are. i am personally looking forward to an nie, given some of the bad history in the past. i happen to know jim clapper pretty well and i can guarantee he will pay a lot of attention and he will call it whatever is in st. g.i. language. >> the report does have a section on u.s. objectives. notes that in both pakistan and afghanistan, our objectives appear to have waxed and waned over the last decade. i think that is useful, because it basically lays out the spectrum of potential objectives we mht have at the maximum a minimum. the report concludes specifically on the afghanistan side at a relatively low bar. as suggested, it is a situation where afghans wh relatively

low level of outside assistance can fend off the prospect of international terrorism. this is not the expansive view of democracy building and state building, although we would of course like that. we would all like to see that, but what is the realistic prospect of that in the near term? it is open and sets the bar at a lower level. >> my question is related to the future. if there was a successful track that emanated from this region, how would you see that being a game changer for current strategy? >> if it came from afghanistan, i think we would be it -- continuing our efforts in afghanistan.

the near miss in the times square bombing is what precipitated the comments that pakistan's government would be held to account. what the u.s. government then does, i don't know. i think there is no fooling around on this matter of terrorism from mr. gates, ms. clinton, and the president. >> it is not a question of whether the attack comes from pakistan, but what does pakistan do in response? if we have confidence that they are not doing what they need to do, then there is no fooling around. >> the secretary of state said there will be consequees. i took her at her word. i thought she was serious. >> we have time for just a couple more questions. we will get both questions and then let our speakers conclude. >> i have three of my company on the ground in karachi and

yesterday there were three blocks from the explosion the gentleman referenced. we are moving them around to get the some provision of safety. i want to identify with his marks -- his remarks. throughout the middle east, where i have been in palestine or jordan or now pakistan and iraq and other places, the business sector is completely left out of the dialogue. therefore they have to operate on a totally different track. they work around the government's, and the governments ignore them in return. i would like to just urge you to contemplate an actual strategy about business. it is big business, existing business, and amerin business. you really need a full strategy. >> we fully agree with you and you have articulated very well.

one point the report makes in the pakistan context, it identifies working with pakistan partners. it concludes that they are a central component there, recognizing that our u.s. vernment outeached to those groups is far lesthan it ought to be. >> as a point of information, to my mind is a scandal that a simple piece of legislation aid at encouraging investment in the tribal areas has been hung up for more than two years in what are the petty is of political differences. you could argue that there is something broader, but it is astonishing given our national security risks that this simple piece of legislation is being caught in the gridlock. >> thank you for that last

comment. the exports in pakistan to the u.s.re things we do not even make any more. it is not as if we would be disrupting jobs. has been criticized but the reason i raised my hand was to speak to the other gentleman. could you clarify, we will hold pakistan accountable? if there is a times where type of thing happening. how do you draw a line between that and the government? how do we hold them accountable? >> of course it is the government to hold accountable. i am simply repeating the words of the senior mbers of our administration, trying to make the point to the governor of pakistan that they have scant in this game. i certainly did not mean to hold

individual citizens of pistan to account. what that accounting is and how deep it goes and what it consists of would be somhing i would imagine the administration would address at the time. >> that brings us to the end of our hour. i think we got a good preview of the report. now you can all go home and read it. thank you very much to our speakers. [applause] [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] >> of our live congressional coverage resumes when the senate resumes monday for general

speeches, then both republicans and democrats will hold a leadership elections. no roll-call votes are expected until wednesday, with the first expected vote on the use of natural gas and a luxury vehicles. other the -- other possible those include waste discrimination and food safety. you can watch coverage at two o'clock p.m. eastern. also, a subcommittee hearing on the case against representative charlie rangel, who is accused of failing to disclose at least $6,000 in assets and income. we will have not lied, monday, and 9:00 a.m. the -- will have that live, monday, at 9:00 a.m. eastern. now, a look at some new senators

in congress. marco rubio won 49% of the vote in florida. then, in dollar's senate race, democrat chris combs one with 56% of the vote, defeating republican candidate to christine o'donnell. byll take the seat once held ted kaufman, who is requiring. >> and one of his first live television appearances since his presidency, george w. bush discusses the crib -- did -- the decisions of his administration. >> now, we will look at the prevention of terrorism organizations from using safe havens both in and outside of the united states. you will hear from william banks, who direct syracuse to

diversities institute for security and counter terrorism. -- who directs the syracuse coach del university -- syracuse's university institute for security and counterterrorism. this is about one hour. >> many thanks for all of lunch. we are exactly on time. let me tell you about our format. we are delighted to have with us, c-span. what we need to do is following our presentation, there will be ample time for questions and answers. if you want, bill banks will call upon the questioners. if you could pause for about 10 seconds to allow the microphone to reach you, we will be universal. before we began, it is a great

delight to introduce an honored guest, many of you know is an esteemed international correspondents. she is with us today. she comes to chicago every now and again to renew old acquaintances, and for us to reminisce about gold -- good times and all of the marvelous columns you continue to write. [applause] >> brief introduction about our speakers today, professor hill banks. he is a professor of public administration at the maxwell school, located at syracuse university. he is a professor of law. he also is and inventor. he is one of those who

conceptualize, going back to the late 1970's and early 1980's, to create a body of law called national security law. even though it is not that long ago, 30 years ago, prior to that time, there was no quota of law or approach to the concept of counterterrorism, international terrorism, and the like. so, among other things, bill is a pioneer in that regard. his specialty, at the moment, and for the past three or four years, has been counterterrorism. he has just issued a wonderful book on the subject that is on the table in front. we have had many discussions. we are colleagues at the american bar association committee on law and national security. he has been precious in a number

of areas involving counterterrorism, and his views are a bit different than mainstream. that is why we invited him here today, to share his views of where we have been, where we are now, and, most importantly, what the next five years or more will bring in the subject. please welcome professor dill banks. -- bill banks. [applause] >> good afternoon. it is nice to be in a room of people that could not get into the bullish lunch. i am one of you. [laughter] >> thank you for the kind introduction. richard friedman, as you all must know, is a natural resource of the highest order -- one of the most important figures in

the area of national security affairs. i do not know where we would have done all these years if it were not for his leadership and his mentor ship of so many of us in the area of national security. he did say something about the late 1970's, and the early 1980's. i want to say for the record i was 11 years old then, so i could not have possibly been and vault. [applause] let me introduce the subject we call black spots with three short vignettes. in october, 2000, suspected al qaeda operatives staged a stunning attack in yemen. 70 u.s. service personnel were killed. two years later, in november of 2002, a pilot-list united states drone launched a missile

from above the skies in yemen and struck a car traveling in the remote region of the desert, killing the believed mastermind of the attack, and five others, all believed to be al qaeda operatives. while the government of yemen expressed public displeasure over the u.s. operation, it was widely acknowledged that the government of yemen simply could not control vast stretches of the country. later in the same year, the spanish military ship detained a vessel that was carrying scud missiles, in route from north korea, to yemen. two days after being detained, u.s. and spanish officials acknowledged they had no legal basis for holding the ship, so they let it go on its way to yemen.

as al qaeda strengthened in imminent in 2009, and this year, in 2010, in may of this year, another missile was fired, but this time it missed its target, and killed the provincial governor in yemen, tragically. once again, the government of yemen protested, but it was clear there remained able to control much of its desert territory. now, it appears that the very media-savvy and u.s.-born cleric has chosen yama -- has chosen yemen as a staging area and that al qaeda and the caribbean prince it -- are rated peninsula -- of arabian peninsula attempted to blow up

cargo planes from yemen by placing in them computer towner and printer packages laden with explosions. second and yet, much shorter. in march of 1992, and in july of 1994, iran-backed, but nonstick organization, hezbollah,. out attacks in buenos -- . out attacks in one of cerus -- windows paris. they were staged at a border city of paris white, brazil, and argentina. the november 8, 2002, a non- state actor in somalia, linked to al qaeda, executed a very

sophisticated, carefully- planned attack on a boeing 757 during its takeoff, using surface-to-air missiles, and within 20 minutes, an israeli owned hotel was hit by an suv loaded with explosives. the attacks were planned and stage from a somali and fishing village. what do these scenarios have in common? first, significant attacks were. out and planned by non-state actors. secondly, they took advantage of locations that enabled them to prepare and execute attacks without discovery. were it not for these on governed places, the operational capacity of the groups would be severely limited. third, each of the three places

is quite different in terms of size, from a fishing village, to a city, to a remote tribal area. he was located in a different part of the world -- latin america, the middle east, and africa. fourth, none of the attacks was sponsored by a state directly. knowing the location of what we called black spots, and understanding their internal and export of dynamics, provides us with information that might be useful for identifying and environments that are conducive to criminal and/or a terrorist operations. it might enable us to track and intercept security flows between those places, and gathering intelligence about emerging and pending security threats. it is now conventional wisdom that the greatest threats to world security the minute from the world's most poorly governed

places, where transnational dangers range from terrorism to weapons " -- proliferation, organized crime, humanitarian catastrophes, mass migration, and even energy insecurity. the project we run at syracuse university is called map in global security, or commonly known as the "black spots project. we examine factors that allow us to look beneath the surface of what may appear to many of us as a benign environment. we work to avoid the input -- the implications of more generalized areas, such as on governed territories, or failed, or failing states. here is our belief that those approaches may be misleading if

taken at face value because no place is completely on govern, and no place has a power vacuum for very long. considering the black spot has a base for a transit point, we hope to be able to detect potential insecurity flows, including people of interest, criminals or terrorists, and mapping such places, tracking the flows from one to another. it offers the possibility for forecasting, where a specific insecurity flow might be heading, and with what objective, provided the basis of what you might think of as an early warning. consider two districts in naples, italy. they have been on the international law enforcement radar for a long time, but are less well-known in the

international security world, yet it is the naples-based organized crime syndicate that sold weapons to the epa, a basque terrorist organization, and opened safe houses to as many as 1000 al qaeda operatives who were traveling between africa, north africa, and north europe. analysis of italy would not have been helpful in understanding the dynamics of these two districts in naples. that is a black spot. generally speaking, the failed state literature presumes that state performance is the leading indicator of security globally and the single most important factor in understanding the prevalence of violent conflict. the same literature assumes that

when a state fails, or is even fragile, performance problems are framed within the territorial boundaries of the state itself, rather than a function of regional pressures, or transnational actors working within or across those boundaries. parallels to the failed week states literature is the threat of post-9/11 academic research that focuses on on governed territories, lawless zones, sometimes safe havens. there is a lot of learning that can be gained from those, but the mere absence of state authority does not confer on a region the propensity to produce or harbor transnational networks of terrorists, armed groups, or at the insurgents. instead, within these state- less, and lawless zones, certain

factors we believe are conducive to insecurity, and our project measures those by a set of variables, which include the adequacy of infrastructure, the operational access to that area, local communications and transportation networks, the availability of sources of income, favorable demographics, which i will say more about in a moment, including the presence of extremist actors, and ideologies, and, finally, the relative invisibility of the place. the united states policy in this area has traditionally focused on addressing the lack of effective state presence, with innovations that seek to build state capacities with successful governments. recommendations usually include promoting competent governance

by investing in political infrastructure and institutions, building security architecture. the focus remains on the state, as we see it in our government, and within fairly traditional political and economic terms. there is little evidence that interventions by the united states have been successful, or even particularly useful in this area. our sense is that there are dynamics -- dynamic regions of incurity around the world that are not best understood through these frames of failed states and not to govern the zones. we think black spots are characterized by alternative, informal, and illicit social structures of power, by a set of rules that are not framed by the government's, and by competitive authorities inside those areas. equally important, black spots

are not as geographically stable and static as states. the change within the broader eggs and flows of globalization and other transnational movement of goods, peoples, and ideas. to sum up the concept, there are three characteristics that we return to over and over again in thinking about black spots. there is an absence of effective government control. there is a presence of alternative governments and social structures, and there is a capacity to breed or export insecurity. those are the three criteria. the features provide evidence of alternative systems that make networks possible, and some indication that systemic security issues are occurring in

that region. those characteristics may be accompanied by the presence or absence of law. the presence or absence of governance, and the presence of a functional state. as we know from the afghan, pakistan border region, which we define as a black spot. the same can be said for the columbia-venezuela border region, parts of the arabian peninsula -- all regions with black spots. the project is designed to provide data on conditions that might lead to illicit activities before they become operational. lethal paramilitary operations did not occur without logistical support, weapons, intelligence,

or personnel. similarly, there is no organized crime without organization, preparation, and without discipline execution of a particular screen. for terrorists, insurgents, criminals to have those capabilities, they need places for certain social factors to coincide and allow for the emergence of a crime-friendly environment. the places selected for further study are those locations that if she -- that shield these non- state actors and provide them with a cloak of in the -- in visibility. knowing the locations of those environments might help law enforcement and intelligence organizations make those areas more visible, and enable them to react tohe actors in a subtle, smart, and discreet manner. so, recognizing and detecting

these black spots -- the term, first of all "black spots" is not a pejorative. it is technical. astronomy students in the room, as you know, like the astronomical phenomenon of black holes, they are visible only by the magnetic anomalies and disturbances that surround them. so, security black spots are detectable only by an anonymous political, criminal, and in security based behaviors and a list process used. this is a core of our analysis. scholars warn us when they come across our work that it is very challenging to employ social science methods to track clandestine phenomenon.

our view is that because in visibility is at the core of this phenomenon, we have to find ways. the core purpose of the research is to understand the relationship between the alternative governance measures, and the capacities they have to breed or export insecurity too far away and targeted locations. the black spots are dominated, again, not by a lack of governance, but by alternative regimes of power and authority, including illicit structures that comprise a complex mix of criminal organizations, local power base is including war lords, terrorist organizations, among others. i have talked about al qaeda and has the law, and a somali group, and they are an important piece

of the puzzle, but they do not fully explained the regional capacity for insecurity borne by a more complex mix of actors. ultimately, the purpose of our research is predicted to identify sites of insecurity toward early warning systems that we hope will mitigate potential harm. finally, let me say 8 word or two about case selection. how do we look at the areas and get this developed? one of the challenges is to select these the nine areas that might be hospitable to the area of black spots. we have chosen multiple variables that we think provide a good test of the existence of a black spot, and will help

determine the strength or weakness of the indicators. we can now descried cases that have the merchant core features and characteristics common with one another, with particular focus with how they constitute security challenges. then, we can begin to indicate how we understand the relationship between alternative governance and insecurity. this is the third year. we have employed graduate students, law students, 20, to 30 of them, at syracuse under the supervision of a post doctorate, who has done a marvelous job, and they develop case studies. we all know about case studies. the materials are taken from open sources. none of us he uses security clearance, or has any clandestine access to information. some of them have language

training, because many of the material are not in english. we are fortunate to have students that have been able to help us in that way. they start digging. after an initial research, one of the supervisors makes a preliminary determination on whether the area may qualify as a black spot. if it does, further research is done, and data gathering, including tracking the insecurity that we can see is emerging or flowing that -- from that place to somewhere else. case study reports are written. so far, we have that the -- identified 140 potential black spots, and finished case studies on 75 from all over the world, and if you are inside the united states. we are expanding the number of locations continuously.

we are mapping the locations using google earth, and we believe, based on analysis so far, there is somewhere between 406 hundred locations worldwide that would meet the basic criteria i have described. in the next stage, we will begin working to understand what makes black spots emerge, what makes them sustain themselves, what causes them to succeed, if that is an appropriate label, or to fail in their illicit objectives. we have hypothesized that black spots are likely to exist in regions with some of the following traits. i will wrap this up in a minute so we can get to questions and a discussion. there should be typically areas that include or are near and international border, a frontier. they often will occur in we

states, where there is no effective state present -- presence. many black spots we have found are located along trade routes, either formal or informal. many are in places where there is a high level of government corruption. many are relatively unattended to by the media. finally, we have found that many are inhabited by heterogeneous population, either asset -- ethnically, or in terms of the social status in the area. we have found it is not sufficient to designate an area as a black spot simply on the basis of independent tendencies, or if it attacked -- attract

actors that are participating in political violence. to test for the dimensions we believe our key, alternative government, and capacity to breed or export insecurity, which have developed the indicators of the existence of alternative government's -- governments that can be measured in terms of the presence or absence of dominick institutions, a listed organizations, or informal rules. the indicators out to determine the strength or weakness of the variables. if we were going to do a computer show, i would show you a list of the factors and the weight each is given and some kind of tabulation -- the beginnings of a statistical analysis that by graduate students probably understand better than i do. i just run the show. i do not do the calculations.

we are developing a fairly sophisticated data set that will be capable of measurements of a bunch of different sorts to test out the importance ingredients that i developed a little bit earlier. it is a fun project. it is challenging because of the fact that social scientists say you cannot effectively studied a clandestine thing, but we say you must. it is also challenging, again, because it is so dynamic. today's black spot might be a functioning community six months from now, and the opposite. it is quite a challenge to stay abreast of this field. i am persuaded that they will be ever more important in the coming years. one of my biggest fears is that our government is losing control

of the game in national security and that private actors, not just terrorist organizations, are becoming the dominant players, and maybe moving the ball more effectively than states. so, on that somber note, i will close, and welcome your questions. thank you very much. [applause] >> who would be first? >> i am curious, have you developed a character aspect of the individual mind as far as people who can analyze the

complexities of all of those uxor,ilities, and cann perhaps by education or adventure -- of sort, perhaps by education or adventure, the quality of the mind it will analyze? example -- einstein. >> could you wil acquit -- repeat the question? >> is actually asking about the psychology of the black spot, what makes it come together. the product -- >> those who are capable of analyzing the results. >> i think of a the hd kind of a mind that can uxor that and

think like an einstein where eureka comes out of education, life experience, and intelligence. is there a pattern, which i would -- is there a pattern, outside of the students, which i agree come from intellectual groups, but are not necessarily as smart as the fishermen who knows where the fish are. >> your question has two parts, and it is a good one. it is about the psychological aspects of the people that constitute the black spots, and those of us to try to understand them. i think the answer to that question is yes, we have a component that studies the psychologies of leadership, and the leadership, of course, is capable of being characterized in a number of different ways.

we will run a workshop in the winter, at a place yet to be determined, where we will ask experts on the psychology of leadership to talk to us about those that we can identify in these black spots that appear to be in charge on the second point, which it charged. on the second point, -- charge. on the second point, you remind me why i come to chicago, and spend so much time outside of my university. we learn more from the fishermen many times, and need to be engaged in their real world. we send our students on field work. if we can spend a few dollars, we will buy them a ticket in the summer to morocco or venezuela,

and have them develop good field work. i hope we are getting information that is good in that way. thank you for your question. yes, here, in the front. >> bill, you mentioned there might be black spots in the united states, and i am curious where they might be, so we could avoid them. [laughter] secondly, given there are black spots in societies that are different, does the characteristic differ depending on where it is located? >> the question has two parts again. i think we are on to a pattern. one is are there black spots in the u.s., and where might they be found, and the other is can we tell the differences and quality between the types of black spots. many of the emerging black spots

in the united states are at or near international borders. think arizona, and think about my home state. there is a reservation near syracuse. i can drive there in 40 minutes. it has been on the radar screen of the united states department of justice for a long time because of smuggling operations that have gone on across the border there. the international boundary, of course, is st. lawrence, and there are a few bridges. it is a remote part of the united states. it is hard to imagine, but believe me, it is. the weather can be harsh and extreme for about half the year. we have found a number of things going on there aside from the things the department of justice was interested in. the department of homeland security now has drone's

patrolling the skies above the resonate ridge reservation. -- above the reservation. the second part of your question is interesting. the answer is we cannot do that yet. that is the next stage. can we draw variations in the quality of black spots? i am eager to get to that information and hope to have a report in the coming months to shed light on that. there were some questions at this table, two, or three. yes, ma'am. wait for the microphone, please. >> i do not fully understand what you mean by mixed parts. do you mean like cartels in mexico, islamic radical

ideology, or the bombing in greece? [unintelligible] the basic ideology is totally different, so how can you lump them all together. >> it is an interesting question as well. the question concerns whether there is a difference between a black spot and dave radical etiology. i think that answer is that it is important to study the ideology of radical groups, and to understand the nature of the ideology in a terrorist organization. our purpose is different. there are a lot of groups, organizations, and government organizations that are studying al qaeda and the mexican drug cartels. we are studying the places where they are bred, and by day, i

mean not only the terrorist organizations, but other illicit actors as well. we think there is something about the places themselves that contributes to the growth of the ideology. there is a relationship between the two. ok. yes, in the red tide. that is you. >> i was wondering about the research knowledge you do in the black spots, where you pass this information on, and what parts of the u.s. government takes a vantage? >> so far, we have had inquiries from the united states intelligence community and the department of defense. because we are not working in a classified department, it is all open-sourced, and the question

will be for us, whether we want to give up, if you will, our academic freedom to study and explore, in return for being in a classified environment. i have found that once you enter a classified environment, i could not write a letter to my mother without it being cleared from -- by someone in the government. there is a trade-off. we hope to develop a product, not a commercial product, but an educational product that will be in the public domain that our government agencies may find useful. that would be satisfactory as far as i'm concerned. >> there are some of these agencies taking advantage of your research. are you confident that someone is trying to connect the dots of the classified information and the information you have developed? >> the question is whether the

government would or is making good use of this information to the extent that they are paying attention. my view is that the united states government policies so far have not paid attention to the black spots phenomenon. they continue to develop on the basis of support or counter- insurgency operations targeting states or government institutions. his the way we have always done things, and so far as i can tell, we continue to do things that way, maybe to our demise. mr. berlin, appear, in the front. -- up here, in the front. >> of the 140 black spots you have identified, i presume they fall into a prospective category. have any of them crossed over into confirmed? >> there are some in which we have no doubt, including the

afghan-pakistan border. >> so of the hundred 40, how many -- 140, are in your mind confirmed? >> 50%, maybe more. those are the easier cases. it will take additional field research. we need resources, students better able to travel. >> the confirmation comes in the form of the newspaper articles, where the government gets back to you and says thank you for the information, that is a red hot? >> we do ask for government feedback on some of the reports we develop, but again, not in a classified environment. we are likely to make that determination ourselves.

i have some friends that i talk to and some of them are in the government, and some of them are not, but it is an inexact social science. it is the best we can do right now. in the second table, in the blue shirt. you have had your hand up for a while. >> you have used the word " terrorist" in a broader sense than what we read in the newspaper. a lot of what we read today seems to be religious orientation, directed by islam or muslim, and i cannot distinguish between the two. are any of these black spots focused totally on that area? but i wantlly care,

to know about the politically oriented directions. >> the question concerns whether any of the black spots have a religious court, as distinct from a political core. i think the answer is a pretty firm no. your inspect -- inspects -- instincts are right, that are politically driven. in terms of islam, will we see is islamism -- the use of the religion as a fig leaf to cover a political objective. tomorrow, i am giving a talk on my campus in reaction to a new book by a journalist called "the muslim revolt." we will have an interesting conversation about that subject. i cannot miss my plane this

afternoon. let's go away in the back, and then work our way up the room if we can. hold on a moment. >> i have two questions. have you done any research on the fluidity of these black spots -- how quickly they open, close on their own, or can be closed, how much they grow, and can shrink depending on various factors? also, he spoke a little bit about characteristics of the black spots -- things like sources of income, infrastructure, things like that. have you looked at -- clearly, the united states has had a wide range of approaches to fighting the sources of income in the pakistan-f get -- afghanistan border region, kind of giving a

blind eye to poppy growth and things like that. have you looked at how approaches to those various characteristics effect how quickly black spots can be opened, closed, or challenged, and should they be challenged? >> the question, even though it has two parts, includes the fully of black spots. as i have said a couple of times, we regard the dynamic nature of the black spot as one of its key factors, so is central to our research. it is difficult to match -- to measure, as you can imagine, and it is difficult to obtain reliable information about the dynamic nature of a black spot. if a group of students is working on a particular case, say three students, and they are taking a snapshot in september,

we ask them to take it again in december, march, and in june, so that we can, at least in that way, check our own records and make sure we are seeing the same thing. if we see changes, then we can take a closer look. population densities, traffic patterns, increases in border traffic, and the like. again, i think the united states has been slow to pick up on these flows of insecurity as an indicator of illicit activity. we tend to slap a band-aid on the thing that happens, without trying to understand what it is about. i hope we do better at that in the future. >> the first question the judge asked is really to have a lot of

data on the psychology of the bad actors. you probably have a lot of information there. does your research include biological labs, which are sometimes unprotected, and you have the breeding grounds for anthrax or the ebola virus, especially in the african continent. >> a two-part question -- taking advantage of the knowledge and expertise of the israelis in this area? yes. we work with a sister institution that has experts that know quite a lot about this field indeed, you are right that they're learning is greatly in foreign powers in that area. secondly, i think the answer is yes, we have looked at the

scientific community is in these potential black spots -- spots. as you point out, many of them are white open to the bad as well as the good, which allows our research is to get more information. -- researchers to get more information. my own experience, in working with this -- in this area, i think the biological warfare, and the chance of a terrorist incident by a german is the most fearful ala -- germ, is the most fearful of all. i am attuned to that opportunity. are there others? >> great presentation. my question is this. you touched on it a bit. is our government organized

correctly to address this challenge? many agencies are organized geographically. this is a global challenge, a functional challenge from columbia, to pakistan. >> are we organized well as a government to respond well to a problem like black spots, and the simple answer is no, i do not think so. the state department continues its age-old functional category, country-by-country. that is what is marked up in boundaries -- a west galleon world, and we are not living in a west alien world. -- west to alien world. i think we will be more nimble to respond if we organize

accordingly. i have good friends inside the department of justice, and the federal bureau of investigation, and the cia, and i see how they organize tasks, and they are organized smartly, among functional lines. there is a bin laden unit. there is a has blocked unit, but not more broadly, -- hezbollah unit, but not more broadly. do we have someone that has not yet as the question? >> just a real quick one. the problem is massive, so i wonder about your security system, and i am not trying to get a chuckle. you do have spies. >> the question is how secure is our research. our university is as good as

any, but we are not in a vulnerable, to be sure -- in a vulnerable, to be sure. [unintelligible] >> will that do better? >> why not? >> fortunately, i don't think anyone success very seriously. >> i'm thinking about the man in texas that sat there for years and years. he was an insider. >> that threat is very real. we do back up and protect our debt of all of the time. we have regular meeting -- meetings about that. i was talking at lunch about the need to back up all of the data. >> are there any traders within your group? >> "no. thank you, all of you, for coming to lunch.

>> i have a question. you alluded, in your remarks, that you are constantly scrounging money, a couple of thousand dollars would send a student to do some great research. that suggests to all of us here that your resources are finite. >> that would be an accurate statement. >> that leads us to the u.s. government, that might not be arrayed in that way. my question is this. we are in afghanistan for several reasons. one of them is to build stability, the other is to address al qaeda and the black holes you have discussed. we are spending a great deal of money in afghanistan. my question of you is one of

proportionality, of course effectiveness. if we were to spend $10,000, what is the return on investment, as opposed to $100 million a day in afghanistan? >> so the question concerns the relative merit of what we are doing in afghanistan as opposed to what we have suggested here. i agree with the tenor that we may be over-invested in a counterinsurgency operation. we are spending $1 million for every al-qaeda operative per year. $1 millioner person. that is a pretty extraordinary if there are that many al- qaeda operatives in afghanistan. we have shared the view that

this is a tragic war in afghanistan. it may be tragic for this president and his presidency in part because it is an unwinnable conflict in a nation without much hope for rebuilding in at the future. you do not want to invite me back again. i have only bad news. thank you very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> before we adjourn, a brief sermon. what strikes me, based on many years of experience, is that just below the top are hundreds of professionals, a nonpartisan

, forward-looking, doing extraordinary work on behalf of all of us here and on behalf of the united states. so, thank you for joining us. a thought about our audience. we had nine or 10 wonderful questions. the people who are assembled here are private citizens to have an abiding interest in the welfare of the united states with a focus of national security. we are delighted that you were here today to share your corner of the world, a very important niche. it is almost 1:30 p.m. we are at adjourned. [applause]

>> our live congressional coverage resumes when the senate returns monday for general speeches. then, both republicans and democrats will hold leadership elections. no roll call votes are expected until wednesday, up with the first vote of the weak bond the use of natural gas and electric

vehicles. -- vote of the week on the use of natural gas and electric vehicles. also on monday, and ethics hearing on the case of charles rangel. he is accused of 13 violations, including failing to disclose at least $16,000 in assets and income in a series of financial disclosure reports to congress. we will have that live monday, 9:00 a.m. eastern on c-span 3. now, a look at some of the newly elected governors. georgia republican nathan deal will take the seat of the republican governor who is term limited. in hawaii, a democrat neil won a seat now held

by republican who is term limited. >> this weekend, the 43rd president, george w. bush on his memoir. he discusses the critical decisions of his administration and his personal life, live from miami dade college, sunday at 2.00 p.m. eastern on c-span t >> kathleen sebelius talks about new tobacco use prevention efforts at this conference. this is about 50 minutes. this is 50 minutes. >> good morning, everybody.

i want totart by thanking the president and the dean for inviting us here today to george washington. so pleased to be joined by two of our deparent's. health leaders, my assistant secretary of health, dr. howard koh and are fda commissioner, dr. peggy hamburg, to announce new steps that we're taking against tobacco use. for years, we have watched tobacco rates fall in the country. in 1965, we were at a situation where over 42% of americans smoked. by 2004, the good news is it had fallen to just under 21%, fairly significant drop. the bad news is that in recent years, the spike to well-known

health rests, youth and adult smoking rates have been flat. they had been dropping for decades and have stalled at about0%. every day in america, about 4000 kids under the age of 18 try their first cigarette. about 1000 of those americans become lifetime smokers. we have ju under 450,000 americans who die every year prematurely from smoking and secondhand smoke exposure, making it our country's leading cause of preventable death. it also costs the health-care system almost $10billion per year. so we lose lives, we lose money, and we are not making any progress. when this administration took office, we decided these numbers were not changing, so our actions had change.

over the last two years, with accelerated our efforts to reduce tobacco use, taking a coordinated approach that uses the many tools available to help tobacco users stop and keep others from starting. the first that was historic legislation enacted last june. for the first time ever, the law gave the fda the power to regulate tobacco products. the law includes a number of vital provisions, but some of the most important prohibit rketing practices aimed at children. tobacco companies have actually been pretty clever of finding ways to market their products to use, giving out free samples and advertising in youth oriented magazines, sponsoring various productions that are aimed at younger americans. under the new tobacco control law, we're bringing those practices to an end.

we have banned misleading terms like "light," "low," and "mild." as part of the tobacco act in 2009, we're funding some of the most promising state and local programs around the country for reducing tobacco use. altogether, we are investing about $225 million in programs like and i a while when they're using evidence-based -- like in iowa, where they are using evident-based programs. eventually, these communities in places around the country will become models for what really works, and we will usehem to promote best practices in and around the country. the third step was part of the affordable care act, which produces a new opportunity to transform our nation addresses

tobacco use through a new $15 billion prevention and public health fund. it that law is also giving americans and private and public health plans access to recommended preventive care is, like tobacco use cessation, at no additional cost. for the first time, medicare will actually cover tobacco cessation for all beneficiaries. previously, medicare beneficiaries actually had to demonstrate that they had one disease in order to -- they had to demonstrate they had one disease in order to be able to get the cessation efforts. we think it is smarter to help people before they get the disease. that is part of the medicare beneficiary package. using this approach, we are using many tools at our disposal, for me dilatory power to state and local investments to -- from regulatory power to

state and local investments. today, we're very excited to announce new initiatives that help bring us all the strategies together and achieve our tobacco control goals. we are unveiling the department's first ever comprehensive tobacco control sttegiaction plan, entitled and in tobacco epidemic. you'll hear more about that in a few minutes from our wonderful assistant secretary of health, dr. howard koh. it lays out strategic actions based on science and world experience that served as road maps for reaching are healthy people target of reducing adult smoking to 12% by 2020. this follows the administration's goals of coordinated and commit it response to tobacco control. to that end, along with dr. koh, we will hear from our fda commissioner, dr. peggy hamburg.

today the fda is announcing a proposed rule to drastically change the look and a message on a pack of cigarettes. the new graphic warning labels will replace the old warning phase with a picture showing t negative consequences of smoking. you will see some examples from dr. hamburg, but this rule becomes final, we want to make sure that every person who picks up a pack of cigarettes is going to know exactly what the risk is they are taking. because of the progress we have made in the last two years and the strategic action plan we are unveiling today, i am here today with a renewed sense of hope and momentum. going forward, our dartment has charted a clear path to ending tobacco use in our country. we have a long way to go, but we will not rest until we have eliminated tobacco-related disease and suffering. the prosperity and health of our country depends on it.

now i would like to turn over the microphone to the assistant secretary of health, who has been a terrific leader h hhs to coordinate our efforts on tobacco control, dr. howard koh. [applause] >> thank you so much, madame secretary, for your leadership on so many fronts. it is a great honor to be here today. we are truly at an unprecedented time and our nation's public health history. while the country has made great progress in reducing tobacco depennce, this devastating challenge remains far from solved. tobacco use remains the leading cause of premature and preventable death in our

society. worldwide, the tobacco academic -- the tobacco epidemic is protected to kill 1 billion people in the 21st century. in the united states, smoking causes almost half a million deaths per year, over 1000 people per day over 8 million in the united states suffer from chronic illness related to smoking. and at long cancer should be an uncommon disease in this country -- and lung cancer should be uncommon disease in this country, but it is tragically the nation's leading cause of cancer deaths among men and women. this is all preventable. for too long, the nation has had to suffer preventable suffering caused by is epidemic. for too long, the nation has been forced to tolate the

intolerable and accept e unacceptable. we have the evidence and the science to end the tobacco epidemic. we know what works. know that the more states spend on comprehensive tobacco control programs and the longer they invest, the larger the impact. we know that most that most smot to quit and that cessation programs can help. we know that aggressive media campaigns to prevent initiation, improved cessation, to change the social norm. we know that comprehensive smoke-free policies reduce exposure to secondhand smoke and improve health, reducing heart attacks, improving long health. and we know that every 10% increase in tobacco price decreases consumption by about 4%, and this has an even

greater effect among the youth, low income, and other price sensitive populations. but it will take more than knowledge to end at the tobacco epidemic. it will take renewed commitment from every sector of society to move us forward a vision of a nation free from tobacco-related suffering and illness. in this context, early in her tenure, the secretary identified tobacco control as one of her strategic priorities and charge the department with creating a plan for moving forward. it has been a great privilege as the assistance occurred of health to chair the working group that created this plan, and i want to take this opportunity today to recognize the substantial and unprecedented commitment of public health experts from across the department who have stepped forward to help create this for a more.

i am very pleased that this document represents the first ever comprehensive strategic action plan for tobacco control for the department. it will align our efforts both internally and also externally with partners from around the country to achieve our helping people objective of reducing the adult smoking rate, currently around 20%, to 12% by 2020. there are four pillars to the plan. the first is to engage the public to change social norms around tobacco use. this action is sorely need because the major u.s. cigarette manufacturers spend approximately $12.5 billion per year, more than $34 million every day, to attract new users, retain current users, increased consumption, and in general generate physical

attitudes toward smoking and tobacco use. to counter this, the department has already begun investing in media efforts to support state and local tobacco control, and these will lay the groundwork for future mass media campaigns. in addition, the fda has started to conductublic education efforts to discourage public perception that any tobacco product is safe, and you'll be hearing more about such efforts om commissioner hamburg in just a couple of minutes. the second pillar is to improve the public health by supporting states and communities in the implementation of evidence- based tobacco control and prevention. in the past 18 months, through the recovery act, and the affordable care act funding, the department has invested nearly $250 million to support proven tobacco control activities in

states and communities. these are essential one states have had to make severe cutbacks to their programs -- when states have had to make severe cutbacks to their programs. the goal is to expand comprehensive cessation activities to make it as easy to quit as it is to purchase a pack of cigarettes. most smokers want to quit and can call 1-800-quit-now to get the assistance they need and deserve. another goal is to prevent such enhancement for americans in collaboration with state and community efforts, and in that regard we recognize the people of south dakota for overwhelmingly approving a comprehensive statewide smoke- free law, which takes effect today. the third pillar is for the department to lead by example and leverage every possible resource. one example, as noted already by the secretary, was to have

medicare expand the smoking cessation coverage to users of tobacco and not just those with diseased, and we look forward to other prevention announcements by the centers for medicare and medicaid services going forward. in addition, the department will work toward reducing tobacco- related disparities by providing services for high-risk populations at community health centers, or health facilities, public housing, and other settings. the fourth and final public is to advance knowledge and accelerate research and expand the science base. this is especially critical given the fda posset authority to regulate tobacco -- given the fda's authority to regulate tobacco. the department's export to working with partners around the country to make this vision come alive. we're also very grateful for the tremendous update that are in

the affordable care act. we are committed to reinvigorating national momentum towards tobacco prevention and control that move us toward a healthier society. it together, we can achieve a vision of society free from preventable tobacco-related suffering. thank you very much. [applause] and now it is my great honor to welcome my very good friend and colleague, the fda commissioner dr. peggy hamburg. [applause] >> thank the. thank you very much, howard. it is really a pleasure to be here. thank you, george washington university, for welcoming us here, and think the madame secretary and dr. koh for your

leadership on this public health issue. as has already been so eloquently pointed out, the strategic plan has won over arching objective, to make the suffering, the disease, and the death caused by tobacco use part of america's past, not part of america's future. that is why congress passed and president obama signed a family smoking prevention and tobacco control act, and why the fda has been working so i hard so it. many of you are familiar with the tax we have taken to date, and the secretary mentioned some of the important ones. we banned the sale of candy and fruit flavored cigarettes. we have prevented cigarette advertising with misleading terms. we are required the tobacco industry to provide us with lists of product ingredients.

this past summer, the fda issued a number of restrictions to limit both the access and marketing of cigarettes and smokeless tobacco products to young people. and has been a very busy first year. it today, we are pleased to announce a new historic initiative, consistent with the fda's mandate under the contract under the tobacco control act, with new health warnings on cigarette packages and advertising. the warnings which you are now seeing are examples of the kind that will replace those that are not printed on the narrow side of cigarette packages. these warnings have not been changed for 25 years. the new warnings will be much larger and more prominently placed on the pact, and they will contain graphic images, as you are now seeing. we believe that there will be

much more effective. under the proposal, as required in the law, health warnings will cover 50% of the front and back panels of every pack of cigarettes. for advertising, these warnings will occupy 20% of the top part of that have had. but it is not only the size and position of the ones that will be changed. so will the messages be changed. for the first time ever, they will say that tobacco products are addictive and they will say in the most plain terms that tobacco can kill. the fda proposal will also require the use of graphic images that depict the negative consequences of smoking. obviously, some of the images are very powerful. that is the point. we need to make sure that anyone who was considering smoking fully appreciates the

consequences of cigarette use. that means presenting the facts directly and bluntly. our objective is to raise public awareness of the profound health risks of smoking, encourage current smokers to quit, and discourage young people from ever starting. that is our goal, and what these health warnings will help achieve. the fda is currently considering 36 different images that will be coupled with nine different warning statements. the images vary in style and design. some are illustrations, others are photographic. the type, size is, stiles, and layoffs ferry. they're designed to elicit a reaction from the audience, including youth, young adults, and adult smokers and potential smokers at. our plan is to identify a

combination of images that best resonate with americans from all walks of life. they will be available to the public, including all of you, too few and, on -- to view and commwent on. you'll find world of information about this initiative on the website. the fda is also conducting a study to assess the relative effectiveness of these images. this will evaluate all the images with the proposed rule. that research at the proposed comments will help us select nine graphic images that will be used, one to accompany each of the required health warning statements and this is what will appear on cigarette packages and in advertising. the final rule with these nine

images will be published in june of next year, and tobacco companies will then have until sept. 2012 to begin displaying them on cigarette packs and in their ads. once that happens, every single pack of cigarettes in our country will affect become a miniature billboards that tells the truth about smoking. we are convinced that not only will these warnings helped discourage nonsmokers, particularly kids, from ever trying cigarettes, but the will also help strengthen the resolve of current smokers who want to. break to. the proposal is consistent with the approach embraced by canada, australia, and the european union, among other countries, and supported by every major health organizations, including the world health organization itself. as you have heard this morning, our effort to educate consumers about the dangers of tobacco use will be executed on many different fronts.

underlying all of these efforts is the understanding that the best single strategy to reduce smoking among young adults is to prevent kids from ever starting in the first place. when the new labels take effect in september, 2012, secretary sebelius and i believe that these warnings will help discourage nonsmokers, particularly kids, from ever trying cigarettes. there will also help strengthen -- they will also help strengthen the ability and commitment of current smokers who try to quit, and both are terribly important to our nation's efforts to. stop the to. -- to stop the devastating epidemic. we'd want to get the real message across about smoking whenever they see an ad for cigarettes or pick up a pack, that is exactly what these health warnings will do. at fda, we're proud to be up to

provide tools that will support the efforts of millions of americans working for healthier futures. it but me close by recognizing that there are still -- there is still a long way to go to reduce the enormous burden caused by tobacco pducts. but we can make progress. progress that will be marked by many steps taken by many people across the country -- doctors, nurses, community leaders, teachers, students, and parents. many of you in this room have been leaders in this effort over many, many years. thank you for your emcor work in this area and thank you for your support that you have given to the fda and hhs as we pursue our import activities in this area -- are important activities in this area to once and for raw stop the epidemic of tobacco use in this country, and to also

help affect tobacco use around the world. there is a lot to be done. i think today's announcements represent an important step forward, and we are really excited by the opportunity that it represents for public health in our nation. thank you. i think we will do questions and answers now. [applause] >> thank you so much, dr. hamburg. we will now open for questions. >> since we know that restricting smoking, banning smoking is probably the most effective way to get people to quit, i like to ask the secretary of the department would require that any institution that its grants or holds conferences or anything else were you have contact would

have to be smoke-free to qualify for grants and support. i think i would be at least as effective as everything you've presented this morning, with all due respect. >> i certainly appreciate the idea. i don't know that has been a discussion, certainly the building that we have our workers in our smoke-free. we engageties ouwhere in dialogue are smoke-free. we're working closely with states around the country. i was pleased last year, after years of effort, my home state of kansas passed a very comprehensive smoke-free law that will be incredibly effective. i think we are working in that direction and that is an idea that we will check back and continue to discuss, . >> good morning.

i just want to congratulate you on a strong plan that it will make a lot of difference in this country. i especially want to thank you, dr. koh, to make it as easy to quit as to pick up a pack of cigarettes. but this one to ask in putting together the warning labels, i know my organization and many others in the room have asked to have 800-quit-now put on a warning label. we think it would help smokers quit not only to have the graphic picture but to have a way to get services to quit. we're wondering why that was not put on the warnings. >> that is probably a question to me, and that is a very important question to raise. the 1-800 line was not one of the requirements of what was in the graphic warnings, but it is very much under consideration.

as we collect comments on the proposed rule making, we hope people like yourself and others will goes important input on the value and role that such an addition to the warning label could have because those decisions are still under consideration. >> in looking at the international experience, countries that combine these graphic health warnings with resources for smokers to access, such as a phone number or web site, show more efficacy in terms of reaching smokers and help them make a decision to quit. that is a suggestion we're taking it under consideration. >> hello, i am a reporter. i'm wondering if he could discuss where the fda is with an electronic cigarettes and if there is any concern these graphic warnings may move people

to try electronic support instead. >> electronics cigarettes are a different activity, and we are here to discuss the graphic warnings. electronic cigarettes are an area of public health concern. we have been examining very carefully, and there is also the vacation around the future of electronic cigarettes, and we are continuing to really take a very hard look at electronic cigarettes and the role they play in recruiting and encouraging people to smoke versus the issue that has been raised, is it a tool to help people quit. but i think we don't know that these graphic warnings will have any impact on the use of electronic cigarettes, and i think the graphic warnings have enormous importance and value in helping people that are either

smoking or considering smoking to get a very powerful visual and message reminder about the negati consequences of smoking, and that is why it is very important we are going forward today to begin the process of getting those graphic warnings on cigarette packages and part of cigarette advertising. i>> good morning. images are selected, will the companies be able to choose which images the what to put on the packages? >> no, the ones that are selected they will be required to use, and there will be a mandate for them to mix them up. so when you go to the store, there will be the combination of the different nine pictures and warnings. i should also say that over

time, there will be changed. a part of what is important getting people's attention is novelty, and we know that we're going to need to keep updating the pictures. we will have continuing research efforts to deepen our understanding about what kind of graphic images and messages have the most impact on people, and over time, in addition to changing the graphic images, if we feel there is a reason to do so, we can also modified the specific warning messages used. >> i want to say a great job. i think we're all very appreciative that this is happening. my question is the parent. i have three kids. the 12-year-old started smoking

despite the level of education and the home and by type of work. i love the pillar about changing social norms, but mass media is one way to affect teenagers faster. that is challenging to find any curriculum at the elementary school level that addresses this successfully. i'm wondering if there's any thought of collaborating with the department of education or to bring this into the school system? >> i could take that, were if you would like to? i can provide some perspective. that is an excellent question. these are issues that require a partnership at the state and local level between health officials and education officials, but is really tremendous that you in your kids want to raise your voice.

i think having young people be champions for smoke-free environments, smoke-free society as a wonderful way to get the next generation involved and have them demand a smoke-free future and work with the educational system. i think this is a theme that is part of our action plan and complements the pillars that we have described. >> i would just thesay that thee is a group assembled that includes a prevention council representing government. every department representative is coming to the table with an eye towards what kind of contributions that can make. the discussion so far has been very exciting. there is discussion about curricula and updating curriculum, both nutrition efforts and tobacco cessation

issues. the department of housing and urban development is already moving ahead with some very exciting projects about smoke- free public housing and consumer education. there is a move underway with a lot of parks and open spaces to have a promotion of smoke-free areas, to make sure that when people a try to access the beautiful outdoors, they are not subjected to second-hand smoke. i think those kinds of discussions with education, with hud, with the department of transportation, with the department of the interior are very much part of this plan moving forward and tried to asset -- trying to leverage the assets going forward, so it is not just the fta, but a variety of agencies putting their lands to bear on what we can all do

to reduce this preventable death. when we are losing almost 450,000 people per year in the united states, it is clearly an effort that needs a government- wide response. >> good morning, i am ricrd windsor. my question relates to organizations. to the extent there is the discussion about new mothers, infants, it seems in the context of populations -- and i appreciate the population approach -- i would be interested in a special focus on pregnant women and infants and children. >> i think, again, one of the efforts that is under way is preparation of a rule that will provide medicaid benefits for pregnant women to make sure that

can access smoking cessation treatment, the same kind of effort that is under way in medicare and has been promoted. that should be announced in the not too distant future, and that will highlight in the discussion of the affordable care act. howard, you may talk and little about what healthy people is recommending in terms of pregnant women and children. >> the secretary has very appropriately sited one of the many provisions in the affordable care act which will make cessation services more affordable to pregnant moms, in medicaid and new smokers and health plans, and also to smokers and medicare. this is part of the ongoing conversation to make our country healthier over the next 10 years and beyond. when we unveil healthy people

2020, we will hear much more about targets for women and youth on tobacco and many other areas where prevention plays a key role. that is a very import question. thank you for asking. >> i am susan campbell, the national coalition for women with heart disease. in the beginning you mentioned that there had been a change in the rights of women who smoke and have long cancer, and that is reflected as well with heart disease. i am very pleased to see some of the statements specifically referring to heart disease, because i think people really don't understand that smoking -- you might die of heart disease before you die of cancer. when you select the final nine warnings, don't forget about heart disease. >> very important point.

i just want to underscore, and 9 warnings are definite. those are set in law, in terms of what will be going forward. it is the graphic pictures that the company those warnings that are currently under study. as i mentioned before, the nine warnings can be modified overtime as is appropriate, based on our a valuation of the impact the warnings are having, and also perhaps our understanding about the patterns and changes in smoking as well. >> i think tha is a great point. smoking underlies not just cancer but a series of chronic diseases which kill people, which shortened lives, which have serious impact not only on health and longevity but on medical costs. so we need to make sure that message is not just about

cancer, it is about the effect of smoking and the impact it has on a whole series of health conditions. >> in some ways your question circles back to another question about the importance of educational messages and quality information being available in all kinds of settings. whenever we do, through whatever mechanisms we are involved in, to reinforce some of those critical public health message is that people need to really hear and understand and act on. >> i am carolyn sparks, with the school of public health. i wanted to ask, ought to these warnings appear on all tobacco promotions, like on the internet? as you may know, there are thousands of internet sites that are promoting tobacco. and also to ask if he had plans to redistrict -- if you had

plans to restrict youth access to these internet sites. >> the internet issues are complex. the specific set of activities has to do with cigarette packages and print ads, but there are activities underway to address how to provide appropriate oversight as well as appropriate warnings on internet advertising sites. it is a key area, especially talking about youth and how to get information, but it is a much harder. to provide oversight and control -- it is a much harder area to provide oversight and control and it extends across the government and the ftc and other comnents of government. >> there was an initiative. but this summer with p.a.c.t.,

where there are provisions to block illegal sales of tobacco through the internet. that was a public health advance as well, but you are right, this is another avenue where kids get access and we need to make sure that kids state tobacco-free, so that initiative starts is down the right road. >> wen name asdy. wendy.ame is i was wondering if the talk about the methodology behind the images and if there are certain demographics and if they will be aligned with the majority of people who purchase them. in addition to educating children about the detrimental effects of smoking, if you are also showing them the images and allowing younger populations to

say what would be effective for them. i was also curious what cost this would be to cigarette companies? it was paying for everything? -- who is paying for everything? >> we have been undertaking what i believe is the largest consumer research initiative around consumer understanding, graphic warnings, and 18,000 individuals have been involved in this activity using, what i overstand, are the cutting edge approaches to consumer surveys. and the results of that data will be used as we select the graphic images for the first round of graphic warning labels on cigarette packs.

>> those 18,000 people are broken into various age groups. there is a definite outreach to young -- >> absolutely, we're lking very much at the summer population of youth who are not smoking -- at the sub population of you who are not smoking and younger adults. we're also looking at gender, geography, smoking status, race, ethnicity, a range of demographics that we know are related to smoking behavior and patterns of smoking, and we will continue our research and hopefully in reaching our own research activities as these products go into the marketplace. we will also be working with colleagues in the academic community and colleagues and

regulatory authorities around the world to deepen our understanding. this will be a dynamic process, but one that is very important will truly inform our decision making and the graphic warnings that will appear on advertising and on cigarette packs. with respect to the cost issues, the tobacco program at fta is supported by user fees from the tobacco industry -- the tobacco program at fta is supported by user fees from the tobacco industry. >> we have time for one more question. >> good morning. -- iwhat the nationallatino am with the national latino tobacco control network. i was wondering on that area

where minorities are disproportionately affected and poor communities, to ensure that the implementation of these efforts are really hitting the community and to be sure we are building the capacity in the community so the committee is engaged in this process. i would like to see if you have considered how you will do specific outreach in minority communities on the implementation of these new regulations. >> i would say that part of the funding for the outreach and treatment programs began as a pipeline and recovery act, and there were specific resources given to every state in the country to expand quit lines, to ramp up their efforts, and then we have 57 of the is community

projects in various regions across the country to try to examine this. it a lot of them are in minority or underserved areas, looking at what really works, how the out reaches. that is a portion of the plan. i think one of the strategies also will be as we look across the department, the expansion of community health centers can play a very key role in this, and that is going to double the footprint of providers in often- underserved areas. certainly, school curricula could help. i think the out reach with our other government partners in areas, such as public housing and the effort to move into more smoke-free environments, that people choose to live then. so it is not only smoking

cessation directly, but making sure people are protected from secondhand smoke, regardless of where they're living. so i think those efforts are very much underway and have to be part of the outreach, because of the disproportionate impact of smoking and the effects of tobacco on populations. another population that we have to pay very careful attention to, and i think my expert colleagues will be spending a lot of time and energy, are americans with mental health issues. because the behavioral health committee -- health community, about half of our deaths are folks who have some kind of serious mental illness. spending time and attention on a particularly out reach a net population, where often still to this day, cigarettes are still

looked at as a reward system in too many environments. we're getting very mixed messages. we know the impact is hugely important in different communities, so looking at this strategy as a nuanced strategy is very important, but everybody who buys a pack of cigarettes will now, i think, have an opportunity to be faced with some dramatic warnings and it dramatically billing that has not -- and dramatic labeling that has not ever existed before. >> it is so germaneand one of tp the people goals for the next 10 years and beyond. it is a perfect thing to include today. they you, everyone, for coming.

[applause] >> our live congressional coverage resumes when the senate returns monday for speeches. then both senate democrats and republicans will hold a leadership elections. no roll call votes are expected until wednesday. possible votes include bills on wage discrimination and food safety. what live coverage starting at 2:00 p.m. eastern. also on monday, a house ethics subcommittee hearing regarding charles rangel. he is accused of 13 violations, including failing to disclose at least $16,000 in assets and income in a financial disclosure report to congress.

that is live on c-span 3. now, a look at some of the new senators in congress. democratic governor joe mention of west virginia -- manchin of west virginia will take the place of the senator appointed to serve out the term of robert byrd. in utah, mike lee will take the seat now held by robert bennett, who did not win his party's nomination. saturday, a landmark supreme court cases on c-span radio. >> there is nothing in the united states constitution concerning birth, contraception or abortion. >> argued in 1971 and ruled on

in 1973, roe v. wade is still considered one of the court's most controversial decisions. for the next two saturdays, listen to the argument on c-span radio, in washington, d.c. at 91.7 fm, a nationwide on xm channel 132, and online at c- span.org. >> 43rd president george w. bush on his memoir. the former president discusses the critical decisions of his administration and his personal life. that is live from miami dade college sunday at 4:00 p.m. eastern on c-span [applause] . >> now, the ceo of the federal reserve bank of dallas. earlier this week, he criticized the decision of ben bernanke to purchase the bonds.

he said this decision may be the wrong medicine for the u.s. economy. the association for financial professionals hosted this 50 minute event in san antonio. >> before richard begins, i would like to dial back to 2002 when i joined the board. i was probably a little further along in my career than most when i decided to do that. one of the reasons i did was because i felt that afp needed to take a greater step forward in terms of providing value to cfo's and treasurers, some of

the senior people in the room here today, not something we were being asked to do in 2002. in may of 2005, we held our first ever executive institute in san francisco. that was the beginning of leading us wary are today. this is our sixth event. we have had six global corporate treasurer forums leading up through this year. in june, we had our first ever global treasurers forum in europe, in london. as i mentioned yesterday, next year it will be in paris and i have already purchased my plane ticket. [laughter] many people from the group are here today. we have expanded our focus across the border. it has been a great ride and hopefully will continue to add further brett and debt to be content to provide more value -- breadth and depth to the

content to provide more value to the people in the room today. if you enjoy its, [unintelligible] [laughter] [applause] so, without further ado, i would like to introduce richard fisher, once again, president and chief executive officer of the federal reserve bank of dallas. he is a voting member of the fomc. he is deputy u.s. trade representative. given the decisions by the fomc last week, we are very fortunate to have him here with us today to share some timely remarks. ladies and gentlemen, without further ado, richard fisher.

[applause] >> i am excited that she will be holding your next meeting in paris, texas. it is a nice part of these taxes. i understand you had condoleezza rice as the speaker last night. very lucky. she is a wonderful woman. she's a great concert pianist. the only musical instrument like a play is the radio. it will not be the same. it has not escaped to me that you invited me to speak at the henry b. gonzales convention center. he was wary of the federal reserve and. today, i will operate under the assumption that the good congressman, god bless his soul, is holding a congressional session somewhere in the hereafter. he has called upon members of

the federal open market committee to answer for themselves after the fed's recent actions. as a tradition that the federal reserve, i can only account for and speak for my actions, not those of anyone on the federal reserve board or ever -- or anywhere else in the system. what a plan to do today is provide you with an analysis of the nation's and credit for iraq -- credit predicament. to summarize the arguments i made with the course of monetary policy and then provide a personal perspective. afterwards i will do my very best to avoid answering the questions you might have. at all fomc meetings after the staff has briefed the committee on the projections of the models and have provided their own insights, chairman bernanke

calls upon all participants in the fomc discussion. to present to the others at the table their individual sense of the economy. when i'm called upon, i give a perspective from the dallas fed staff about a survey i personally conduct about a wide swath of the ceo's and c.f.o.'s of businesses large and small across the country. as well as my conversations with financial operators that i know from my former days as a hedge fund manager. there are plenty of a forecasting models, as you know, available to all, and it to me the key to crafting monetary policy is placing the theoretical analysis done by our able staff of a cop -- of economists using other players

actually operating in the field. the essence of what a report to my colleagues when we met last week is that more things are moving in the right direction than the wrong direction. there are some green shoots beginning to show up but it is pockmarked by brown spots. general economic conditions are improving slightly and are expected to continue doing so. the risk of a double-dip in the economy has lessened as has the risk of inflation. financial speculation and access, however, is beginning to raise its head. on the real economic front, data from manufacturers, railroads, shipping, express shippers, retailers, and others that i have surveyed indicated that activity picked up on a year- over-year basis in october. and was slightly better on a year-over-year basis for the pace of september. as might be expected, we report

prize pursers for a range of commodities including cotton, pulp, metals, gold use in manufacturing including specialized products like semiconductors. you would not have known this from reading the daily press. i do find it of interest that one of my contacts and just recently came back from visiting with off ordered 50 of his chinese suppliers and reports the chinese government was encouraging to grant wage increases on the order of 15%- 20%. combining wagered as with recent price increases, the manufacturing low-price chinese products that support -- that supply them with clothing and lower and devices.

these are dolly lked -- dollar levels 30% higher. production sites in vietnam and india are only slightly under bidding their chinese counterparts. to be sure these are opening positions of negotiation. i made my living negotiating trade agreements around the world. i know the products. they are alarming. they may pretend to shift back to value-added goods in the immediate future, this can set a squeeze on market -- margins those from importing from that corner of the world. -- reporting the same phenomenon. none of them feel they have the pricing wherewithal to pass on the cost increases here with on of more than 2%, or roughly 2% given the weakness of consumption. the one thing they are certain

of is the retail goods and inflation is highly unlikely to drift downward into a deflationary. this is done uniquely by the federal reserve bank of dallas. he trimmed inflation rate does if slightly different story than those sold by the core of analysts which gets so much attention from the federal open market committee. it came in at 1% annualized compared to an annualized rate at 1.3% in august. the number for these two months, however, is above the rates we saw earlier in 2010. it has been steady for the past six months with a 0.1%

differentiation and coughing in precisely at 1% of the last three months. if the trimmed mean is a better gauge of the underlying trend in pce inflation (and we at the dallas fed think it is), then it's not too surprising that the core pce rate should be moving down toward the lower and steadier trimmed mean rate. that does not mean we are drifting toward deflation. the message the trimmed mean is sending is consistent with the price picture i have drawn for my colleagues in the past couple of meetings: the underlying trend in inflation appears, for the time being, to be holding steady, albeit at the rate we were accustomed to in the 1950s rather than the rate weave become accustomed to since then. without pricing power, and in the face of anemic demand, all of my nonfinancial business contactslarge or small, public or privatecontinue working to protect their margins through productivity enhancement. and to take advantage of ready

access to cheap money to finance productivity enhancement, as well as to refinance their balance sheets, pay dividends or buy in their stock (if they are public). some of the larger ones report borrowing domestically in size and warehousing those funds so as to avoid having to repatriate the funds building up abroad at onerous tax rates. a fewand this is good newsare using cheap money to refinance their remaining pension obligations in light of unsustainable discount factors used for accounting purposes. to dwell on a point: most all the businesses i talk to are expanding investment in productivity enhancement. far too few of the large companies i talk to report interest in hiring american workers or committing to large- scale capex (capital expenditures) in the united

states; they believe their potential for return on investment (roi) is greater elsewhere. the smaller companies that do not have global options are putting off hiring until the coast is clear on the tax and regulatory fronts. this reticence intensified during the final innings of the election season, which begs the question of whether this will now change with the new congress. i'll circle back to this issue in my concluding remarks. nonfinancial and financial companies alike report that they are flush with liquidity. bankers are aggressively courting the larger corporate credits; several of my ceo and cfo interlocutors report that in the last few weeks, the biggest banks have approached them "literally begging to lend us 10-year money at less than 3 percent. "as you well know, corporate debt markets, including junk markets, are robust. and smaller companies are not

complaining about the lack of access to capital. as a special part of our last monthly texas manufacturing outlook survey, conducted during october, i had our staff ask questions of the 240 companies surveyed about credit availability. only 60% responded that they were seeking credit for financing long-term expenditures, and of that 60%, only 18% responded that they were having "substantial" or "extreme" difficulty obtaining that financing. only 54% of those 240 texas companies reported that they were seeking short-term credit, and of that 54 percent, only 12 percent responded that they were having "substantial" or "extreme" difficulty getting credit. this was specific to my district. given that our fed activity index, which we publish monthly and the highest correlation of all of the federal reserve bank surveys that is a reflected, our survey might have some concerns.

it concerns me that liquidity is omnipresent on bank and corporate balance sheets, and yet it is not being used to hire american workers. it also concerns me that the most recent lipper/amg financial market data show year-to-date flows into virtually all asset asses except money market funds. the flows are strong into every category: high-risk to low-risk bond vehicles, taxable and nontaxable, domestic and external, fixed and floating rate, and, of course, commodities. margin debt remains shy of 2007 highs but is fast approaching levels that prevailed before the nasdaq implosion in 2001. in fact, margin-account debit balances as a %age of the market capitalization of the s&p 500 now exceed the precrash level of 1987 and 2001. junk yields are at their lowest levels since october 2007. and the leveraged buyout market is back to paying 2006 levels of ebitda -- earnings before

interest, taxes, depreciation and amortization -- of 6 to 8. 5 times, with the recent announcement of carlyle group's reported 11 times ebitda purchase of syniverse holdings echoing the peak of the precrash craze. as you know, buyout people do not typically acquire companies with a plan to expand the workforce, but instead with an eye to tighten operations, drive productivity, rejigger balance sheets and provide an attractive payback, usually in shorter time than under normal corporate horizons. and the corporations i talk to that are eyeing possible acquisitions with their surplus cash and ready access to the credit markets are not given to thinking of strategic acquisitions as a way to expand payrolls. in sum, scanning the business landscape and the conditions of the financial markets, i concluded as a golfer that the greens are playing very fast and must be approached with great caution. at a minimum, i concluded, the committee would need to be very careful in how we calibrated

our next strokes, lest we overplay it. i fully understand the theoretical impulse to drive long-term interest rates to lower levels in hopes of stimulating loan demand and challenging the propensity for economic actors to hoard rather than invest. given that foreign exchange markets react to interest rate differentials between countries, one effect of engineering lower rates would be to devalue the dollar, presumably to create demand for exports. the ultimate objective would be to advance final demand, generate employment for american workers and revive output. i agree that we are indeed in what is referred to in economic parlance as a liquidity trap. yet, i think it worth noting that we already have low interest rates, and spreads against risk-free instruments are historically narrow. despite their theoretical promise, reductions in interest rates to lilliputian levels have not done much thus far to spark loan demand.

loans are desirable when business see an opportunity for tapping credit markets to earn a return on investment that significantly outpaces the cost of credit and other risk factors. even with the low rates that already prevail, businesses lack confidence that they will earn a superior roi by investing so as to expand their domestic workforce, in comparison to what they might earn from alternative investments abroad or by buying in their stock or cleaning up their balance sheets. for their part, consumers will borrow when they believe it makes sense to shift consumption forward. but after the sobering experience of the past three years, they are restrained by a lack of confidence that their future income streams will be sufficient to cover their payment obligations. on the supply side, we know that businesses are floating on a sea of liquidity. banks already hold over $1 trillion in excess reserves.

holdings of government securities as a %age of total assets on bank balance sheets are growing. if we had a level of bank reserves or liquidity in the marketplace that was binding or inhibiting loan growth, i could understand the impulse to relieve that stricture. further quantitative easing through additional asset purchases will surely increase the level of bank reserves, lower rates marginally and add more liquidity to markets while weakening the dollar. the more germane question is whether this works to the benefit of job creation and wards off financial excess. in his speech in jackson hole, wyo., in august, chairman bernanke had asked all of us to consider the costs and the benefits of further accommodation. my response was that i was skeptical about many of the presumed benefits of further asset purchases. i was more certain of some of the potential costs.

one cost is the risk of being perceived as embarking on the slippery slope of debt monetization. we know that once a central bank is perceived as targeting government debt yields at a time of persistent budget deficits, concern about debt monetization quickly arises. i realized that two other central banks were engaging in quantitative easingthe bank of japan and, most notably, our friends at the bank of england. but the bank of england is offsetting an announced fiscal policy tightening that out- thatchers thatcher. this is not the case here. here we suffer from fiscal incontinence and regulatory misfeasance. if this were to change, i might advocate for accommodation. but that is not yet happening. and i worry that by providing monetary accommodation, we are reducing the odds that fiscal discipline will be brought to bear. more on that in a moment. i also worry about the risk of our being perceived as using

quantitative easing and buying copious amounts of financial assets above and beyond the ordinary bounds of the federal reserve's system open market account as "the new normal" for implementing monetary policy. everything we know from monetary history tells us that in times of crisis, we should open the floodgatesthis has been the practice of central bankers since the 19th century. this is what monetary theorists might call bagehot 101, after the british patron saint of central banking, walter bagehot. we did it in 2008 and it worked to pull us from the maw of financial panic and economic ruin. but it did not seem to me last week to be a time of panic or crisis. i suggested that were we to act by throwing more money at the economy under these more benign circumstances, the markets might come to expect more, that

quantitative easing could become like kudzu for market operatorsexpectations of continued federal reserve purchases of treasury securities as normal operating procedure might grow and grow and be terribly difficult to trim once they take root in the minds of market operators. i might understand the case for accommodation if serious deflation were a clear and present danger. as i pointed out by citing the trimmed mean and through my anecdotal reports, it is not. i would add for this audience here today that this is thanks to ben bernanke's adroit leadership in engineering the liquidity measures implemented during the panic of 2008-09 and by avoiding the policy errors of the 1930s. because of what we did in staring down panic and its aftermath, neither m2 money growth nor inflation has fallen off the cliff. and while nominal growth is

less than desired and is very painful, nominal income is growing, however incrementally, not shrinking. i expressed concern about the purported benefits of a weaker dollar in the exchange markets. much of what we export is in the form of high-value-added goods and services and in commodities like cotton and soybeans that we produce with enormous efficiency. a not insignificant portion of what we import, in addition to oil that feeds into gasoline prices, is used to clothe and support lower-income earners, the very people suffering from unemployment or job insecurity whom we are endeavoring to help. when faced with a further squeeze on their margins that comes with higher import prices, the wal-marts, dollar generals, costcos and other stores where the most impacted people buy necessities will likely react by driving productivity even harder, which, translated, means selling more while employing fewer workers.

i also suggested that if the consequence of further easing was to weaken the dollar, this might undermine our standing in international fora, and drawing on my experience as a former deputy u.s. trade representative, might undermine efforts to ward off protectionism. as to the proposition that higher prices of financial assets will liberate those most in need, i wondered aloud if that were indeed true. we are already seeing the beginnings of speculative activity in stocks, bonds, buyouts and commodity markets. the rich and the quick are certainly able to exploit these circumstances to get richer. i have no problem with market operators making money. i did so myself in my previous life as a funds manager ,before i took the vow of financial chastity and joined the fed!,. but i take no comfort, and see considerable risk, in conducting monetary policy that has the consequence of transferring income from the

poor and the worker and the saver to the rich. senior citizens and others who saved and played by the rules are earning nothing on their savings, while big debtors and too-big-to-fail oligopoly banks benefit from their subsidy. i know of no presidential administration or congress, republican or democrat, that will tolerate, let alone advocate for, that dynamic for long, and i expressed my worry that this could come back to bite us and possibly threaten our independence. then there is the issue of exit policy. the more we engage in a policy of asset purchases that moves us further out the yield curveand the more we laden our balance sheet with price-sensitive assetsthe greater the likelihood of realizing a loss on our holdings. one can model out some of this risk and conclude that the coupon stream of the securities we will be holding will protect us against capital loss under reasonable price-reversal scenarios.

but if unreasonable scenarios prevail, i shudder at the prospect of the chairman or any other members of the fomc appearing before the house banking committee in 2012 to report that the central bank of the united states has generated a loss of x billion dollars. in sum, i asked that the fomc consider that we might be prescribing the wrong medicine for the ailment from which our economy is suffering. liquidity and abundant money are not the binding constraints on the economic activity we wish to see. the binding constraints are uncertainty about income and future aggregate demand, the disincentives fiscal and regulatory policy impose on ridding decisionmakers of that uncertainty, and the reluctance, given those disincentives, of those who have the power to create jobs for our people to invest in undertakings that would create them. the remedy for what ails the economy is, in my view, in the hands of the fiscal and regulatory authorities, not the

fed. i could not state with conviction that purchasing another several hundred billion dollars of treasurieson top of the amount we were already committed to buy in order to compensate for the run-off in our $1. 25 trillion portfolio of mortgage-backed securitieswould lead to job creation and final- demand-spurring behavior. but i could envision such action would lead to a declining dollar, encourage further speculation, provoke commodity hoarding, accelerate the transfer of wealth from the deliberate saver and the unfortunate, and possibly place at risk the stature and independence of the fed. my perspective, as with those of all other members of the fomc, was given a thoughtful and fair hearing at the table. after deliberation, the majority of the committee concluded that under current and foreseeable conditions, the

better approach was to purchase $600 billion in treasuries between now and the end of the second quarter of next year, on top of the amount projected to replace the paydown in mortgage backed-securities. the math of this new exercise is readily transparent: the federal reserve will buy $110 billion a month in treasuries, an amount that, annualized, represents the projected deficit of the federal government for next year. for the next eight months, the nation's central bank will be monetizing the federal debt. this is risky business. we know that history is littered with the economic carcasses of nations that incorporated this as a regular central bank practice. so how can the decision made last wednesday be justified? chairman bernanke provided a

public answer in an editorial in "the washington post" the day after the meeting. in that editorial, he summarized the analysis of the majority of the committee. "this approach eased financial conditions in the past and, so far, looks to be effective again. easier financial conditions will promote economic growth lower mortgage rates will make housing more affordable and allow home owners to refinance. lower corporate bond rates will encourage investment. and higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. for good measure, he added, "we have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time. "and over this weekend, he added in a public speech that he did not think the new levels of asset purchases would unleash "super ordinary" inflation. having made my arguments to the contrary, i am a member of the

committee that chairman bernanke leads. i respect the will of the committee and defer to the chairman as its spokesperson. i would suggest that even if you share my cautious perspective on this matter, you might be assuaged by looking at this new initiative as a bridge loan to fiscal sanity. we have a new congress. from my perspective, there are two ways your central bank can approach them: the way it is being done by the bank of england, which appears to me to be seeking to cushion the adjustment to a policy of fiscal abstinence by a new government after a prolonged period of fiscal debauchery. or to provide the space necessary for our newly elected congress to work with the president to find a way to restore fiscal sobriety without choking off economic recovery. the new leadership of the house

of representatives, and the reelected leadership of the reshaped senate, together with president obama, surely must understand that we are at the end of the line and that time is of the essence. the fed is doing its level best to deliver on the dual mandate it was given by the congress. but monetary accommodation, by itself, is not the answer to our current woes. the fed, as i see it, has taken a leap of faith that our political leaders will forge a sensible budgetary and regulatory path that incentivizes businesses to put to work the money the fed is printing to invest in creating jobs for american workers while averting what the stanford historian david kennedy described in yesterday's new york times as "a looming fiscal apocalypse. "we need for the congress to move quickly, beginning in its lame-duck session. as winston churchill said, "we need action this day!" otherwise, the effect of quantitative easing will, in my

view, simply result in financial speculation, further investment in more welcoming quarters abroad and, ultimately, in "super ordinary" inflation. the fomc is taking a calculated risk. if the congress and the executive fail to deliver, i believe the fomc will have to consider changing course. here is the message: the fed is going out of its way to be a good citizen. it is time for the congress to do the same. thank you. [applause] >> i am happy to take any questions anyone might have. i do not know if we do that here or not. since we are on television,

please state your name. [laughter] fire away. it is always an inhibiting introduction. no questions? let me ask myself the question -- i am kidding. >> hello, i am jeff johnson. the fed has taken a risk. what risk do you want congress and the president to take? >> i think it is pretty clear that the risk they have to take is to pull up their socks and

organize themselves so that we have a tax and regulatory regime that encourages and incentivizes corporations, whether public or private, to take the risks to express confidence in the future. in the land of hiring more american workers. -- it will end up hiring more american workers. that takes guts. we have huge fiscal holes and unfunded liabilities. i often talk about medicare. we at the dallas fed do our own numbers. he has $35 trillion in unfunded liabilities. we have come up with $90 trillion. those are big numbers. you need to deal with the long- term predicaments and, at the same time treat them in a way that incentivizes people who hire workers to put them to work.

he did not bring down unemployment by discouraging people from hiring. that is a gutsy thing to do when you have been practicing the equivalent of what i described it for the british as a "fiscal debauchery" to sober up and do the right thing. we will see if that happens. i am not saying that we are totally non-partisan. you understand that. i will tell you one of my favorite anecdotes. one of my all-time favorite public servants, other than paul volcker, is a man named george shultz. he was a republican public servants. i did not know if anyone held as many cabinet jobs as he did it did so well. he was a director of the omb under nixon and he was concerned that the administration was tempted to spend more money.

the numbers then were minuscule compared to now. he called in one of his aides and said, "just between you and me, who enjoys spending more? is it worse under republicans or democrats"? he came back the next day and said, "mr. shultz, there is no difference between republicans and democrats in congress when it comes to spending money except one exception. democrats enjoy it more." i do not think that is no longer true. i did not think again for your favorite one party or another. together -- and i mean this -- we cannot do that as just a central bank. it has enormous risk and leads to bad behavior. we have extended ourselves significantly and we are well aware of that.

it does no good unless people take the funds that we have a put out there and put them to work. we live in a globalized environment and there are options. you are all business people. you will advise your cfo's and ceo's for the best return on investment. we can do that in anywhere in the world. they will have to figure out how to be competitive on that front. they are the contras. we are the central bank. we desire to create more employment for everyone. that is what they have to do. >> is your arm ok? ok.

>> my name is carl. did the financial regulatory reform address too big to fail? >> are you referring to the bill recently passed by a congress? time will tell. i am a firm believer that too big to fail means you are too big period. the four largest financial institutions, and i am a representative, are larger than they were before the crisis. i do not believe having been a former banker that if you get to be a certain size and scope that you can follow the big bank or rule which is "and know your customer." that becomes quantitative analysis which i believe is where mistakes are made. personally, i would be in favor of breaking those institutions up and i have said so publicly. i do not think it is fair for them to be subsidized by the

rates they are being paid on deposit money presently. when i say to break things up, that sends a shiver up people's spines. the work being done is to try to figure how they will conduct themselves according to different capital rules domestically and for the basel iii conference. this includes the volcker rule which has now been renewed for discussion. i think paul volcker is right. it induces too much risk-taking behavior. that should not be underwritten by the guarantees we provide to public savers. the answer is it will take time to figure this can be done. we have a new financial stability board. it is just in formation. we at the fed have to under 54 rulings that we have to pull together -- 254 rulings that we

have to pull together now. that goes back to the churchill ", "i want this this day. we are still answering that. time will tell. i think it is a very necessary thing to deal with the. we must treat it. that is -- will we find the cure? there is another question over here. >> how does the eds plan work? what is the conceptual model for $1.80 trillion? can you walk through the steps, the triggers, how this works? >> there are many different ways. we developed the toolkit significantly. in the old days, monetary policy was very easy.

if you bear with me i will give you an easy analysis to wrap your mind around. we basically spent our time controlling the funds rate, and the rate that banks lend to each other. the fomc would meet and decide whether they wanted to tighten monetary policy working with the same -- or keep it the same or loosen it. think of it as a faucet for a sprinkler system. we would spend our time on that faucet. we made the assumption that the sprinkler system worked. and did not. it became a goldberg device that went out of control. we, as regulators, has missed that. the institutions have sprung up. the objective was to tighten it just right so that our girtin would grow, be nice and green, and are burdened with the

beautiful. if we did not water enough, it would turn brown and die. now have a much more complex portfolio. first of all, we own securities. i mentioned when they are, mortgage-backed securities and charge it -- treasuries. one option would be that when you buy them, you put money in the market, which is what you're doing now. you can always sell them or restructure the portfolio to take money out of the market. we also have payments made on excess reserves. we did not do that before. congress requested it -- or rather they suggested it. we can move that right around in order to effect excess reserves which is more than $1 trillion on the 12 balance sheets of the reserve banks. how much movement will be really effective? we have affected their ability to operate in the market. we now have time deposits paid

for the large financial institutions. there are a couple of tools in our tool kit. the real issue is how far in advance to identify what you need to do, the lag times were never really clear. that is the methodology we use for tightening the faucet. we do have a lot to learn about the tools we have in our camp, but we know we have them and can use them if needed. we will use them if we feel that inflation is rearing its ugly head. there is the answer to your question. yes, sir? or yes, ma'am? it depends on where the microphone goes. [applause]

my note complice in monetary policy. >> good afternoon. most of the discussion and commentary has been around the cyclical factors driving and employment. i am interested in your comments on the secular forces driving certain jobs to never come back to the u.s. and if you think it is the government party job to think that what america will be good that. what the think about the strategic efforts around that and what more can be done? >> i am a central banker. i am not a legislator. i have no influence. i say that because our job is to work the watering of the garden and make sure we get it right. it is very clear to me, however, given my former job as a former

deputy trade representative and just watching what is going on in our economy that other nations are obviously making enormous profits -- progress. i would remind the room that this is good news. we fought a cold war and one. -- won. all the people we worried about in china, russia, and elsewhere are gone. they are now our competitors. .hey're not even competitors they are our partners and our "cooperators." when you have billions of people and you want to improve living standards, then you end up putting them to work and you start moving upward. you see that in china. you would probably know more about that than i do. winston churchill, who i like to quote, often refers to refined process these. he was a free trader.

other countries would sell low- value goods. we need to move up the value- added latter. we must move up the ladder to compete. but we must continue to move up the value-added letter to improve our people and prosperity. what does that come down to? education. i think that is where we are threatened to significantly. that is the role of civic leaders, families, and publicly elected leaders to improve. to me, that is one of the most important issues in the world. it is true from primary school, secondary school to our highest universities. we have to make sure we are preparing a workforce that can compete. when you are in high value- added. to get paid more. we know what the statistics are to drop out of high school. the rate of unemployment there

is multiples higher than those who complete high school, complete college, and so on. that is the key, long-term issue facing our nation. i have one other comment. we are also a nation of immigrants. my parents were immigrants. i do not see -- maybe my eyesight is bad, but i do not see a single native american in this office. -- in this room. we are all the children of immigrants. when i speak at universities and give commencement speeches and someone is to look at the change in the complexion in the audience. if you, by the way, are at a commencement when they are giving out economic degrees, you have to work to announce the names and understand the culture they come from. imagine drilling and oil well 3 spend an enormous amount of money among -- imagine drilling and oil well and you spend an

enormous amount of money. we bring over the best minds in the world to educate and we do not let them stay. it makes 0 cents. -- zero sense. we need to take advantage of the people who come here, in the nicest way, to improve ourselves. i think those are two things we need to get right to succeed. i am sure there are others, but i am not in that business. one last question. well, i guess we were out. i was hoping someone would sing the association song. thank you very much. [applause]

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> car like congressional coverage resumes when the senate returns on monday for general speeches. both republicans and democrats will hold off the floor leadership elections. roll call votes are not expected until wednesday with the first expected vote on the use of natural gas and electric vehicles. other possible votes include bills on wage discrimination and food safety. watch live coverage on c-span2 at 2:00 p.m. eastern. also, a house ethics subcommittee hearing on the case against representative charles rangel who is accused of 13 violations including failing to disclose at least $600,000 in assets and income in a series of

inaccurate reports to congress. that is live at 9:00 a.m. eastern on c-span3. at the closing news conference of the g-20 conference, president obama criticized the chinese currency policy. he also answered questions on whether he will extend the tax cuts introduced by the bush administration and on the failure to reach a free-trade agreement with south korea. his remarks are about 45 minutes. >> good afternoon, everybody. before i discuss the g-20, i want to briefly comment on the agreement in iraq that has taken place on the framework for a new government. there are still challenges to overcome. all indications are that the government will be representatives, inclusive, and reflected the will of the iraqi people who cast their ballots in the last election.

this agreement marks another milestone in history of modern iraq. once again, iraqis are showing their determination to unify iraq and build its future. those impulses are far stronger than those who want iraq to descend into a secretary in war and terror. for the last several months, the u.s. has worked closely with our iraqi partners to reduce a broadbased government, one whose leaders treat all iraqis as equal citizens. now, iraq's leaders must finish the jobs so they can meet the challenges they will face. in going forward, will support the iraqi people as they strengthen their democracy, result political disputes, settled those, and build ties of commerce and cooperation with the united states, the region, and the world. now, here in s seal -- in seoul

we are grateful to our hosts of the south korea for your extraordinary hospitality. we came here to finish the work that has taken us to london, pittsburgh, and toronto. we worked together to pull the global economy back from catastrophe. we committed ourselves to growth that is balanced and sustained including financial reform and fiscal responsibility. the actions that we took were not always easy or popular, but they were necessary. as a result, the global economy is growing again. some economies, especially emerging economies, are experiencing strong economic growth. trade has risen. jobs are being created as in the united states where we have had 10 consecutive months of private sector job growth and created more than 1 million private- sector jobs this year alone.

in short, we succeeded in putting the global economy back on the path of recovery. we also know that the progress has not come nearly fast enough especially when it comes to my highest priority which is putting americans back to work nor have we yet achieved the balanced global growth that we need. many advanced economies are growing too slowly and not creating enough jobs. some countries are running large surpluses, others large deficits. simply, we risk slipping back into the old imbalances that contributed to the economic crisis in the first place and which threaten the global recovery. hear, the question was whether our nation's could work together to keep the economy growing. i know we focus on this agreement, but the fact is the 20 major economies gather here are in broad agreement on the way forward.

it is an agreement based on a free market that was put forward by the united states. for the first time, we spelled out the actions required in the four key areas to achieve the sustained and balanced growth that we need. first, we agreed to keep focusing on growth. at home, the united states has been doing our part by making historic investments in infrastructure, education, research, clean energy. as a consequence, our economy is growing again even though we must do more to make sure the growth is sustained and transit's into jobs. here in seoul, we agreed to growth must be balanced. countries with large deficits much -- must work to reduce them as we are doing so in the u.s. and we are on track to cut in half of 2013. we are prepared to make tough decisions to achieve our goal. likewise, countries with large surpluses must take steps to

boost domestic demand. as i have said, going forward no nation should assume that their path to prosperity is paid to simply with exports to the united states. second, we agree that exchange rates must reflect economic realities just as the major events economies need to keep working to preserve stability among reserve currencies, emerging economies need to allow for currencies that are market- driven. this is something i raised yesterday with president to of china -- hu of china. we all need to avoid giving an undue advantage over one another. we took further steps to implement financial regulatory reform. back home, we are implementing the toughest financial reforms since the great depression. we are expecting the same sense of urgency, rather than complacency, among our g-20

partners. we agreed to new standards here similar to those who have passed in the united states to make sure banks of the capital they need to withstand shocks and not take excessive risks that could lead to another crisis. we agreed on an approach to make sure the taxpayers are not asked to pay for future bank failures. fourth, we agreed to address development as a key driver of economic growth. the work we did hear it builds on a new development policy that i announce in september and recognizes the the u.s. effective means of living people out of poverty is to create sustainable economic growth that will create the markets of the future. we also agreed on an action plan to combat corruption, which in some countries is the single greatest barrier to economic progress. finally, we reaffirmed the need to avoid protectionism that stifles growth and instead pursue trade and investments to

open markets. that is why, for example, we will continue to work toward a u.s.-south korea free trade agreement. not just any agreement that the best agreement to create jobs both in america and korea. i spoke frankly to my g-20 partners today. emerging economies have gained a greater voice in international financial institutions in part because of the work we have done here at the g-20, so, too, must they embraced their responsibilities to open markets to the trade and investments that create jobs in all of our countries. again, i want to thank our south korean hopes 00 ho -- korean hosts. rivlin at the steps must take. -- we have laid out the steps we must take. these are commitments we will have to meet. with that, i will stick to questions.

i will start with julianna goldman from bloomberg. >> if u.s. concerns on automobiles and beef are not adequately addressed, at that would be better to have no deal at all? >> i have always said that i'm not interested in signing a trade agreement just for the sake of an announcement. i am interested in trade agreements that increase jobs and exports for the united states and hopefully also increase opportunities for our trading partners. i think that is achievable between the united states and korea. the whole issue here, from my perspective, is do we have a deal that works for us? that is my first obligation. his obligation is to make sure

it works for correa. i think we can get a win-win, but it was important to take the extra time so that i am assured that it is a win for american workers and companies as well as korean workers and korean companies. i am going to have to be the one to go to congress and sell this. from my perspective, again, i am not interested in an announcement with an agreement that does not produce for us. we have had a lot of those in the past. we have had a lot of announcements, but at the same time we have seen american manufacturing deteriorate. as it -- i think there's a lot of suspicion that some of these great deals may not be good for america. i think this one can be, but i want to make sure that when i present the trade agreement to congress that i am absolutely confident that we have the kind

of deal that is good for both countries. dan lothien, cnn. >> thank you. after the midterm elections, you said that you were open to compromise on the bush tax cuts. i am wondering if you are prepared today to accept a temporary extension for the wealthiest americans? on an unrelated question, do you feel the election has we can deal on the global stage? -- weaked you on the global stage? >> the into the second question is no. what we have seen over the last several days as we have travelled through asia is that people are eager to work with america, eager to engage with america on economic issues, security a shares, on a whole range of mutual interests.

that is especially true in asia where we see such enormous potential. this is the fastest-growing part of the world. we have to be here. we have to work. i am absolutely confident that my administration over the next two years will continue to make progress in ensuring that the united states as a presence here, not just for the next couple of years, but for decades to come. with respect to the bush tax cuts, but i have said is that i will meet with both the republican and democratic leaders late next week and we will sit down and discuss how to move forward. my number one priority is making sure that we make the middle class tax cuts permanent, that we give certainty to the 90% of americans who are affected by

those tax breaks. i do not want to see their income taxes spike not only because they need relief after having gone through a horrendous recession but also because it would be bad for the economy. i continue to believe that extending permanently the upper income tax cuts would be a mistake. we cannot afford it. my hope is that somewhere in between, we can find some sort of solution. i will not negotiate here in seoul. i will negotiate back in washington with republican and democratic leaders. ben feller, ap. >> thank you, mr. president. you came talking about the frustration americans feel about

the slow place -- slow pace of growth. you have been talking about sustainable growth of. the american people do not seem as interested in brad roe growth as much as they want noticeable help -- in a gradual growth as much as they want noticeable help right now. do you think the unemployment rate will still be no. of 9% when you run for reelection? >> i do not have a crystal ball, but i will say that first of all we have run the economy by 1 million jobs over the last year. that is pretty noticeable. i think those 1 million people who has been hired noticed those paychecks. that is at 10 consecutive months of private sector job growth. in order to speed in order to speed up job

growth, we've put forward a range of proposals that i hope to discuss with democratic and republican leaders -- because i don't think we can just stand pat. i continue to believe that we need to invest in a creaky infrastructure back home. and i think as you travel around asia, you start seeing other countries investing in infrastructure. that's what the united states has done in the past, but we've been living off the investments that we made back in the '30s, '40s, '50s, and '60s. and it's time for us to make sure that we've upgraded our roads and our railways and our airports. that will make us more productive and will put people back to work right now. i continue to believe that it is important for us to work with businesses to see if we can incentivize them to invest now rather than holding cash waiting for the future. they've got cash to spend. and so we've put forward a series of tax proposals that historically republicans have supported. and my expectation would be there's no reason for them not to support it just because i'm

supporting it. and so that's a conversation that i hope to have next week. but we have a recovery. it needs to be speeded up. government can't hire back the 8 million people who lost their bs. ultimately that's up to the private sector. but i think we can set the conditions whereby we're seeing significant improvement during the course of the next year, the next two years, and we can chip away at the unemployment rate so that we get back to the kinds of levels that reflect a growing middle class and increased opportunity for all people. jake tapper. >> thank you, mr. president. this communiqué has a commitment that all countries will refrain from competitive devaluation of currencies. i'm wondering what you think

that means concretely when it comes to china's behavior, what you expect from them? and also i'm wondering, when it comes to congress, if you think your party, the democratic party, would benefit from new blood, new leadership? >> i've been very clear and persistent since i came into office that we welcome china's rise; we think the fact that china has grown as remarkably as it has, has lifted millions of people out of poverty, and that is ultimately good for the world and good for america -- because it means that china has the opportunity to be a responsible partner. it means that china can be an enormous market for the united states, for korea, for countries throughout asia and around the world.

and it's just good to get people out of poverty and give them opportunity. what i've also said is that precisely because of china's success, it's very important that it act in a responsible fashion internationally. and the issue of the rnb is one that is an irritant not just to the united states, but is an irritant to a lot of china's trading partners and those who are competing with china to sell goods around the world. it is undervalued. and china spends enormous amounts of money intervening in the market to keep it undervalued. and so what we've said is it's important for china in a gradual fashion to transition to a market-based system.

now, this is something that china has done in the past. and china has also acknowledged that it needs to transition to a more balanced growth strategy internally where they're focusing on their enormous domestic market and giving their people the opportunity to buy goods and services and consume -- all of which will promote their growth, but also will reduce some of the imbalances around the world. and so what this communiqué i think communicates -- not just to china but to all of us -- is letting currencies reflect market fundamentals, allowing your currency to move up and down, depending on the role that you're playing in the international trading system, is the best way to assure that everybody benefits from trade rather than just some.

and the communiqué strongly communicates that principle. my expectation is that china is going to make progress on this issue. president hu is going to be visiting me in washington in january, and our hope and expectation is, is that we will continue to see progress on this front. it means some adjustments for china. and so we understand that this is not solved overnight. but it needs to be dealt with and i'm confident that it can be. sheryl stolberg. oh -- i think that what we will naturally see is a whole bunch of talented people rise to the top as they promote good ideas that attract the american

people when it comes to jobs and investment and how to grow the economy and how to deal with our challenges. i think speaker pelosi has been an outstanding partner for me. i think harry reid has been a terrific partner in moving some very difficult legislation forward. and i'm looking forward to working with the entire leadership team to continue to make progress on the issues that are important to the american people. sheryl. >> thank you, mr. president. i'm hoping to get you in a little bit of a reflective mode. you spoke in your press conference in d.c. about your relationship with the american people. you said then that it had built slowly, it peaked at this incredible high, and then during the course of the last two years it had gotten rockier and tougher. and i'm wondering if you think the same could be said of your relations with foreign leaders, who maybe were just a teensy bit falling all over you when

you first arrived on the world stage. >> that's not how i remember it. i remember our first g20 you guys writing the exact same stories you're writing now about the exact same issues. don't you remember that, sheryl? [laughter] the united states, obviously, has a special role to play on the international stage, regardless of who is president. we are a very large, very wealthy, very powerful country. we have had outsized influence over world affairs for a century now. and you are now seeing a situation in which a whole host of other countries are doing very well and coming into their own, and naturally they are

going to be more assertive in terms of their interests and ideas. and that's a healthy thing. that's why we now have a g20 -- because the old arrangements didn't fully reflect these new realities. but let's just reflect on this summit. the framework for balanced and sustainable growth is one that we helped to originate. the financial reforms and basel iii are based on ideas that came out of our work and reflect many of thprinciples that are in dodd-frank. the development document that was set forward in this communiqué tracks the development ideas that i put

forward several weeks ago in terms of how we can encourage not just aid, but also self- sufficiency. the corruption initiative that's reflected in the communiqué was prompted by recommendations and suggestions that we made. so sometimes, i think, naturally there's an instinct to focus on the disagreements, because otherwise, these summits might not be very exciting -- it's just a bunch of world leaders sitting around intervening. and so there's a search for drama. but what's remarkable is that in each of these successive summits we've actually made real progress. and sometimes the progress -- charting the progress requires you to go back and look at previous summits, starting off

with -- let's say, on financial regulatory -- in toronto, we said, here's what we need to do; let's have this ready by the time we get to seoul. it wasn't real sexy back in toronto and nobody really wrote about it, but it actually moved the ball forward in terms of a coordinated response to financial regulation. imf reform is something that the united states has said we need to get done. and in previous summits, we said we're going to find a way to get that done. and lo and behold, here we are at this summit and we've actually achieved what is a huge shift in how power is assigned in these international financial institutions.

so the work that we do here is not always going to seem dramatic. it's not always going to be immediately world-changing. but step by step, what we're doing is building stronger international mechanisms and institutions that will help stabilize the economy, ensure economic growth and reduce some tensions. now, last point i'll make on this: part of the reason that sometimes it seems as if the united states is attracting some dissent is because we're initiating ideas. we're putting them forward. the easiest thing for us to do would be to take a passive role and let things just drift, which wouldn't cause any conflict. but we thought it was important for us to put forward more structure to this idea of

balanced and sustained growth. and some countries pushed back. they were concerned about what might this -- is this somehow going to lock us in to having to change our growth patterns or our trade policies or what have you. and that resistance is natural. it arises out of the fact that the u.s. is showing leadership and we are pushing to try to bring about changes. >> -- leaders and if you had noticed any change during your time in office -- >> and i guess what i'm saying is, is that i actually think that my relationships have grown much stronger with the people who i've worked with here. when i first came into office, people might have been interested in more photo ops because there had been a lot of hoopla surrounding my election.

but i now have a genuine friendship with prime minister singh of india and i think that he and i share a level of understanding and interest in working together that didn't exist when i first came onto the scene. i think the same is true for chancellor merkel; the same is true for prime minister erdogan; the same is true for president lee. that doesn't mean that there aren't going to be differences, but -- the same is true for my relationship with president hu. it wasn't any easier to talk about currency when i had just been elected and my poll numbers were at 65 percent than it is now. it was hard then and it's hard now. because this involves the interests of countries and not all of these are going to be resolved easily.

and it's not just a function of personal charm. it's a function of countries' interests and seeing if we can work through to align them. all right. savannah guthrie. >> a quick follow-up. some are interpreting your senior advisor david axelrod's comments to a newspaper back home that your compromise position is to temporarily extend the bush tax cuts. is that the wrong interpretation? >> that is the wrong interpretation because i haven't had a conversation with republican and democratic leaders. here's the right interpretation. i want to make sure that taxes don't go up for middle-class families starting on january 1st. that's my number-one priority -- for those families and for our economy. i also believe that it would be fiscally irresponsible for us to permanently extend the high- income tax cuts.

i think that would be a mistake, particularly when we've got our republican friends saying that their number-one priority is making sure that we deal with our debt and our deficit. so there may be a whole host of ways to compromise around those issues. i'm not going to negotiate here in seoul on those issues. but i've made very clear what my priorities are. >> oh, sorry, that was actually my quick follow-up -- >> oh, i see. [laughter] >> -- but this leads me right to my real question, which is, speaking of fiscal responsibility, given the fact that the bulk of the expense of extending the tax cuts to the middle class would be trillions of dollars, in the interest of telling the truth to the american people, can we afford that? thank you. >> well, the middle class in the united states saw their real wages go down 5 percent

over the period of 2001 to 2009, at the same time as all their costs were going up. and so giving them permanent relief is good for those families. i also believe strongly it is good for our economy right now, at a time when we are still in recovery. the costs are significant and we are going to have to have a discussion about over the medium and long term how do we match up our spending with our revenues -- because right now they are way out of balance. that's why we have a deficit. that's why we have a debt. and it is our responsibility to the next generation to make sure that that gets solved.

i don't start thinking on the revenue side. i start thinking on the spending side -- where can we potentially save money? i'm looking forward to getting the official bowles-simpson recommendations. i'm going to study those carefully, consult widely, and see what we can do on the spending side that will have an impact. and then we've got to see how much of a shortfall do we have. and then we're going to have to have a debate, which will probably be a tough debate and has to be an honest debate with the american people about how do we pay for those things that we think are really important. i think it is really important for us to invest in research and development because that's going to be the key to innovation and our long-term economic success. but we've got to figure out how to pay for that. i think it's really important

to invest in our education system. that's going to be a key to our long-term economic growth and competitiveness. how are we going to pay to make sure that young people can go to college? i think it's important to make sure that social security and medicare are there not just for this generation but for the next. how do we make that sustainable? so that's going to be a series of tough conversations. what i know is that if we're spending $700 billion -- if we're borrowing $700 billion to pay for tax breaks for folks like me who don't need them and where i'm least likely to spend that money and circulate it in the economy, that's probably not a great approach. but, again, i know that the other side feels very strongly about it and i'm willing to have a tough, hard-headed discussion with democratic and republican leaders about that issue. chip reid. >> thank you, mr. president.

i know it's not your habit to comment on fed decisions, but there's been quite a bit of reporting, if you believe it, and i'm sure you do, that there's quite a bit of unhappiness among g20 countries over that decision. and i'm not asking you to comment on the decision. but did you get an earful from other leaders here on the fed decision? could you share with us what some of them said? and if you're not willing to delve too deeply into that, what was the number-one complaint, concern, or piece of advice that you got from foreign leaders about the u.s. economy and your stewardship of the economy? >> what about compliments? you didn't put that in the list. there was only complaints, concerns, or -- [laughter] you know, there was not a lot of discussion about the fed decision in the leaders' meetings. i think a couple of times there were some veiled references to

monetary policy that may have effect on other countries. but it wasn't central to any of the discussions that we had. i know that on the margins, there was a lot of discussion -- and in the press, there was a huge amount of discussion about it. but i have to tell you that wasn't part of the discussion that we had inside the leaders' meetings. most of the discussion had to do with how do we translate this idea of rebalancing into concrete steps. and the communiqué accurately reflects the consensus. it's puzzling to me that the reporting is all talking about conflict when the communiqué actually reflects a hard-won consensus that the world's 20 largest economies signed up for

and that gives us some mechanisms to start monitoring, looking at indicators, seeing how countries are doing on this front. it doesn't provide an enforcement mechanism that says to korea or the united states or germany or brazil you have to do something, but it does give the international community the ability to monitor and see exactly what countries are doing, and to see if the policies they're pursuing are fair to their trading partners. and if they're not, then it gives a mechanism to apply at least some peer pressure on those countries to start doing something about it. i think when people talk to me about the u.s. economy, their main concern is, is it growing fast enough. because a lot of countries,

including south korea, depend a lot on exports and the u.s. is the world's largest market. they want to see us grow. they want unemployment to go down in the united states. and so i think they're very interested in what are additional strategies that can be used to encourage take-off in the u.s. economy. and i described to them some of the steps that we're taking and that we're going to be continuing to take in order to make that happen. i guess the last point i would just make about the fed decision, when i am asked about it my simple point is to say that, from everything i can see, this decision was not one designed to have an impact on the currency, on the dollar. it was designed to grow the

economy. and there's some legitimate concern that we've had very low inflation, that a huge danger in the united states is deflation, and that we have to be mindful of those dangers going forward because that wouldn't be good for the united states or for the rest of the world. beyond that, that's just an observation about what i think the intent was. last question -- scott horsley. >> one of your top advisors said this morning that the challenges facing the g20 now are much more manageable than they were at the height of the crisis. how does that affect the dynamic? is there some taking the eye off the ball among your fellow leaders?

>> i think what it means is that in the absence of crisis people probably are willing to hunker down a little bit more on some of the negotiations. speed seems less of the essence, and so people think, well, if it doesn't get solved now maybe we can put this off for another day. what's remarkable to me, though, is despite some of those impulses we're still getting stuff done. and as i emphasized before, we should not anticipate that every time countries come together that we are doing some revolutionary thing. instead of hitting home runs, sometimes we're going to hit singles. but they're really important singles. and i just listed some of these

out. imf reform -- this is something that folks have been talking about for a decade or more. it's gotten done. financial regulatory reform -- huge lift -- that we talked about in my first g20 summit, it is now coming to fruition. we've still got some more work to do but we've made enormous progress in a huge -- really short period of time. basel ii i think took a decade to negotiate; we got this done basically in a year and a half. the development agenda that's been put forward will make a difference. this rebalancing is still a work in progress, but everybody is on record now saying surplus countries and deficit countries both have to be mindful of their policies and think about the adjustments that they need so that we can sustain economic

growth and keep our borders open to goods and services over the long term. so those are all positives, and i think that's an indication of the seriousness with which people take these meetings -- even if, as i said, it's not always going to be revolutionary progress but sometimes evolutionary progress. i feel obliged to take maybe one question from the korean press -- since you guys have been such excellent hosts. anybody? this gentleman right here -- he's got his hand up. he's the only one who took me up on it. go ahead. ad i'll probably need translation, though, if you're asking the question in korean. in fact, i definitely will need a translation. [laughter] >> unfortunately, i hate to disappoint you, president obama, i'm actually chinese. [laughter] >> well, it's wonderful to see you. >> but i think i get to represent the entire asia. >> absolutely.

>> we're one family here in this part of the world. >> well, your english is better than my mandarin also. [laughter] but -- now, in fairness, though, i did say that i was going to let the korean press ask a question. so i think that you held up your hand anyway. >> how about will my korean friends allow me to ask a question on your behalf? yes or no? >> well, it depends on whether there's a korean reporter who would rather have the question. no, no takers? >> [inaudible] >> this is getting more complicated th i expected. [laughter] >> take quick, one question from an asian, president obama. >> well, the -- as i said, i was going to -- go ahead and ask your question, but i want to make sure that the korean press gets a question as well. >> okay. my question is very simple. you mentioned interpretation. i know part of the difficulty being the american president is that some of the decisions that you take, actions you make will be interpreted in a way that are not what you thought they

would be or what you meant they would be. for instance, some of the actions you've taken were interpreted as anti-business, domestically, in the united states. and as someone just mentioned, some of the actions taken by the u.s. government that you represent as well were interpreted as sacrificing other countries' interests for america's own benefit. so you find yourself constantly being interpreted in a thousand different ways. how do you address these interpretations? >> with a wonderful press conference like this that give me the opportunity hopefully to provide my own interpretation. but, look, you make a valid point. we live in a connected world. everything i say, everything my administration does, anything one of my aides does is interpreted in one fashion or another.

in america we call it spin. and there's a spin cycle that is going on 24 hours a day, seven days a week. and i think that in this media environment, it is in some ways more challenging to make sure that your message and your intentions are getting out in a consistent basis. but i think that if i'm consistent with my actions and i'm consistent with my goals, then over time hopefully people look at my overall trajectory and they can draw accurate conclusions about what we're trying to do. with respect to business, for example, we've had in the united states some battles between myself and some in the business community around issues like financial regulation or health care.

at the same time, i've said repeatedly and i said on this trip, we can't succeed unless american businesses succeed. and i'm going to do everything i can to promote their ability to grow and prosper and to sell their goods both in the united states and abroad. and the fact that the economy is now growing and trade is expanding and the stock market is up i think is an indication that i mean what i say. and hopefully by the end of my administration businesses will look back and say, you know what, actually the guy was pretty good for business -- even if at any given point in the road they may be frustrated. so -- all right, now i'm stuck with this last one but i think i've got to go fly a plane. >> [inaudible] >> right. >> what led your administration to decide to try and extract

further concessions from korea on imports of american beef? and did you miscalculate the extent that this appears to be non-negotiable here in korea? do you really think you can etienne convince people living in korea to buy more american beef? >> well, first of all, beef was not the only issue that was of concern. in fact, a larger concern had to do with autos. and the concern is very simple. we have about 400,000 korean autos in the united states and a few thousand american cars here in korea. and people are concerned about whether the standards, the non- tariff barriers with respect to autos is something that is preventing us from being able to compete with very good products. now, i think that we can find a sweet spot that works both for korea and the united states.

but i repeat, i'm not interested in trade agreements just for the sake of trade agreements. i want trade agreements that work for the other side, but my main job is to look out for the american people, american workers and american businesses. and i want to make sure that this deal is balanced. and so we're going to keep on working on it. but i'm confident we can get it done. all right, thank you very much, everybody. i'm late for my flight. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> now look at some of the newly elected governors.

toward republican nathan deal defeated nation in barns with a 50% of the vote and will take the seat now held by republican governor sonny perdue who is term limited. in the white governor's race, and neil abercrombie 1 with 58% of the vote, repeating the republican lieutenant governor. -- in the hawaii governor's race. >> the senate returns monday for general speeches. then both republicans and democrats will hold off the floor leadership elections. no roll call votes are expected until wednesday, with the first expected vote on the week on the use of natural gas and electric vehicles. other possible boats include bills on wage discrimination and food safety. watch live coverage on c-span2 at 2:00 p.m. eastern. also an ethics subcommittee

meeting on the case of charles rangel. he is accused of 13 violations including failure to disclose $600,000 and assets in a series of inaccurate financial disclosure reports to congress. that is live at 9:00 a.m. eastern on c-span3. >> in an ideal world, the fact that there were people shorting the mortgage market would have sent a signal to everybody saying they are smart investors to think this thing is going to crash and burn, but because of the way these instruments work, you were not betting on real mortgages but unbending on the casino version of a mortgage. >> in 2003, bethany mcclain wrote about in ron in "the smartest guys in the room." sunday night at 8 eastern on

"q&a". >> on this morning's "washington journal," a discussion of whether the expiration of presiden bush's tax cuts which impact middle-class and wealthier americans. this is about 40 minutes. host: he has served time in the congressional budget office overseeing that and now is the president of the political action forum, douglas akin joining us to talk about the presidt's tax cuts. what's your reaction when you hear about possible talks next week about the extension of the tax cuts from the white house and from others associated with the president? guest: first, good. this needs to be resolved. if we let ts drag on, there's a very real chance that they won't be able to change the withholding tables, and that means every american will see a tax increase. so there is some urgency here. it needs to be decided. host: whether or not do the ones for the middle class and the ones for those who earn more, why do they have to be

linked? guest: i think the central issue that we want to have a better tax codes. and all tax reform says lower rates, broaden the base, to delink them to raise rates, keep the artificially narrow base. i think that puts us in the wrong direction. the proposal just put out by the president's deficit culture is bold and what do they say? they want a lot more revenue. how do they do it? tax reform. and i think there's a real lesson there. host: as far as going forward, what do republicans have to do as far as working with the president on this issue? guest: i think they simply have to recognize the economic reality, which is this economy is very weak, it's been growing for a year, but growing aneemically. this is a time to take every policy lever taxes and think about how can it make the economy grow more rapidly, to delink or raise taxes. i don't think anyone should do it. host: going back to the

proposal, one of the things talking about mortgage deductions and things like that. guest: for a long time economists have felt that bsidizing mortgages is bad tax policy. what does it do? it rewards leverage. it says that people who own homes are somehow more deserving than those who rent, and the tax rate is bigger the higher your tax bracket. so it's a long standing proposal of the tax commuths to start of limit or ultimately get rid of that deduction. but it's been in the tax code since we had an income tax and never gone away. so the policies are very difficult. host: in the "wall street journal" there's various proposals about what should be done for the tax cuts. as far as the democrats proposal it says extend the middle class breaks permanently. let the breaks for higher earners expire. the impact on the deficit according to calculations is 12.1 trillion over ten years, and for 2011 those who pay the taxes would pay about $60,000

more in tax. and step back. there's some things to recognize. the deficit and the future deficits are a normsly important issue. you cannot overstate the threat they present to the prosperity of the next generation and our national security. ultimately, our ability to defend ourselves, to protect our vaes around the globe depend on the strength of the u.s. economy. and the mechanics of owing your banker when they don't share your values are not very good either. so this is a big issue and you won't tax your way out. thun of the proposals on the table come close to solving the deficit. yeah can't. even thrrs 3 of spending can you tell us, that's the artsdz tick. the spending promises are so large that you can't grow your wait out, tax your way out. so from my perspective, go on. let's get serious about the spding side of the federal budget. and if you need to raise revenue, you should. have a tax code you believe in

and do it that way. host: that says extend the current tax code for a couple years. it will be a political decision how many. host: for that upper 2%, how many of those that earn in that bracket are linked to businesses? guest: this a question we've never resolved. here are the facts. it was a deliberate goal to integrate the business and the individual taxes so that all income will be taxed at the appropriate individual rate. that was a tax policy objective. as a result, we have trillion dollars of business income reported on individual taxes. of that, about half is reported in the top two brackets. and now comes the skirmish. if you look at one side, they say yeah but it's a small number of businesses. and there are only a small number of returns there. on the other hand there's a lot of income. to my eye, the amount of economic activity to the tax, doesn't matter how many returns. if you're taxing a lot of economic activity you're going to have a big impac on

business. host: the numbers are on the bottom of your screen. what is the american action forum? guest: it's a think tank center right in character, not -- fiscally conservative. the idea was to put out by the government the kind of things that i've been fortunate to run inside the governmt. description of serving time was probably more harsh than i would have said. but those shops relied on policy education and policy advice, policy options on the issue of the moment. they didn't sit back and think until issues came to them. go talk about what's relevant in the moment and do it in a time sensitive and politically inl formed way. politics are involved so write the materials, do the presentations with that in mind. and so it's small, it's nimble,

and 're having fun. host: as far as the issue, as far as how for those in the upper brackets and whatever percentage of the are tied to businesses, wouldn't it be better to change the way taxes on businesses specifically are levied and noto much how personal income taxes are calculated? guest: i think there are two big jeandast and that's part. we have a corporation income tax at odds with our objectives for international competition and for sensie economic growth. and so there's a lot of work to be done there. i think that would be a great agenda. but that should be linked with the personal income tax because you've ended up creating weird incentives. we've had a period when the corporate rate was lower than the individual rate and you saw the dentist incorporate themselves, put the whole family on the payroll. you don't want to do that. on the other hand, if you let the personal rate be lower, you get the corporations dissolving

themselves and turning themselves into these pass-through entities. so you have to do both at the same time to make them work together. host: to calls, bethesda, maryland you are first. good morning. caller: good morning. i'm just wondering, how is it that the tax can you tell us are going totimulate t economy? they've been in ace for ten years. while we did have a housing bubble, i don't see that they did much more the middle class. guest: it's a good question. i don't think the way to formulate this is stimulus at this point. i think that word's been ovesed. it's appropriate when the economy is falling and when there is a need for extraordinary government intervention. we've seen that. at was certainly true back at the end of 2008. but we are now in a situation where we have an economy that's growing too slowly. if you look at the elements of that economy, the opportunities for growth, house hodes are unlikely to drive this

recovery. they're strapped with debt, their houses aren't worth what they used to be. they're saving a lot more because they need to and that's desireable. our governments in a comparable situation. every locality, state government, federal government is bleeding red ink. and so there's one and only one part of our economy that's finally capable and in the position, that's the business seblingtor. smaws businesses are part of that. so the logic says let's not make their environment harsher. let's not raise taxes at this moment. let's try to get a stronger economy and take care of our prlems by spending on the spending side where they really begin. host: phoenix, arizona. michael. caller: yes, sir. i'd like to ask what do you think about a flat tax? because a flat tax would take care of the personal versus corporate disparity that you were talking about earlier.

host: guest: a flat tax would do that. there are lots of virtues. but its major flaw has always been that in the end americans do want a progressive tax system. they uniformly almost support it in the end. so you could do viations of a flat tax where the top rate maxes the business rate and then you have a one or two brackets below that. most tax forms have taken that form recognizing the distinctive desire for progressivity. host: will there be work in this lame duck session? how does the house leadership now that it's going to be under republicans change the discussion? guest: they'll have to simply figure out what to do with the existing tax code. the times time isoo short. there's a lot to get done. so i would expect a straight out extension. going forward, i think the ball is really in the president's court on deficit reduction, tax reform. big issues the president always

lead. democrats still control the senate and the white house. republicans have an obligation to stick to their principles and to be relevant to the american people. it is not -- they weren't sent there to pursue an ideological agenda. they were sent there to govern well. my hopwould be that the leadership recognizes this. i think they do. and what they'll do is look for years where they can work with democrats and the president to move this country forward. host: cutting spending? caller: that's an imperative. we've heard you can't do it people reflect it. but the reality is we have to or this country faces a serious long-determine decline or an imminent financial disaster. so cting spending is going to haveo be the new normal both sides of the aisle have to get ready. host: should everything be on the table? guest: it has to be. host: start wrg? guest: anywhere you want host: where would you think? guest: social security reform

don't change the outlook quicy. it is not about current. it's about our children and what their future will be. so that's something you don't have to do with great haste. i do think you should begin by not making the problem worse. so, in my view, the recent health care law is an absolute fiscal disaster. setting up two new entitlement programs where we have broken medicare and medicaid systems is a step in the wrong irection. and i certainly think the annual appropriations in defense and nondefense. host: in health care, do you see repeal possible? guest: no. but that doesn't mean that those programs are desireable in any way. i think the political reality is the votes aren't there for repeal so this is going to be part of the longer term conversation, if you will between democrats and republicans. host: iowa, independent line. pat, go ahead. caller: yeah. this taxing of the 250,000

dollars or more, the republicans are saying because of the rough times the tax breaks for the rich should be extended. if you're making $250,000 or more, you're not having a hard time in today's climate. so why shouldn't they be taxed? guest: ultimately the question is, who pay that is tax? if that tax on someone who is in your view affluent and doing fine is a tax on o a small business owner and we raise it and their decision becomes, gee, i'm not going to hire a worker. or, worse m going to lay someone else, they're not bearing the burden of that tax. that tax is being shifted on to someone perhaps of very modest means. so the key here is to make sure that maultly the economy grows and grows rapidly. that's an imperative. we never balance the budget without rapid grotes. we don't provide real opportunity to people. there's no opportunity in a tax credit, there's opportunity in a job. and that's what we're missing right now.

host: iowa, republican line. karen, thanks for waiting. caller: the democrats have found another villain and the villain this time are the rich people. last time it was the private insurance companies, and the list goes on and on and on. the truth of the matter is they have passed some huge legislation that -- such as obama care andles i.r.s. so they can collect penales for people that aren't buying the health insurance. and any time you have government jobs you've got -- they make at least a third or half again what the private industry makes. i think we need to cut down the cost of the jobs. let the government jobs come wn to what private business makes and private individuals make. and the same with the benefits. let congress cut their wages. they're making $174,000 a year.

one final comment i want to make, i was watching the democrats and they complain that the rich people don't spend the money, they save it and they don't need it. so if you don't -- is that how we're going to start tangpeople? you don't need the money so we're going to come take it. i thought that was called stealing. if i go to myeighbos house and i see something i need and i take it, that's stealing. they are stealing from us. is wrong and i'm tired of the mocrats. they need to quit villifying people and businesses and all the things they're doing. it's chicago style politics and i am so tired of it. guest: one of the lessons i learned is there's nothing more animating in politics which is fear and anger, so one of the things that is central to this debate that is very difficult to convey is the notion that we need to save more as a nation. there's no question about that.

that's been the source of a lot of our problems, international borrowing to fund both our household borrowing and our government borrowing. but at the moment, the fear that if people save we're not going to get cash into the business. so the trick is to encourage the business sector to pick up the spending because they've got the cash while the household sector actually heals itself. that would be incredibly desireable. and the second thing, it's frustrating for me. i ran the budget office. you look at both sides of the budget. we have these discussions of fairness that have two qualities that i dislike. the first is they divorce the tax fairness from the spending fairness. in the end it's the net transfer that comes out that maers. the second is this motion of drawing lines. i've never understood why you want to draw lines in a society. we've always been characterized as an extraordinarily diverse nation that manages to unify. drawing lines is at odds with that. and it's never struck me as

sensitive or helpful. host: what about the caller who brought up the means of protecting profits? guest: i'm not sure i understood it completely. but the problem is an important thing that has built this economy. so i think the notion that you want to sort of somehow attack profits is wrong. but at the same time, the vernment government can't be the source of prots. profits should come from the ability to compete effectively and deliver value to the american families. that should be the goal. host: you are the president of the action forum. guest: yes. the forum is a conventional ink tank. we're about ideas. we'ra not for profit, tax exempt. and we do ideas. the sister organization, advocates for those ideas. it runs ads, it has a public education function. and so any ideas we generate that they think have merit they can pick up and try to sell. host: how are you funded? guest: by a combination of

individuals who believe in the vision. some trade orgofferingsaces and corporations. sort of croods the board. anyone who is in washington that wants to give money, i would be happy about that. host: good morning, go ahead. caller: good morning. nice to see you. thank you. i was going to say, to go back to the old tax rates from ten years ago when bush was a reblican congress they went to reconciliation for the tax cuts, isn't it true that he started two wars and cut taxes at the same time? wouldn't it make sense to go back to that point? because after all, he did have surplus. there was a balanced budget when he came into offi. this is two simple things. just go back to the tax rate d tell the american people,

he will, we had two wars, and a ax cut at the same time. it doesn't make any sense. thank you. guest: well, thanks for getting up so early in l.a. to have this conversation. the reality is that you can't unwind the clock. and if you look at the budget outlook, in the administration's budget we run deficits that are never smaller than $700 billion over the next ten years. they're rising at the end of ten years. and $900 billion is ierest on priest deltted. we're getting a new credit card to pay off the old one. that's very dangerous as a nation. and that's a budget in which the wars are assumed to have gone away, a budget in which the chi is assumed to have recovered. so it has really not a lot to do with our history. it has to do with our future. and those budgets also include raising the tax rates at the top. so there's no solution to the problems we face now and looking forward as a nation

that involve pretending we can go back to owe. we're just not in that world any more. we're actually in a much more dill world and we're going to face some decisions. hostn-mail asks. guest: i think this is a tribute to just how bad our corporate tax is. we have both a very high rate, 35% which affect deessigses about where to locate profits and firms l locate profits in low tax jur diagnoses if we can, and we have enormous features that allow some companies, particularly fast-growing ones like google that rely on intellectual property, their patents and their particular software, to avoid a lot of profit. so that's screams out we need to fix this. and what our tax code has den

-- done is gven a big incentive for headquarters to end up overseas. so no firm is going to locate in the united states. and the second thing it has made the much more desireable for the r and d to go offshore. and when that happens the manufacturing goes offshor so we're add odds in two ways. we have the highest rate and we're the only country left on the globe that tries to tax on the basis of worldwide profits every year. every couny has switched to the situation of what happens inside their jurisdiction and doesn't attempt to tax the otr side. i think there's a lesson there. if you're the last one swimming against the tide, you've got something wrong. host: can you further explain that so a company located in the united states and they're multinational they pay taxes on u.s. activities and other jurisdictions on what they do over there. so what we guest: guest: if we have a company in brazil competing with the german company, the german company pays brazilian taxes. the u.s. company pays brazilian

and u.s. taxes. we lose. host: what should be done as far as capital is concerned? guest: i would prefer a system where we wte it off the year you acquire your capital. that's a big invest ynt incentive. it gets rid of a lot of complications and the gaming that go on just nice and simple. host: instead of depreciating guest: yeah. why do you need 35 years worth of records? host: madison, wisconsin. is next. inpendent line. guest: thank you for taking my call. i just find it hard to understand how the republicans are being allowed to take this naative that tax cuts equal economic prosperity and job grow. if this were the case, where are the jobs and where is the economic prosperity for the tax cuts that have been in place for the last ten years? also, if congress was really

interested in handling our deficits and wanted to produce job growth, instead of arguing over tax cuts we should be together focused on opening up markets overseas like in china and india to produe these jobs. we are in two wars, we have a big deficit. we need to make sacrifices. there are people in iraq, afghanistan making sacrifices. why is it that rich ople don't want to make sacrifices for this country? we have a count bri where it has allowed the best and brightest around all the world to come get rich and nobody wants to pay for ig anything. nobody wants to stand up and come together as americans. and i just find it hard to believe how going back to republicans controlled congress is going to help this economy in this country when we've been there, done that, and there's no job growth. can you explain thato me? guest: i think the first thing to recognize is it's not just

taxes. and anyone who says that only taxes determine how the economy per forms is misrepresenting the facts. there's an enormous amount that goes into a successful economy. at this point i think a great point of agreement between republicans and democrats is the need for big education reforms so that the most important of the economy, the american worker, has a chance to compete on the global stage in the years to come. and i would agree on the importance of opening markets. 95% of the world's consumers are outside the borders. that is where the future growth in part will come from and we need to be there ready to capture those markets and we're siting on the sidelines at the moment. i think that's extremely detrimental. job growth is being hampered by realities. the reality is we had an enormous financial crisis driven by a financial bubble that is a bipartisan creation. after that we saw a big recession. histy has shown that in the aftermath of such financial crisis, growth is often slow,

recovery is protracted. you're not back in a year and a half, you're back in three, four five years. so we face a future in which it's going to be a real challenge to grow rapidly. that's why i think everything we do, our infrastructure policies, our spending policies are across the board and our tax policies included have to be focused. ho: what's the i guess, how do you think he'll do on that guest: it's a real challenge. he has a very mixed record on trade. he ran openly talking about reopening nafta and being against that trade agreement which was a great way to unify north america. he is now talked about a national export initiive, doublinghe exports in the next five years. but we haven't seen anything concrete in the way of passage with trade agreements that would support reaching that. and i would hope that would happen. that would be a tremendous step in the right direction. . .

guest: everyone said i want the global economic pie for me. host: but there was agreement ago when in at the height of the eye into crisis. some newspapers talked about how companies got together and started putting together principles. guest: in the crisis, it was easier. in a crisis, the fear drives a lot more agreements. the agreement was about the financial sector and getting that right. the agreement about who gets the profit and who gets the goods is a much harder deal to reach.

commerzbank my question is, -- caller: the question i have is why are we trying to cut grandma's healthcare. to me, the villain is the chinese and the indians. why don't we put a heavy tax on beer imports? who has the guts to tell china, "if you do not make businesses over here and help us, we are point to put a heavy tax on your imports and we are going to raise your prices close to the american prices so that we can compete with you. then you will not have a monopoly." we keep cutting the schools and

cutting the police. we are cutting everything over here. guest: on the first part, the reality on the federal budget is that if you look at how we spend our money, we traditionally spend about 20 cents out of every dollar. in health-care costs continue to grow the way they are growing and as the baby boom retires, social security, medicare and medicaid alone will take 20 cents out of every dollar. we are slowing the growth and that is the key. no one is talking about contemplating the eviscerating the safety net. there is a reality that they are going to have to deal with. americans are going to have to understand. trade wars have never served us well.

they are attempting. they do two things. they raise prices for people. the price of imports go up. they get built into everything in the economy. that does not help people pay their bills. we get cut out of the market. when hasting trade wars in the past and they always end up harming -- we have seen trade wars in the past and they always end up harming everyone involved. the government buys up treasuries and it will push down long-term interest rates on everything. it will spare the time. what we can get for what they are doing is trivial. i do not think this is a way -- i would have preferred to see them stick with steady as you go and hold onto any extraordinary measures for tough times.

host: taxes on the independent line. caller: thank you for taking my call. i am against them getting the tax cuts expired. i need everybody in the country needs to be treated equally. as far as other cuts, one of the first things i can see that i have never heard anybody speak of is medicare. you are required to apply for medicare two months before you turn 65. that is even if you are working. with me, i am not want to be able to apply for social security until i am is 67. i would be on medicare two years earlier than i would be on social security. how much money could be saved if they would change that law so that you cannot apply for

medicare until you turn 65 or retire, which ever one comes later? that seems like it would save a lot of money. guest: i cannot keep every number in my head. i do not know the number. it is a sensible observation. it points to something we think about seriously. there is a lot of talk about changing social security ages so they matter how people live right now. if we had the age of retirement comparable to what it was when people started the program, it would be 70. there is a case to be made for raising the retirement age. we would have to do it in some kind of organized way so that all programs work together. right now, they do not. host: someone twitter is saying, "did middle-class incomes decline." guest: over the past decade, one

of the great strategies -- which tragedies has been that productivity gains were eating up health care. it remains an important part of our policy challenge. the middle class is doing well. they played the lead toward the of the income taxes -- they pay the majority of the income taxes. host: john on the democrats' line. caller: the guest earlier spoke about the growth in the economy and it cannot come from the working class. cannot come from the government. it had to come from the capital class. we all know that there is an old adage where it is incongruity

between capital and democracy. it is difficult for the working class to apprehend. it is becoming more discernible. capitalism always seeks ever expanding yields or profit margins. the working class is going to have a hard time realizing that. at one time, manufacturing was here. they had and illusion that they had gains. now the park -- the profits are in the markets and labor is cheaper. to get the mindset that to the reality the gentleman is talking about is quite difficult. if you remember barack obama in his health care forum, i think it was somebody from iowa. they were speaking about health care and barack obama said it

elderly people were discriminated against because they had pre-existing conditions this would be unfair. it almost went to the point where he said discrimination based on income was not ok. if you take away the power to exclude based on wealth and income, that would not exist. host: thank you, caller. guest: this is an issue in the public might try to understand postwar economies. we stood alone of the development -- of the developing countries. it was easy to make money manufacturing. it got spread to honors as well. as competitive devices have close, it has become much more difficult. the manufacturing sector is just as big a part of our economy as

it always was. the pressures of productivity force us to hire fewer and fewer workers. the competitive pressures have made it imperative that they no longer hold onto extra employees. host: someone on the republican line from the -- from new york. caller: every time the american dollar loses value, the rich people are losing more money. they did not have to hire anybody. they are making enough interest. this is the first time in history that you have an american president and the republicans demoralizing the cotry. i was wondering if you can give an permission concerning those

questions. guest: i do not think you can trace economic success to the gao yu of the u.s. dollar. there is serious concern about the dollar's fall and our ability to attract the money we need. i think the leadership issue is clear. it is a lot up here and a lot of demoralization right now. all parties will benefit if we get past that. host: houston, texas on the independent line. caller: the day mr. douglas holz-eakin. the tax cut have done a lot to create jobs. unfortunately, those jobs have been created in indonesia.

our constitution was pretty clear about how federal government should not embrace terrorist. -- bracetarrif -- embrace tar iffs. guest: there are incentives to locate activity outside the united states. that is where markets are. it is expensive to ship -- to ship some goods. sometimes -- something she can do without relocating. it walmart go to china, they have to employ chinese people to do it. good thingink it's a for the koreans to have 40% tariff on our be. we had a korean trade agreement that was sitting out there and was negotiated.

it recognized this problem, but it has yet to be ratified. host: can that help with the recovery the way the president wants? guest: i absolutely. if you build things and build a bridge and employ people to do it, that is the start of the virtual cycle where people can start businesses. there is no question that stimulus had an impact. it he spent one trillion dollars , there is no doubt that it will have an impact. it did some things. no, it did not do all it could have.

guest: it is a heart channel to get to the state government. a lot of money went through that. in the of the structure pieces, there is a long history of public works in this country. in every downturn, we go to public works. the number of shovel-ready products are small -- is small. host: crosby, minnesota. you are next on our democrats line. caller: i have so much to say. i will focus on one thing. as far as the deficit goes and how we spend our money, you were talking about world war ii and the 50's north dakota 60's and how well we did -- and the we did so the 1960's,

well because we educate the american people. people were able to go to callers through the gi bill. our economy boomed because we educate our people. instead of investing in all of these other countries, we need to invest in the people. then i think we will have all sorts of new inventions and new businesses. it will help our economy. secondly, i get an e-mail or grant programs that are opening up through the government. there are new grant opportunities. i see all of these grant opportunities coming out that are doing things in other countries that i think those countries should be doing for themselves. host: caller, thank you. host: caller, thank you.