who will state senate yet. that was a closed chamber last session. it evolved into a party flip during this session and there and it seemsut its

like it will be similar. i don't know who will prevail. host: tim is watching this from oswego, new york. independent. caller: the first thing is the new york state legislature is a disgrace, both parties. they are horrible. and until somebody can take care of that situation, we are screwed. but my comment was i did vote for -- everybody a vote for this year, even if they were the majority candidate that one, i voted jiging -- the republicans still have a lot to prove. but one of the things when i was listening to you, it is my understanding that 22 states passed the balanced budget amendment and only 11 states more need it to become an amendment. is there any sign of hope that

with this republican takeover in state legislature and governorships that they may do it? >> it sounds intriguing if that is true. sometimes you have to pass all the states needed in a given time period, so i don't know if that is still valid. i could certainly see that as a possibility. you have a lot of states that are newly gop-controlled in the state house and senate and governorships, and there's a lot of energy. something the tea party i think would support. it is a plausible idea. it is just a guess. host: "the washington times" highlights minnesota, home of the democratic farmer labor party. guest: interesting case. of the 24 chambers, i think, that i raised it as in play, or 25, i captured all but three

that actually flipped. there were three that i said was not in play and a flip. one was the chamber and the state of minnesota. [laughter] so, yes, it did surprise me. i thought the one chamber would flip and i did not think both. at the same time you had the democrat, mark deyton, currently leading in the governor's race -- host: one of the two governor's races still not called. a three-way in minnesota. guest: yes, correct. he seems likelier to win because had far more votes than say senator al franken was when two years ago they had a long recounts. he has a fairly large margin of comfort but it is not official yet.

it was a general anti-incumbent tide apparently because fully was a gop governor and democratic state house and senate and now you would have the same thing. it seems that the voters seem ok with a divided government in that case. a fairly interesting point is there was a definite anti- incumbent theme in terms of the governor results. a total of 18, and looks like, seats flipped. more than half. existing because it is a very similar number to 2002, which was the eight-year -- eight years since then and it is an echo election of that. what happened in 2002, series of

budget crises in the states. voters were frustrated in terms of governors and it through 17, 18, or 19 out. states who are historically democratic lead gop governors and states generally -- the flip of that. and now those seats were generally opened this year, and they fled. host: this story by dow richardson in "the washington times" that suggest that state republicans in minnesota credit their success of campaign message of jobs and economic growth and says amazing when the republicans johnson of message resonated in a state that has experienced relatively low unemployment compared to other missed work -- miss western states. -- midwestern states. sandusky, ohio. fenty as on the democratic line. a lot of interesting races in

ohio -- betty. caller: i voted democratic. which, i guess i lost on all of them because we now have a republican house, senate, and a governor. host: why do you think that happens? caller: i don't know. i think voted against their best interest, which is my opinion. the thing is that today i read in one of the local papers, kasich said a statement saying if you don't agree with us, get out of a the way. a right to work state, abolished income tax. he already said the school funding is not possible. he is going to change all that. where are we going? cordre was helping people with foreclosures and he is out and now we have dewine only worries about getting rid of health

care. everybody voted against their best interest, and my opinion. guest: this brings up an interesting point. obviously the gop field like they got a pretty strong mandate, particularly in a lot of states like ohio where they want the governor and state house and senate and they will probably act on that. it is not popular in either two or four years, voters could throw them out again. we already had three consecutive change or wavy elections. 2006 when the democrats swept in, 2008 when they got 60-seat senate majority and the obama campaign one, and now the gop swings back in 2010. i could entirely see it happening again in 2012. we don't know yet. if the gop is a smart they will try to enact things that are popular and pick their fights.

if they don't, then there could be a backlash. host: there is a twitter follow critical to your analysis -- guest: there is definitely a gop wave across the country and a lot of places. and they get a huge amount of credit for that. they certainly have the opportunity, and they succeeded in a lot of places. it is striking that at least the governorships -- not so much for congress but for governorships, you had i think fiber six states that would gop held blue states -- five or six states that were gop held or blue states. if connecticut works out what we think of them, democrats swept

all six. it is not that it was a total anti-incumbent wave everywhere but i think there was an undertone, to use the same metaphor. host: do you agree from as " a from minnesota republican party chairman. local products -- local politics was not local these -- this year. guest: in a sense it is hard to parse the wording in that, is the state of the economy a local or national issue. you could argue with both but the gop did it a good job of seizing on the frustration with the obama and the democratic congress, their policies, and virtually everywhere did better than they did certainly in 2008. host: --

guest: good question. i had them either tossup or lead republicans. i definitely had them in play. i see this as a case of a southern state where the democrats have historically been in power going back decades and decades, but slowly losing ground to the gop first in federal races, in the presidential race, senate races, house races, and to the state house and senate level. i think it was going to happen sooner or later just given the general trends of voters in that state. but it was certainly a strong year for the gop. host: roseville, michigan. amanda, a democrat. caller: give me a minute. i get tongue tied when i am nervous. just try to explain to the democrats and liberals why there

was such a way, is because if you are a republican, a conservative, and you know what obama stood for prior to him winning, and the democrats being in control since the end of 2006 and you saw what they did and what was produced and then obama came in and swung way to the last, republicans and conservatives don't want our country fundamentally changed. in a few years from now people are going to thank the tea partiers from the for sale in the country because we did not want the country to become what it has not been although the democrats have been trying to change it for the past 50, 60, 100 years. we are trying to go back to the fundamentals of what this country was founded on a and a wave of that was swept through, something that will continue because that is what we need and that is what we want and i am

very surprised that dingell is in in michigan and john conyers is an, corruption, corruption in the city of detroit and the surrounding cities. one more thing is that -- like as said, we don't want to change. obama represents a marxist socialist -- i don't know what you want to call it but that is not what america is and that is not what we stand for and the democrats, the liberals who want to say in that we are racist and all of that -- that is not what it is. that is because we love america and we love what it stands for, how we were founded and we don't want those things to change. host: thank you. guest: certainly a lot of voters felt that way this year, and i think that is showing up in the results you saw. but there are lots of other voters who don't feel the same way. i almost see in two or four years what the cases.

host: this is what the governors look like post-election. two are in play but at this point 29 republican, 18 democrat, and one independent. shelby township, michigan. tim on the democrats' line. you are on the air. caller: good morning. after that call from roseville, have to tell you, you have to change your call and my to democrat, independent, and parakeet. the best they can do for intellect is just a repeat what they are told on fox news which is owned by rupert murdoch, a rich kid from austria who inherited a business from his daddy. what happened in michigan is republicans controlled both houses in lansing for 22 years and with their good buddy as governor of a tax cut michigan completely out of business and they tapped into the rainy day fund so when he was term limits if he moved out to california

and jennifer granholm came into a state that was completely bankrupt. both houses controlled by republicans that would not work for her. they would rather see us lose our jobs and those are homes than to work with someone else. finally, in 2007 -- 2006, if you say 2006 is because you are a. 10. -- . 10. democrats were finally starting to take over the house and here we go, they elected all of the republicans again. right now the state of michigan because of the tax cuts -- it costs you $536 a year to maintain your vehicle because the roads are so bad here. in order to fix the roads it will cost an additional $1 billion on top of the cost of fixing the road and when you drive down the road and you look underneath the bridge there is plywood to catch to the broken

plight -- concrete from hitting your car. guest: i cannot talks this of the woods to the michigan roads situation but there are a lot of governors this year that will face serious problems. states gets hit especially hard because they are squeezed between -- having a balanced budget forced on you and a tax revenues have been down quite significantly due to the state of the economy. anybody taking office right now will face a load of problems. it is not a good situation to be impaired if they can stick it out and the economy improves over the next couple of years they will probably do fairly well. that is what they saw in 2002. the class of 19 new governors who changed parties in 2002, most of them, not quite all, but most of them did get a second

term because they caught the upswing of the improvement in the economy. so, even in states like kansas, oklahoma, tennessee, you saw democrats getting a second term in states like rhode island and connecticut and so for -- forth. democratic states use of gop governors getting a second term. so much is timing. a look bad right now and it might be bad depending on the economy, but if they can do well the next couple of years there is a pretty good chance a lot of these guys will get a second term. >> looking at governors. republican pickups and the 2010 election. iowa, kansas, maine, michigan, new hampshire, gillette me start again. new mexico, ohio, oklahoma, pennsylvania, tennessee, of wisconsin, wyoming. sorry that we did not have the graphics for you.

i what is one of those days of a rematch? guest: yes. not quite a rematch. when the second chance at governorship. a former governor and the state of iowa, he served, i think three terms as a gop governor in the 1980's, early 1990's. he was facing chet culver, one of the few sitting incumbents to be ousted. he faced a very tough economy and just didn't pull it out. pretty much decided a few months ago. never manage to come back in the polls. i think people chopped up to, here's a guide, there were good times, let's give him a chance. >> in maryland there was a rematch between sitting government more and o'malley and bob ehrlich -- martin o'malley. -- going into the cycle it was thought to be a fairly competitive race.

he held the governorship for four years. well known. but this is the case you did not see the wave crest and the more liberal states like maryland. o'malley, i did not think people ax and a love and adore him but they felt more comfortable with a democrat. host: texas. sherry, republican line. caller: good morning to both of you. i am sorry i sound so congested. i am getting a cold this morning. i called in because i am registered as a republican but i usually don't like an independent. i pick of the person and their record. but not this year. not this year. i voted straight republican ticket. and it was just to sound a message to washington, to democrats. if we don't cut federal, state,

county, and citied -- city government budgets by 30%, we are all going to be destroyed and devastated. and this country will never be able to recover from it. it is better to cut 30% now and take the hit and suffer the pain then to lose 100% down the road. and it is not too far down the road because the can as only going to get kicked another couple of years, and we are going to be in a really serious trouble. and i just don't see any possibility of the democrats and republicans hearing our message out here. it is like we are talking to the wind. cut the budget. cut the spending by 30%. everywhere. at all levels of government. so at least we can save 70% of what we build up in this country for the past 250 years but is 70% saved is better than 0

percent of the states. host: thank you for your call. in the governor's race in texas, it was bought earlier on to be competitive with the houston mayor competing with the incumbent. but there was quite a spread in the end. guest: there was. just a really gop state in a really gop year. >> what does the legislature look like? guest: strongly republican. one chamber that was once close was now strongly republican. bill white, the democrat, very good candidate in a different election environment he could probably prevail. but not this year. just the shape of the electorate and how frustrated they were with the national picture and a frustration with democrats. it was a very tough climb in the end. host: "the new york times" features the texas governor's race and right below it a story about florida where voters chose

a ceo who is prepared to make cuts, at the wing that last caller. i am wondering what kind of legislature has there -- and guest: which state? host: florida. guest: scott. of all states, florida might be the strongest republican tide of any. not only did a fairly unpopular candidate scott wind fairly narrowly, by a point or so, but the gop won every single state office and lived four seats in congress, which is the maximum they could probably do. so, it was just a real, real gop tide in this state. now, the challenge for here is i think, you know, a lot of voters and politicians agree in their heart of hearts that they need to cut.

where did they cut, though? it is difficult because the public likes in theory to cut but in practice may not like what cuts were proposed. that is why it it was going to be tough in the next few years. everybody knows some cuts are going to have been made but it will be a real political fight, making sure voters are willing to go along with the cuts they're calling for. host: rick scott profiled in "the new york times" today. this is what they say about the 57-year-old newly elected governor in florida. venture capitalist with stakes in health care, technology, and manufacturing companies. biggest campaign promise was 700,000 jobs in seven years. the state is fourth in population, and the biggest challenge as a governor they say is creating jobs and turning around an economy destroyed by foreclosures and decades of reliance on both real-estate and

tourism. that is red spot, the gov.-elect of florida. -- red spot, the gov.-elect of florida. the next call is davis, california. this is peter on the independent line. caller: hi. i am wondering how many midterm elections actually swung toward the left in the last 20 or 30 years or so? host: the state or national level? caller: state or national. guest: 2006 is a great case in a point. six-year fatigue with bush. a lot of frustration over the war. and the democrats gained seats quite significantly. i do not have numbers on top of my head about governorships but definitely gain did both, the democrats did. i think the democrats also had a good year in the first reagan

midterm at the depths of the 1982 recession. i don't know exactly how many seats they gains and the federal or state level but there certainly have been. host: another new yorker. kevin on the democrats' line from kingston, new york. caller: i just have more or less a comment. you know, you see like what the elections that everybody -- then voted like a republican. -- they voted, like, republican. the republicans have put us in this position we are in right now. for people to go back -- i guess when obama -- with all the agenda as he was trying to put forth -- i mean, when he started as president of the united states, they always voted no on everything with him. they never were trying to be cooperative or be bipartisan with anything. from the beginning the republicans said they would say no to every agenda he brought

forth. as americans, we should stick by it or tried to look at or find common ground. we are so extreme on both ends, democrats and republicans, that we are not finding common ground and they are doing it for political gain. look at what happened with the midterm elections. their job, i guess, they succeeded in what they wanted to do but what are they going to do going forward with america? are we still going to be stonewalled, the promises they are setting forth? they won in these elections camouflaging themselves or coming through this tea party movement. they came back in and they gained in these seats. i think they continue to deceive the american public. their theory of this trickle down economics has never worked for us. the eight years with bush. they made the rich richer and the rich took the money and ran and that is why america fell into the debt that it is in my now. i mean, obama came forth with a lot of good agendas and things lot of good agendas and things to try to get