make the most of our lives so we are not picking winners and losers in government, so we are not reading the system. do we want to get back to a system that is reliable, a system that treats everyone the same, and a system that says no matter who you we don't want the government setting the rules. when one of the rule of law reestablished. that our forefathers and veterans fought for. it is a society that can grow and prosper. america can lead and we can push the bounds of opportunism. and could push the bounds of economic growth and prosperity. the sticking point comes to us in a couple of forms.

one where he'd that gets us and we can -- the debt gets us. another is a to the point where we take individuals in society and we take away their chance of making more with their lives. we don't want a society that is a majority of takers verses makers. to think nothing but of consumption versus taking risks, planning, working, being an entrepreneur. i would simply say that sound money is an issue that has to come back. it is something that people have enjoyed and people cannot take

for granted anymore. [applause] >> next up is my other favorite economist. he also taught at the university of missouri st. louis, and that new york university. he has been a visiting scholar at the federal reserve bank of atlanta and a fellow at the institute for economic research. she is the author of a number of books including the theory of monetary institutions. and competition in currency. [applause] >> when freedom works announced

the schedule of this event on its facebook page yesterday, fans made a number of comments. my favorite red, how the fed has failed? really? in 10 minutes? the fed should stay within the limits of its statutory authority. those of us that think it does not have business in unveiling of the creditors of failed financial institutions and no business deciding which sectors of the financial markets should be allocated. the documents released last week be tailing the shenanigans have only confirmed that the fed has failed those of us that believe in the rule of law rather than central bankers. i want to focus on the big,

historical picture. this is the bottom line based on a working paper that i co- authored. it is available at the institute web site. the bottom line is that the fed has failed on its own terms. it has failed on its own terms based on the best statistical evidence. even if we put aside constitutional objections, it is a failure on pragmatic terms. they have not been shorter. defenders will say, surely we don't want to go back to the system that existed before. there were three major financial panics. but the fed has not made a panic

less frequent. we have five banking panics between 1930 and 1933. it led to the terrible collapse and output of as the great depression. and we have the financial panic of 2007, the worst since the great depression. it has ushered in today's economic woes. defenders of the fed have not abolish financial panics. now they say let's not judge the fed on one mistake because the fed is learning. but how many times will have to say that? has it lowered unemployment or has it increased growth? nell. -- no. but we should not expect the

fed to do those things. it should focus on one objective, and maintaining purchasing power of money. the fed cannot improve the economic growth in any sustainable way. there isn't any rationale to have a dual mandate or a bible a mandate. -- of bipolar mandate. it has that story as we fail to preserve it. silver and gold standard's kept the dollar values constant over the decades. as the guide emphasizes, the dollar has lost 95% of its purchasing power. a dollar today only buys what a nickel bought in 1914. on the blackboard, perhaps, have

not done it in practice. inflation steadier and more predictable under the fed that was under the gold standard? somebody buying a 30-year bond or 100 year bond faces more uncertainty today about the purchasing power of the dollar that investors face of the classical gold standard. the best evidence is that the market has pretty much collapsed. should we give the fed credit for preventing deflationary? not all deflationary is bad. when productivity is increasing and computers become cheaper to produce, that is the kind of deflation we had.

that is when the money supply is shrinking. the fed has wiped out episodes of good deflation. goods became cheaper and cheaper. there have been several episodes of bad deflation. has the output been more stable? as they used to say, to fine- tune the economy, it has not happened. the record is especially bad between first and second world wars. although the statistics used to seem to say that the economy was more stable, the statistics that

we now have things to the efforts of economists that have made improvements to the output measures have no longer say that. one of the leaders, while she was an academic economist before she became the head of obama's council of economic advisers, she has never been a key partyer. -- a tea partier. the measure more widely. but when we had just the statistics, it looks slightly more stable than the post world war two. even if we discard the great depression, his is spying on the

big one. even though today, the economy is much better diversified. we should expect to improve stability if the fed has no effect. the fed has had a naturally stable economy to deal with. in the economy has been less stable. fine-tuning has turned out to be destabilizing in practice. we can try measuring stability in another way. if you read the old recessions' using the old statistics as christina reported in 1999, the average length of recession is one month longer in the pre- world war one area. if we at the recent recession, the case for the fed's failure becomes even stronger.

let me say that the bailout during the recent crisis did not save the economy. they sharply increase its bad incentives for financial markets going forward. i am not saying that we should go back to the system we have before the fed. it was far from a free financial markets. various regulations weakened the banks in that. setting the stage for the three panics i mentioned. congress concluded that the system was broken and a serious change was needed to improve it. instead of trying the regulation, who gave the central bank. today, we have just as much reason to conclude that the system is broken and a serious

changes needed to improve it. hopefully this time around, we will learn from our failed experiment and we will try banking without artificial restrictions and without bailouts. and the commodity money instead of by a committee of political employees. [applause] >> this represents a kickoff on a national campaign. we want to make sure that every activist that cares about economic issues-a copy of the building blocks for a serious national debate as we go into the next congress. of like to ask the ceo to come up for closing remarks.

>> i just want to say how thrilled we are to see this conversation moving toward public policy. the history of our organization is intertwined. it is been rediscovered because of a business cycle theory explain some much. our guide to sound money that we are releasing today has a " on the back that bears repeating. of those that wish to stop the drift of increasing government control should concentrate their efforts of monetary policy. to many of us that believe in the cause of limiting government ignored this urging of the topic of sound money. one was to revitalize and bring

more attention to the academic conversations of looking to the as back toward south money principles. and the organizations and scholars that are connected to the network, a loose confederation of think tanks that believe in protecting individual liberty and limiting government. one great example is this partnership of publishing a guide to some of the money, getting it distributed. to be including academics in this have been involved in various aspects of our project. i am very excited to see where this is going to lead. hopefully, public demand and political will will address the hard questions. anybody who cares about this

topic to go to the url soundmoneyproject.org. you can download it in its entirety and explore ways to collaborate with us and support the educational work atlas has been carrying around. i will also do a quick plug for freedom works. please join me in thanking freedom works and our distinguished panel of speakers for this event today. [applause] >> of was of the the words has died of cancer. the wife of former presidential candidate was diagnosed with breast cancer in 2004. family friends say she died at her north carolina home this morning.

in a few moments, and urban institute forum on deficit reductions. in an hour-and-a-half, president obama's news conference with congressional republicans on extending certain tax cuts. after that, more about the tax deal with senate leaders. and we will re-enter the discussion of the federal reserve and the economy hosted by freedom works. next, a forum on reducing the deficit in a changing the tax cut. and former members of the earlier deficit reduction groups. they also have had the tax cut agreement. >> why don't we get under way

here? i have the president of the urban institute, and i want to welcome all of you in this room as well as those of joining us through c-span to this first tuesday form which will focus on the revenue enhancing components of the various proposals that have been issued over the course of the last few months. the various commissions have been charged with looking at the fiscal situation and how we might reduce our deficit and slow down the explosive growth of the federal debt. as you all know, yesterday the president and the leaders in congress released an agreement not to raise them or reform the tax code.

the deficit have spoken clearly with one voice, and as the economy strengthens, we have to go -- this does not seem to be the message that has been heard. hearing what i regard to be the call from various commissions, and political system has decided to celebrate this consensus was not in need to diet and but another heaping plate of desert. it will be a desert for all, no matter how overweight we might be. it will come in many flavors, and income tax relief and estate tax relief.

and business tax relief. there will not be much dessert served here today. we will focus on the components of the deficit commissions reports that call for revenue enhancement and tax reform. we have a terrific panel here with both expertise and relative experience to talk about the diet yet to come. i will introduce them in the unusual order because there is what we used to call interlocking directorships here. various people serve on various commissions, so to get it sorted out correctly, you have the floor and that is executive director of the national collection of responsibility and reform.

previously, he was ceo of the leadership council and served for eight years in the clinton white house where he was chief domestic policy adviser and director of the domestic policy council. alice is now a senior fellow and the economic studies program, but as you all know, she has had virtually every important budget position. she was the co-chair of the bipartisan policy center taskforce. she is also the member of the commission.

she served as the vice chair of the federal reserve board and was the director during the clinton administration. for the purposes of those of us that are here in washington, she was the chair of the district of columbia's assistance authority. and started her government career as the assistant secretary at the department of health education and welfare for planning and evaluation. there is an institute fellow here, and holds the chair in public policy. he was the co-chairs of the national academy of public administration and national research council's for the fiscal future of the united states.

this is his report, and for full transparency, i served on his commission. this is alices report. this is bruce's reports. now we have full transparency here. rudi was also a director of the congressional budget office, has been a resident fellow and the assistant director for economic policy as well as a deputy assistant secretary. donald is the director of the urban brookings tax policy center here. and is a member of the commission. we put them together here so they can conspire or defend each other. he served as a member of president george w. bush's

council of economic advisers. and was the deputy director and acting director of the congressional budget office. we have three people here who have been part of the congressional budget office. donald has been a senior economic adviser for the council of economic advisers as well as a member of it. he also served as chief economist for the joint economic committee. last but not least is our moderator who is a resident and a fellow here at the tax policy center. and the writer and editor of a fiscal policy log. he was formerly a senior correspondent for the washington bureau of business week. he is the author of caring for

our parents and a frequent writer and speaker of long-term care issues. let me turn it over to howard can't get the discussion under way. >> i guess i was the only person up here that did not serve on the commission. let me start with a very basic question. the charge of your commissions was deficit reduction, but you'll chose to also look at tax reform. i wonder if -- if each of you could talk to us about why you tackle that as well. >> with the scale of the deficits we faced, we concluded we will have to do much or then -- how much more than tinker with the margins.

we wanted to start a serious adult conversation. you have to leave behind the toughest things and the mess that we made over the last 25 years. we also felt that it was an area that was right for bipartisan discussion because there was a lot of common ground and not liking the current code. an interesting opportunity that developed over the course of our deliberations as the republicans made the point, and it dawned on them that the spending problem was not limited to discretionary spending. and the only have $1 trillion coming in every year.

the longer that discussion went on, the more conservatives and progressives said that we had to sweeping change and that the only way to put together a package of spending cuts and additional revenue was to overhaul the existing system which americans have no confidence in and with good reason. >> most of your options could be defined as tax reform. why did you go that way? >> those of us say that the budget mess is one that you can't really get out of without additional revenues. it is hard to believe that we can persuade conservatives to go along with additional revenues unless they can be shown how you

can do that with marginal tax rates. you can get those lower marginal tax rates by getting rid of all of the tax expenditures members referred to. it is very hard for me to imagine raising revenues just by raising rates in the current system. it is such an inequitable and inefficient mass, that it would just intensify all of the problems it creates. i know it is hard to create sympathy for rich people, of people say it wasn't so bad to have a 39.6% raise. since then, you have got to remember, we're going at 3.8% as a result of health reform.

but the income relating to parts b and d premiums under medicare. there is a crazy structure rican at one penny to your income and have to pay $1,000 for the premium. it is another 3% tax rates. we're talking about social security, so i think we have to be careful about doing it to vigorously or we will push them into a search for tax avoidance schemes, probably some tax evasion >> the bipartisan policy said it was probably the most well-developed tax reform proposal. why did you go down that road?

>> for all of the reasons we have stated, i am not going to defend the rich here, but one of the things that is not realised by people -- it was riddled with provisions that disproportionately benefit the upper income people. we blow up the system and start over so we don't have upper income provisions.

let's start over and see what happens if you get rid of all of the deductions, exclusions, etc.. and you can bring the rates down very far. but there are some things you want to put back in. clearly, a provision likely eitc, only better. a child credit -- there would be good reasons. want to preserve those but not

in a way that is disproportionately benefiting the rich. in this plan, there is a lower level. and that means that everybody who owns the house could benefit from the mortgage interest reduction because it is not a deduction. it is a credit. it would go to non-itemizes as well. this enables the tax rates to come down and be more simplified. we ended up with 15 and 27. and a much more progressive tax

system. we did not think you could raise enough money to close the the back of that alone. we also added a broad the sales tax. >> what was your thinking as a member of the commission in terms of tax reform rather than saying just to raise taxes? >> we will characterize different folks in the room, tax expenditures are a large problem and there are more holes than you think. once you recognize that, you realize there is an awful lot of money to play with anything about budget issues. there is room there to try to improve the tax code if you could afford.

in dealing with our budget channels. what ultimately led by the bumper sticker name, it is a little -- while we can understand, bad things will happen to us. that is a hard sell in -- some circles. the strategies were doing that, we are reducing the rates at which a government is using to drive the decision making.

and for a category of folks, the effects would be to make it much easier for them to file their taxes. they might be able to get a form from the government and it would be much more simplified. there is interest in having it go along with the plane. if that is not a mixed metaphor. >> in criticism i hear on the left is, why on earth are we cutting tax rates for rich people we're trying to reduce the budget deficit? have a nobel prize, but the answer is very simple. we may be cutting tax rates, but we are not cutting taxes for rich people.

i don't know where you get that. [laughter] upper income people would actually pay more. >> hours was distributional a neutral when it started. it would get slightly less progressive, but you can easily fix that. licet average tax rates about the same throughout the distribution. >> there are a lot of misunderstandings. we look at the wealthy americans that pay an effective tax rate of 16%. we extend tax rates of 35. the richest people in america at page 16. we have a system of expenditures and loopholes.

you can avoid most of the taxes that you have been asked to pay. our plan is also distributional a neutral. that is one of the bottom lines, that we maintain or improve productivity over the current system, and everybody ought to pull their weight. >> is one of the reasons why the upper income people ought to be unhappy, a new system would tax capital gains and dividends as ordinary income. they tend to go to upper income people. >> we are sort of focusing on the tax elements, but talk a little bit about productivity more broadly.

that had to be part of your discussions as well. >> there is a fundamental flaw in how we are looking at it these days. of the various commissions have produced a distribution table that show how much tax increases will affect different groups. compared to current policy, and similarly with social security reform, you look at how different income groups would be affected. it looks like everybody is going to get hurt. the whole purpose of this exercise is to prevent the economy from getting into deep trouble. what we should really be looking at is how do these policies compare with a situation where we would go into a fiscal crisis? how they compare to a situation for we are saving be brought on

savings with continually lowering our growth rate. we don't do those things because we don't really know. if you look at ireland or greece and what is happening to the populations there, they're getting hurt across the income spectrum. i dunno if it is a progressive or regressive, but when you get to that point, people are really hurting. we should be looking at the distribution tables as everybody benefiting to some degree. >> and did you think about that in terms of progressivity, home of the distribution of all of the tax spending as well? >> and certainly in the terms that he just suggested. i am one who believes that we are facing a high probability of

a grave threat to our economy. when orn't know exactly what form, but if we have a big spike in interest rates as our creditors lose confidence and a plummeting -- the dollar, we have a recession that would make this one looks rather trivial. and a plea to the el that is very bad for a very low income working people. it could be a lot worse if we were in a prolonged recession was very high unemployment. that is certainly one of the possibilities. i think that is what needs to be held out against the distribution of the cuts or tax changes that are made.

[inaudible] >> is there something in the tyranny of the distribution? >> your manager what you measure. one of the things you discover if you look at our tables, you will discover that our tables have a lot of numbers on them. a lot of numbers. you think you will discover

seven tables. one of the reasons for the growth over time is that different people have different perceptions about the right way to think about progressivity. and we want to try to provide all of the possible ways to look at that. and it is off to the races as people pick and choose. one of the challenges, if you're going to measure changes, you need a baseline to measure the change. people differ dramatically. we want to do it both ways. >> this has generated allot of questions. too much in tax increases, too much in spending cuts.

talk to us about the starting point for the president's commission. did you start, or did just evolved as you were looking for proposals? >> we looked at physical consolidations around the world. most of the studies suggested that they rely are more heavily on revenue. for understandable reasons, the spending cuts tended to put more of the weight, and it does that in part because when you are in a whole, it is difficult to tax your way out of it. there are plenty of people that want to do 50-50 on this fear that republicans were at 100 percent spending

[unintelligible] that did not make any sense to us and did not strike us as an accurate reflection where either the democrats are the republicans -- we tried as best we could to have a balanced package that was on the scale to solve the problem that could command a broad swath of bipartisan support. and have some track record based on what other countries have done that. >> and did you start with a ratio and work from there? or was the ratio what it was? >> we started with spending cuts. that was my republican colleagues's influence.

he said, let's see how much we can do on the spending side. i think he was disappointed. what we put together and what seemed like a quite drastic freeze in discretionary spending and cut from other kinds of programs, it did not add up. i think it was in his head. we're going to have to do more on the revenue 5. the tax expenditures are just huge.

and they have a different distribution that expenditures. the reform of the tax code seemed to be a way of really getting active expenditures in the tax code. so we ended up, compared to the president's commission, a somewhat different balance. it was less aggressive discretionary spending and more tax increases. how you count tax expenditures? and how you count interested? if you count interest as spending, you have a huge opportunity to cut businesses.

the reduction in interest comes from both the spending side had the revenue side. interest almost has to be shown separately. new revenues, they're quite long. >> we will stop for just a second. could you tell us about tax expenditures? we throw the phrase around all the time. what are we talking about? >> the basic idea of the way they are computed today is that you look at the tax rate structure and to give it some -- the sort of imply.

and any opportunity to deviate from the basic -- any opportunity to deviate is called a tax expenditure whether it be a deduction from income. a lot of conservatives object to that. why should the income structure had been given primacy? what about a consumption tax, for example? i think the basic point is that we have these provisions in the tax code that really are in expenditures in drag, as it were. the focus on very specific things like research and experimentation. they give you a tax deduction if

you undertake certain expenditures. they're all all sorts of things like this in a tax cut. i think most of us know what we mean when we are talking about tax expenditures. but what they used to say about economic statistics, he should not be able to use them without a prescription. i think the same about the tax expenditures. >> you have a number of elected officials that of like the idea of tax increases. you said that there was some sense that tax expenditures were different. tell us more about that thinking and how you can get from there to where you into the? >> republicans have spent a lot of time attacking the notion of

appropriations earmarks and wasteful spending. it dawned on a number of republicans that we have a tax year mark problem as well. there are only $16 billion worth of earmarks. i think that got under their skin. the other thing is that any true conservative has to look back with pride at what ronald reagan did. most studies suggested that they generated an additional percentage point of economic growth. having there is genuine enthusiasm for the idea of scrubbing the back and broadening the base, dramatically lowering the

rates, and generating economic growth that would allow us to stave off a future rate increase and maybe eventually cut taxes further. >> it is your sense that we can productively look at tax expenditures? and address them in the same way? >> at some point, yes. i think different people have different reactions. this is one of the topics we're depending of the audience or the mood of the speaker, he characterized it in different ways. while it to be a little more red meat about it, who called and tax breaks. i can also call the loopholes and special interests. i refer to them as the mortgage interest reduction in the local tax reduction. there are a set of issues about

these things do look like the tax code. the extreme would be a tax credit to put solar panels on your house. that is something that we choose to of the men to the tax system. it is an encouragement to how it is intended the beginning of your mood. it seems to not have a big effect of the housing market. they will call it a tax expenditure. will call at the favorable tax rates for capital gains and dividends. those are a difference in kind. they are on the list because they are a deviation of what the standard income tax would look like. it would be the issue of that double taxation of income as earned by investing in corporations. there is a whole debate about whether that is right and whether that is wrong.

you could argue for a tax policy reason, not necessarily running through the tax code reason. >> it is fascinating that these proposals treat it as ordinary income. it has gotten surprisingly little discussion. what do you think about that? >> power commission did not. we had differential rates. from my past history, i have been both philosophically and practically an advocate of a progressive consumption. i think it makes much more sense in going back, the seventeenth century argues it is better to tax people on what

they strike from the economy as what they do rather than what they contribute. it is difficult to define capital and come. you have to deal with these peculiar thing is called capital gains that are only sort of a voluntary tax. realize that every year. i think it is difficult in the income tax system to decide what the tax should be for capital gains. it is one of the things that allows warren buffett to pay a lower tax rate that his secretary. basically, i am not sure there is any right way. certainly, taxing the ordinary

income makes the system of lot more progressive. >> plea came to the conclusion that simpler was better. the biggest advocate is ordinary and come into the commission was the ceo -- bring down the top rate, bring down the corporate rate, and you will end all kinds of funny business that goes on that is inefficient, that leads to all sorts of distortion, and the capital gains rate has been 15 now, it was 20 in the 90's. the economy is not necessarily doing that much better. we felt that if you had load top

rates and low corporate rates, [unintelligible] >> i go with that explanation basically. i think that the evidence that when you have capital gains at a differential rate, you have a lot of resources flowing in the things that wouldn't attract the resources if they were taxes like everything else. it is nice work for tax lawyers, and they are fine people, but i don't think it is a useful thing. >> i am really struck by how much these proposals have in common. we're going to focus on the areas where they differ.

one of the real and important differences is the president of the commission decided to fix tax revenues as a percentage of gdp. i wanted to ask bruce, why did you pick 21? why was it better than 20, 23, or 22? and why did you fix a percentage of gdp at all? >> in the absence of any action, it will be team at revenue. -- at 18 at revenue. we certainly could not afford to go to 20,000, it would be very difficult to get to 18 and 18

or 19 and 19. we felt that spending was the place to start. the republicans made a compelling argument that in the past, when the tax increases came along, the cuts never quite followed because the need for fiscal restraint which is just around the corner -- who was just around the corner. we wanted to put the cup lid on spending. we saw 19 of 21 would be in heroic achievement. we have crossed the 20 mark once, we felt it was the best

area. it took a lot of work to get spending in that neighborhood. we thought it was more important to have those lines try to converge at a relatively low level. this challenge is not going to go away. to be on easy street. if we settled into a high level now, we're going to be in a world of hurt. >> if tax rates get much higher, they won't stand for it.

has that changed? have we reached a different plateau? >> i don't know. [laughter] it is probably a feature of old age. it varies between 17 and 19%. [unintelligible] i can't explain why that has happened. i don't think that is how you should think of it. you should think of a government that 21% of gdp that is terribly wasteful and inefficient. it does things that we all like. i think that is the way you should take about it.

what do we want government to do? once you settle the expenditure side, you have to decide how to pay for it. . .

that combination is going to drive our spending up over the next couple of decades even if we are very successful in doing everything to make the held delivery system more efficient.

everyone who talk about smaller government avoided talking about social security and medicare and even medicaid. i just don't than that they realize if you go one doing those things that you want the government to do, it will cost more over the decades. >> does it make sense to try to fix tax revenues? >> we need to figure out what we want the nation to do and to

figure out a reasonable way to do this. if you take the projections as we have them today, because of the rising health-care costs, you will be on a rising trajectory of spending. and there is not a magic number. at what point does the economy fall, the reality is that there are no magic numbers. then just to drive home the point, it is and not just about the size, howl you are getting value for your money. whenever i talk about the budget, we talk about spending a certain amount and we take in a certain amount. because of tax expenditures, those numbers are very squishy.

you would need to look at of the tax expenditure and the sea which we are actually spending and then have an adjusted number. >> i think that there is a concern on how the conversation is going in europe and in ireland. there is a great reluctance to talk about specific programs. we talk about freezing silva service pay or the tensions that are at the center. in the non-defense area, we don't talk about what these things we're doing to the civil service and what this will do to

actual programs. >> how will we pay for this? it is interesting that the commissions came up with a slightly different approaches to doing this. the commission chose a value added tax. there was a number of different options including a consumption tax. this is radically reformed the still basically an income tax framework. did you consider a consumption tax and why did you decide not to use one? >> we do have a modest energy tax. we look at consumption taxes and some intriguing plans including

had a plan which transforms the income tax system and its red of income tax to over 100. >> the u.s. senate took a vote and it failed 85-13. we did not see much prospect for getting 14 votes out of the commission. i think said there was run -- there was an insurmountable hurdle for a number of the mortars -- the members including some democrats, including how to get there from here. in theory, we are starting from scratch, would lead to what the

consumption tax? probably. from the republican standpoint, a turning point in the deliberations without a tax group meeting. the commissioners were not primed for the answer. he made the case for a consumption tax and it caused a bit of a stir. one of our cochairs said that we are not a god damned --

commission. for the republicans to ended up supporting the plan, that was a seminal moment that ashley the purpose of this exercise was not to be a camel's nose under the tent for some kind of a new tax law was the best way with the broadest bipartisan consensus to cut spending. >> first of all, we did not call it a vat. one of the most articulate members said that if you call

this a national sales tax, i am for it, if you call it that, i am not. which saw in the consumption tax and energy tax, once we realized that we live to our tax plan, it was not going to raise enough to solve the problem. we were going to have to add another tax. so, there are strong arguments for a carbon tax, broad based energy tax of some sort. we talked about the arguments for a broadbased consumption tax which i think our major.

personally, i would be in favor of shifting to a more progressive consumption tax but i don't have a clue on how you get from here to there. we do know that a sales tax is possible. every country does this except for us. we ended up adopting for the debt reduction sales tax and we rejected the energy tax not because a lot of us did not like that but because we did not want to have two new taxes. ithe energy tax is not raise enough money.

>> for the record, i recommended a progressive consumption tax. along the way, -- and we did raise the idea of that as a possible option. we will tell you without violating the fact that we are in a closed room that the spirited reaction was for both sides of the i/o. this was by no means one or the other. when pressed to recommend what i prefer, we prefer it that way of taking the income tax and turning it into a progressive consumption tax.

my personal hierarchy, if you will raise more revenues, this would be like we all talked about. there is a whole host of things that we can do to make more money. the next thing you do are the energy taxes. carbon tax, gasoline tax. then you see where you are on spending, on revenue. if in fact when all is said and done, it will be higher, then the three letter acronym is used.

they make sense if you want to have a significant chunk of revenue but you don't want to create a is that and only create one% of gdp from it. >> each of the panel says mention the question of how we get from here to there on a consumption tax. rudy spent a number of years talking about this in a lot of detail. based and your experience with a the tax plan from community, can we get from here to there? >> that is a huge question. this becomes a more complicated question. they have their own ideas in

terms of certain things that they wanted to favor in this system. they were strongly in favor of having signed vanish from municipal bonds. -- in favor of having an advantage from municipal bonds. the rules are hopelessly complicated. this is impossible to explain to anyone. if you want to do it, you just have to do it t. >> let me take a break from asking questions and get you a chance to ask a few. please introduce yourself and

make the questions questions and not speeches. >> i am with the coalition on human needs. r.e.m. did the concerned with what the fiscal commission did in relation to discretionary spending. i know the first round, commission said let's get to all 8 but in the second round, it was actually moved. at the rate we're going, if we don't do the appropriation bills in this lame duck, there will be a push by the republicans in congress. i appreciate that -- has come up strongly saying that this is too

deeply cut. and the other hand, there seems to be a little push. there seems to be very little in it is on the side of house republicans to do anything that calls for a tax increase. i want to know what people think as we are talking about, well, we will do this tax reform and so forth. what is the likelihood of this happening because the like -- in the meantime, the spending cuts are piling forward. o >> we were heartened by the broad bipartisan support that we thought. to have a plan that is embraced by dick durbin, a progressive champion.

there is a lot more room to get this done in this town and we can possibly imagine. white could such a broad spectrum of members come out for a plan with as much tough medicine as this? because they are genuinely concerned about the state of the country if we don't act. that will be what forces us to take action. i take slight issue with your characterization of the domestic spending cuts. it is true that we have a very tough discretionary pass by you have to look at the whole picture. what house republicans have proposed are deep cuts on non- defense discretionary spending. what we said is that we need to

be tough on spending and we need to be fair. if we don't do this, this will put more pressure on the non- defense discretionary spending than anything else we can possibly do. those programs will come out a lot better off than in the conservative plan. >> you did have house republicans members on the commission who did not support the vote. it was interesting, they said one of the reason was health care and not taxes. did you get a sense that there is -- on taxes? >> one of the frustrated things about the tax debate, the economic debate throughout that

time has all been about raising taxes, the threat that democrats would raise taxes. taxes have gone up three times since then. we spent 25 years debating the threat of higher taxes. one of the reasons that i think whether you like the number 21 or not, the notion of a cap on revenues is that in the same way a cap on discretionary spending takes away on the debate of what he will spend and you start debating on what you will spend, you need to have that debate on taxes. the way that republicans tudor package when this was clear that this was not a slippery slope,.

if republicans gen menu believe that democrats were willing to hand spent -- hold spending down and democrats generally believed that democrats -- the republicans ruling to have a balanced budget, i think that we can get there. >> i have been talking to is a very conservative people about this. to the extent that ec give on the revenue side, that goes back to this notion that so many of these special provisions are just expenditure programs. you will see the conservative side willing to give on that

point. >> whether something actually happens in the next few months depends on several things. first and foremost, on where the president is and you will see that in his budget and in his state of the union. if he comes out strongly for tax reform of some form, then i think the chances are enormously increased. the other thing is that i don't think of the house republicans know what their bottom line is that the moment. they're trying to figure out what being in the leadership means and they are jockeying for position within the group and a reading too much into the post campaign pronouncements.

>> we want to come back to this political question but we will wait until the end. >> have the agreement with congressional republicans about the tax rates might affect making this a top priority in the next congress. >> as a member of one of the commissions, i think that one of the sweetener's that was in the proposal dealing the payroll tax holiday, a good portion showed up in the plants yesterday. things will be easier to pass. for accomplishing fundamental tax reform, suppose the proposal goes forward, i think one

potential benefit of that is what i would characterize as a band with benefit. those issues which have taken up a tremendous amount of time in congress, if they all did finish for two years, this creates an opportunity for the people on the tax-writing commission to focus on something else. i like to think that thinking about our long-term debt program and how broken our taxes are, that kind of creates a window. >> you had this experience some time ago.

>> tax reform is devilishly difficult. there will be a lot of losers and there are always things where the losers howell more loudly than the gainers. i don't want to underestimate the difficulties. one thing that it has done is to reduce the political inflow of fun amal reform, if i can put it that way. there is a very tough road ahead but all of the reports make clear that it is impractical if you compare this to raising rates in the current system or devising other ways to

go. this is a way of raising revenue and financing a somewhat bigger expenditure level without the extreme in the fantasies -- extreme inefficiencies and inequities of our system. >> do you want to take a crack at this. bu>> the tax cut deal is not the best evidence we can see of why we need tax reform.

here we are debating the future of the bush tax cuts long after either party really wants to be having that debate. i think the plan should be contingent on long term deficit reduction. whatever happens, we don't want to be in the same situation two years from now then we were over the past two weeks. we have an opportunity to scrub the decks and fundamentally overhaul the code and change the debate in a way that will be genuinely positive for the economy, for economic growth, and for individual debt. this only goes till 2013 under our plan. tax reform would not kick in

until 2013. i think that the opportunity is there but i don't see any other way out of this. we cannot afford to extend all of the push tax cuts for the rest of the decade. that adds up to the same amount of deficit reduction and it that would add to the deficit as much as our plans reduce. the fiscal reckoning is coming, we have to do things differently. we cannot afford to throw good money after bad. the most important reason for doing tax reform is if you're going to dedicate 1.1 trillion dollars to some kind of use, you have to look closely to make sure that some fraction is

actually going to the purposes you intended. i think that it would be a great issue for both parties to grapple about. the only kinds of debates you can have our work both sides want to come to the table. >> i am searching for the road map for how we get from where we are today to this form. >> i don't have a road map but i think that my colleagues have said that there will have to be some action in the next congress. the debt ceiling will be upon us in march or april.

you cannot write a tax reform between now and then but it might be the occasion for the commitment to do so. >> other questions? >> as you know, the compromise took out making work play and replaced this with the tax cut which is something that two of the panels said should be considered. i'm wondering what you make of the trade-off and how difficult will it be to remove that payroll tax cut in a year if the plan goes through? >> in rough orders of magnitude, the payroll tax cut will the about twice as big than making work pay. in growth dollars, this will be bigger. this is a little bit more

targeted debt lower and moderate income people. the payroll tax is much much bigger. . .

my aspiration and hope is hopefully we will clean up our tax code in the intervening two years. [laughter] yes, ma'am. >> think you. .arol wyman the mortgage tax deduction -- we have seen a whole housing collapse. what do you think is different from 2005? how do you feel the changes in mortgage interest deduction will play out? >> is one of the most sacred of the sacred cows. i think the real question is whether it is as much of fact. you have countries like canada depth that do not how that --

you have countries like canada at that do not have that, and home ownership rates are the same. it is a subsidy to the mortgage more than to the house. it is a question of whether it just increases leverage without increasing real housing investment. but all of those things are probably irrelevant to the political debate, the most important thing. a very large portion of the population gets it and enjoys it. it will be very difficult to deal with. i would like to get rid of it altogether. but as a compromise, you see proposals to convert it to a credit and to limit it to smaller mortgages. or to only one house, and so forth. >> one thing that has happened since 2005 is we have had a huge demonstration that we know how to build high-and houses --

houses.-end surely, a contributing factor was the fact that the mortgage interest deduction is so ske up. that is an economist sort of argument, but i think it is one more reason why we ought to rethink this one. >> the argument of course will be that this is the wrong time. the real-estate market is going into the tank. you cannot drive prices down even more by adjusting the mortgage deduction. how do you respond? >> my sense in the conversations i have been in is that in the one hand -- some has gone up in housing. a lot has gone up in debt. mortgage interest brings us together. this is a more precipitous time to roll back the mortgage deduction and we haven't seen in years. on the other hand, housing is

important to the economic future. how do you square that circle? the answer is to think of some way to keep in mind the long run goal, which is to either eliminate or ratchet back dramatically, and figure out some way to phase into that, grandfather some people. there are people in america who bought a house last week with a new mortgage. it would be incredibly cool to get rid of the mortgage interest deduction the next week. -- it would be incredibly cruel to get rid of the mortgage interest deduction and the next week. but keep an eye on where you want to be. >> this is another third rail. a lot of politicians got together and a commission said, "let's do about it." >> we will be pretty well grounded after this. [laughter] >> what is happening to me, watching this tax debate played out among our commissioners -- we took them all away and then said you can add whatever back,

but you have to raise rates or reduce the amount of debt is a reduction. in that phase, most of these expenditures really do not stand that much of a chance. there will survive in some form, but not the way they are. most of the ones we have talked about are skewed towards -- skewed towards the affluent. they are not well targeted. there were not crafted to be the most efficient -- they were not crafted to be the most efficient. you do what we did. you figure brought a way to do a credit. you limit the costs, the way we would any other program. otherwise, you are sacrificing the goals of deficit reduction for lower rates. i concur is an enormous transition to the new world -- i think there is an enormous transition to the new world we have to get to. on the study said of deficit-

reduction, if we can model our way along to the next decade, we do not have to solve it all. but our commissioners took a look at the health exclusion, which is a huge sticker in the health reform debate. democrats and republicans alike agreed we really do not need that part of the law. we should phase it out in 10 years or 20 years. i think many of these expenditures and earmarks just will not be able to survive the scrutiny they are going to get now. >> expects -- eric? >> eric soter, tax policy center. i was impressed by the amount of attention mortgage interest tax deduction has gotten, given all the other third rails that have been brought up. i recall in the reagan tax

reform plan, he proposed eliminating the state and local tax deduction. he got a tremendous amount of push back. i have not heard anything about that. but you guys on the fiscal commission, in addition to getting rid -- want to get rid of the exemption of state and local interest. are you surprised by the lack of reaction to that? more broadly, have the commission thought generally about the impact of all of these proposals on the instruments that are responsible for 40% of our spending and taxes in the state's tax -- in the states? >> we did a lot of thought to the fiscal condition of the states. if there is a real hero in this whole episode from a long standpoint, it is eric soter, who sacrificed his thanksgiving and many other holidays to

perform the distribution analyses for commissions. we're for or crippled for him for his spectacular work, -- we are forever grateful to him for his spectacular work. one thing that was clearly distinctive from the set of deficit reduction efforts, distinct from the ones in the '90s, is that it was never an option to just evolve the process with states. the stakes are growing faster than the federal government and do not have the ability to borrow, are not in the position to pick up the slack. we never took seriously any cost shifting efforts. the state and local deduction, as you know better than 9, pretty much washes out with the alternative minimum tax. if you eliminate the alternative minimum tax, you're largely eliminating the need for the state and local deduction.

i think when tax reform happens, it will be hotly debated. as i said, we had so many third rails in our plan that many of them just slipped under the radar. we of not gotten any death threats on that one yet. [laughter] >> on municipal bond interest, i did get a call from a bond buyer saying, "am i reading this correctly?" i think it is a good example of something the congress might want to do -- namely, support municipal borrowing. we do not have to do it to the tax code. if we really want to do it, put it in a subsidy. it is much more efficient. >> george washington university.

this is with respect to the bipartisan policy. the payroll tax cut lasted one year. by what mechanism is the social security trust fund made whole? >> it increases the deficit. >> it does increase the deficit. but it is replaced immediately? >> yes. i think so. [laughter] it was certainly replaced. i do not know exactly -- i think immediately. is that right, eric? the payroll tax repayment -- the peril tax holiday -- the payroll tax holiday, does it get immediately reimbursed? yes. >> before we go on, yes or no question to each of the panelists. this is off of what bruce is talking about, the schedule bruce was talking about before. we're going to extend the bush

tax cuts for a couple more years. do you think that we will use as peter orszag has suggested the next few years to reform tax code so that by 2013 we will be prepared to do a brand new tax code? >> yes. [laughter] >> maybe. >> yes, but i am an optimist. >> yes. >> i am surprised. thank you all very much for coming. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

elizabeth edwards has died of cancer. the wife of former presidential candidate john edwards was diagnosed with breast cancer in 2004. family friends say she died at her north carolina home this morning. in a few moments, president obama's news conference on the deal he has made with congressional republicans on extending certain tax cuts. in a half hour, more about that textile from senate leaders. after that, the group freedomworks hosts a discussion of the federal reserve and the economy. later, a discussion of tax reform and deficit reduction. a senate governmental affairs subcommittee is looking into the may 6 market crash, when the dow jones industrial average dropped 700 points in a few minutes. witnesses are scheduled to include the heads of the

securities and exchange commission and the commodity futures trading commission. live coverage is on c-span3 tomorrow at 2:00 p.m. eastern. >> middle and high school students -- have you worked on your documentary's for the studencam competition? >> one of the things i look for when watching your video is you, the student. i want to see your personality. that helps make your video stand up from all the rest. >> what i like to see most from the entries are a real investment in the topic you will be telling us about. be sure to be interested in what you're telling us. if you are not interested in what you are presenting, we probably will not be either. >> 1 tie-breaker for me is the requirement on using c-span video. i am looking for the u.s. where people have looked at c-span content and seen what elements but the most sense for telling the kind of story they are

trying to tell. >> for all the information including deadlines, present formation, and how to upload your video, go to studentcam.org. >> president obama today defended his deal with congressional republicans over expiring tax breaks and unemployment insurance, a deal criticized by some congressional democrats. this is a half-hour. >> good afternoon, everybody. i want to say a few words about the agreement we reached on tax cuts. my number-one priority is to do what is right for the american people, for jobs, and for economic growth. i am focused on making sure that tens of millions of hard-working

americans are not seeing their paychecks shrank january 1, just because the folks in washington were busy trying to score political points. because of this agreement, middle-class families will not see their taxes go up on january 1. that is what i promised, a promise made during the campaign, a promise i made as president. because of this agreement, 2 million americans who lost their jobs and are looking for work will be able to pay their rent, put food on their tables. in exchange for a temporary extension of the high income tax rates -- not a permanent, but a temporary extension -- the policy i opposed but republicans were unwilling to budge on -- there were tax cuts for the middle class that i fought

if you're a parent, you have a tax cut next year. we will cut payroll taxes in 2011. we will add about $1,000 of take-home pay to the typical family. this is not an abstract debate. this is real money for real people. it will make a real difference to the lives of the folks who make a real difference in the pace of job creation and economic growth. in other words, it is a good deal for the american people. i know there are some who would have preferred a protracted political fight, even if it had meant higher taxes for all americans, even if it had meant an end to unemployment insurance to those who are desperately looking for work. i understand the desire for a fight. i am sympathetic to that.

i am as opposed to the high-end tax cut today as i have been for years. in the long run, we simply cannot afford them. when they expire in two years, i would like to end them, just as i expect the republican party will fight to end the middle class tax cut that i have championed and they have opposed. we will keep having those debates. we will keep having this battle. in the meantime, i am not here to play games with the american people or the health of our economy. my goal is to do whatever i can to get this economy moving. my goal is to do whatever i can to spur job creation. my job is to help out more middle-class families who are struggling right now to get by. americans who are out of work through no-fault of their own. a long political fight that carried over into next year might have been good politics, but it would be a bad deal for the economy and a bad deal for the american people. the responsibility as president is to do what is right for the

american people. that is a responsibility i intend to uphold for as long as i am in this office. with that, i will take a couple of questions. >> you have been telling the american people all along that you opposed extending tax cuts for wealthier americans. you said that today. but you never said was that you opposed the tax cuts but would be willing to go ahead and extend them for a couple of years if the politics of the mom and demand it. i am wondering if when you take a stand like that, why should the american people believe your gourd to stick with them? why should the american people believe you are not going to flip-flop? >> this is not politics. this has to do with what we can get done right now. the issue -- here is the choice. it is very stark. we cannot get a preferred option through the senate right now. as a consequence, if we do not get my option through the senate right now and we do nothing, then on january 1 of 2011, the

average family is going to see their taxes go up about $3,000. at the end of this month, 2 million people will lose their unemployment insurance. i have an option, which is to say, "you know what? i am going to keep fighting a political fight which i cannot win in the senate, and by the way there are good to be more republican senators next year sworn in than there are currently." so the likelihood the dynamic is going to prepare -- is going to improve for getting a preferred option to the senate is quick to be diminished. i have the option of holding fast to my position. as a consequence, 2 million people may not be ready -- may not be able to pay their bills, and tens of millions of people who are struggling now are suddenly going to see their paychecks smaller. alternatively, what i can do is i can say that i am going to

stick to my position that those folks get relief, that people get help for unemployment insurance, and i will continue to fight before the american people to make the point that the republican position is wrong. if there was not collateral damage, if this was just a matter of my politics or being able to persuade the american people to my side, then i would just stick to my guns. the fact of the matter is the american people already agree with me. there are polls right now that's a the american people for the most part think it is a bad idea to provide tax cuts to the wealthy. the issue is not be persuading the american people. they're already there. the issue is how persuade republicans in the senate who are currently blocking that position. i have not been able to budge them. there is no suggestion anybody in this room things realistically that we can budge

them right now. in the meantime, there are a bunch of people being hurt, and the economy would be damaged. the first job is to be sure the economy is growing, but we're creating jobs out there, and that people who are struggling of get some relief. if i have to choose between a protracted political battle on the one hand, but those folks being hurt, or helping those folks and continuing to fight this political battle over the next two years, i will choose the latter. >> you are describing the situation you're in now. but the last two years? was there a failure of the democratic leadership on the hill or hear that you could not preclude? >> let me say that on the republican side, this is their holy grail, these tax cuts for the wealthy. this seems to be their central economic doctrine. so unless we have 60 votes in

the senate at any given time, it would be very hard for us to move this forward. i have said that i would like to have seen a vote before the election. i thought this was a strong position for us to take into the election to crystallize the positions of the two parties, because i think the democrats have better ideas. i think our proposal to make sure that the middle class is harmless but that we do not make these bush tax cut permanent for wealthy individuals, because it was going to cost the country at a time when we have got these looming deficits -- that that was the better position to take. the american people were persuaded by that. but the fact of the header is i have not persuaded the republican party. and of not persuaded mitch mcconnell. i have not persuaded john boehner. i have to look at the best thing to do given the reality for the american people and for jobs. giuliani -- julianna?

>> if your budget office forecast that unemployment would be 7.7% in the fourth quarter. is the projected rate -- are you going to do more to boost jobs than your recovery act? >> this is not a significant boost to the economy that the recovery act was, but we are in a different situation. when the recovery act passed, we were looking at a potential great depression. we might have seen unemployment go up to 15%, 20%. we do not know. in combination with the work we did to stabilize the financial system, the work the federal reserve did -- that is behind us. we do not have a double-dip recession. we have a situation in which a -- in which the economy is growing and company profits are up. we're seeing some job growth in

the private sector. but the economy is not growing fast enough to drive down the unemployment rate given the 8 million jobs that were lost before i came into office and just as i was coming into office. what this package does is provide an additional boost that is substantially more significant than i think most economic forecasters had expected. in fact, you have already seen some, just over the last 24 hours, that suggests we may see faster growth and more job growth as a consequence of this package. i think the payroll tax holiday will have an impact. unemployment insurance probably has the biggest impact in terms of making sure that the recovery that we have continues perhaps at a faster pace. overall, every economist i have talked to suggests that this will help economic growth and this will help job growth over the next several months. that is the main criteria by

which i have made this decision. this is something that i think everybody has to remember, and i would speak especially to my fellow democrats, who i think rightly are passionate about middle-class families, working families, low income families at the toughest time in this economy. the single most important jobs program we can put in place is a growing economy. the single most important anti- poverty program which can put in place is making sure folks have jobs and the economy is strong. we can do a whole bunch of other stuff, but if the economy is now growing, the private-sector is not hiring faster than it is currently hiring, will continue to have problems the matter how many programs to put in place. -- we will continue to have problems no matter how many programs we put in place. that is why no matter how many more months of uncertainty -- no matter would that have a -- not

only would then have a direct impact of people who see their paychecks get smaller, not only would then have a direct impact on people who literally depend on unemployment insurance to keep their home or keep their car -- in terms of macroeconomics, the overall health of the economy, that would have been a damaging thing. >> to follow up, the unemployment rate was just north of 8% when the last recovery act was put in place. it is now 9.8%. are you willing to state the unemployment rate will go down as a result of this package? >> my expectation is that the unemployment rate is going to go down because the autumn -- because the economy is growing, even though it is growing more slowly than i would like. it is still growing. how fast as a going to go down? how quickly is the economy going to grow? when our private sector businesses going to start making investments in equipment and start hiring people again? there are a lot of economists

out there who have been struggling with that question. so i am not going to make a prediction. but i can say with confidence that this package will help strengthen the economy, will help strengthen the recovery. that i am confident about. chuck? >> mr. president, what do you say to democrats who say you are rewarding republican obstruction? you yourself said there were unwilling to budge on this. a lot of progressive democrats say they are unwilling to budge. you are asking them to get off the fence. why should the reward republican obstruction? >> let me use a couple of analogies. i have said before that i felt that the middle-class tax cuts were being held hostage to high class tax cuts. i think it is tempting not to negotiate with hostage-takers, unless the hostages unharmed.

-- unless the hostage gets harmed. then people will question the wisdom of that strategy. in this case, the hostage was the american people. i was not willing to see them get harmed. this is not an abstract political height -- political fight. this is not isolated in washington. when the peoples of insurance runs out, there will not be able to pay the bills. there are folks right now who are just barely making it on the paycheck they have. when that paycheck gets smaller on january 1, they are good to have to scramble to figure out how to pay all -- they are going to have to scramble to figure out how to pay all their bills, to pay their child's college tuition. what are they going to do exactly? i would have enjoyed the battle with republicans over the next month or two, because as i said the american people are on our side. this is not a situation in which i have failed to persuade the

american people. i know the polls. the polls are on our side on this. we were not operating from a position of political weakness with respect to public opinion. the problem is that republicans feel that this is the single most important thing that they have to fight for as a party. in light of that, it was going to be a protracted battle, and they would have a stronger position next year than they do currently. i guess another way of thinking about it is that if -- certainly, if we had made a determination that the deal was a permanent tax break for high income individuals in exchange for these short-term things that people need right now -- that would have been unacceptable. and the reason is because, you know, you would be looking at

$700 billion that would be added to the deficit with very little in the short term that would >> the deal that we have struck here makes the high-end tax cuts temporary. that gives us the time to have this political battle without having the same casualties for the american people that are my number one concern. >> aren't you telegraphing, though, a negotiating strategy of how the republicans can beat you in negotiations all the way through the next year? because they can just stick to their guns, stay united, be unwilling to budge to use your words and force you to cap late -- capitulate? >> i don't think so. this is a situation in which tens of millions of people would be directly damaged and immediately damaged, and at a

time when the economy is just about to recover. >> everybody was writing that despite public opinion, somehow the guy is going to bulldoze his way through this thing. >> and that is not happening. >> well, that is my point. my point is i don't make judgments based on what the conventional wisdom is at any time. i make my judgments based on what i think is right for the country and for the american people right now. i will be happy to see the republicans tested. whether or not i am not itching for a fight on a whole range of issues, i suspect they will find i am. and i think the american people will be on my side on a whole

bunch of these fights. but right now i want to make sure that the american people aren't hurt because we are having a political fight. i think that disagreement accomplishes that. as i said, there are a whole bunch of things that they are giving up. the truth of the matter is, from the republican perspective, the earned income tax credit, the college tuition tax credit, the child tax credit, all those things that are so important for so many families across the country, those are things that they really opposed. and so temporarily they are willing to go along with that presumably because they think they can beat me on that over the course of the next two years. and i'm happy to have that battle. i'm happy to have that conversation. i just want to make sure the american people aren't harmed while we are having that broader argument. scott? >> thank you, mr. president. last week the members of your

administration were boasting about your willingness to walk away from the korean negotiations and how that led to a better deal. can you explain that? >> the difference is that if i didn't get the korea deal done on january 1st, the taxes of the middle class america wouldn't go up. that was pretty straight forward. if we didn't get the korea deal done by january 1, two million people were suddenly looking at no way to support their families. this goes to chuck's question as well about what is going to be different in the future. you have a situation here that was urgent for millions of people. but as i recall, with the korea pretrade agreement, that was deemed by conventional wisdom as an example of us not getting something done. i remember a story above the fold on that.

then when we got it done with a better deal that had the endorsement not only of the u.s. auto companies but also of labor, the story was sort of below the fold. so i would just point that out. [laughter] i think i am happy to be tested over the next several months about our ability to negotiate with republicans. >> having bought that time now, do you hope to c-span 2 this two-year window to push for a broader overhaul of the tax code? >> the answer is yes. part of what i want to do is essentially get the american people in a safe place so we can then get the economy in a stable place. then we are going to have to have a broad-based discussion across the country about our priorities. i started doing that ned down in -- yesterday down in north

carolina. here is going to be the long-term issue. emergency economic action on the banking industry, on the auto industry, on unemployment issues, on a whole range of issues, on state budgets. the situation is not stabilized, but for those folks out of work, it is still an emergency. but we have to have a larger debate about how is this country going to win the economic competition of the 21st century? how are we going to make sure we have the best trained workers in the world? there was just a study that came out today about how we have slipped further when it comes to math and science education. what are we doing in terms of schools to make sure our kids can compete. what are we doing in terms of research and development? what are we doing about our infrastructure so that we have the best airports, the best roads and the best bridges? and how are we going to pay for

all that at a time wednesday we've got both short-term deficit problems, medium term, and long-term deficit problems? that is going to be a big debate, and it is going to involve us sorting out what government functions are adding to our competitiveness and increasing opportunity, and making sure that we are growing the economy, and which aspects of the government aren't helping. and then we've got to figure out how we pay for that. that is going to mean looking at the tax code and saying what is fair, what is efficient. i don't think anybody thinks the tax code right now is fair or efficient. but we've got to make sure that we don't just paper over those problems by borrowing from china or saudi arabia. so that is going to be a major conversation. and in that context, i don't see how the republicans win that argument. i don't know how they are going to be able to argue that

extending permanently these high-end tax cuts is going to be good for our economy when to offset them, we would end up having to cut vital services for kids, veterans and seniors. but i'm happy to listen to their arguments, and i think the commern people will benefit from that debate. that is going to be starting next year. merck? >> thank you. how do these negotiations affect negotiations or talks with the republicans about raising the debt limit? because it would seem that they have a significant amount of leverage over the white house now going in. was there ever any attempt by the white house to include raising the debt limit as part of this package? >> when you say it would seem they would have a significant amount of leverage over the

white house, what do you mean? >> just that they will say essentially we are not going to raise -- we are not going to agree to it unless the white house is able to or willing to agree to significant spending cuts across the board that will probably go deeper and further than what you are willing to do. what leverage would you have -- >> here is my expectation, and i will take john boener at his word. that nobody, democrat or republican, is willing to say the full faith and credit of the united states government collapse, that that would not be a good thing to happen. so i think that there will be significant discussions about the debt limit. that is something that nobody ever likes to vote on. once john boener is sworn in as

speaker, then he is going to have responsibilities to govern. you can't just stand on the sidelines and be a bomb-thrower. and so my expect -- expectation is that we will have tough negotiations around the budget, but that ultimately we can arrive at a position that is keeping the government open, keeping social security checks going out, keeping veterans services being provided. but at the same time is prude when -- prudent when it comes to taxpayer dallas. john, last question. >> some on the left have questioned -- i have looked at this deal and questioned what your core values you, what specifically you will go to the mat on. can you reasure them? can you say there are some specific things this is where i

don't budge. what is going to be different in 2012 when all these tax cuts again are up for voting? >> we will have had two years to discuss the budget. not in the abstract, but in concrete terms. over the last two years, the republicans have had the benefit of watching us take all these emergency actions. we prided over a $1.3 trillion deficit that we inherited and pointing fingers and is saying that is their problem. over the next two years they are going to have to show me what it is that they think they can do. i think it becomes pretty clear , after you go through the budget line by line, that if in fact they want to pay for $700 billion worth of tax breaks to wealthy individuals, that that is a lot of money, and that the

cuts -- the corresponding cuts that would have to be made are very painful. either this rethink their position, or i don't think they are going to do very well in 2012. so that is on the first point. with respect to the bottom line in terms of what my core principles are, i have a whole bunch of lines in the sand. not making the tax cuts for the wealthy permanent. that was a line in the sand. making sure that the things that most impact middle-class families and low income families, that those were preserved. that was a line in the sand. i would not have agreed to a deal -- which by the way some in congress were talking about, of just a two-year extension on the bush tax cuts and one year of unemployment insurance, but meanwhile all the other

provisions of earned income tax credit or other important breaks for middle-class families like the college tax credit, that those have gone away because they had obama's name attached to them instead of bush's name attached to them. the notion that somehow we are willing to compromise too much reminds me of the debate that we had during health care. this is the public option debate all over again. so i pass a signature piece of legislation where we finally get health care for all americans, something that democrats have been fighting for for 100 years. but because there was a provision in there that they didn't get that would have affect maybe a couple of million people, even though we got health insurance for 30 million people and the potential for lower premiums for 100 million people, that

somehow that was a sign of weakness and compromise. now, if that is the standard by which we are measuring success or core principles, then let's face it. we will never get anything done. people will have the satisfaction of having a purist position, and no victories for the american people, and we will be able to feel good about ourselves about our good, pure and tough we are. and in the mean time, the american people are still not able to get health insurance because of preexisting conditions, or not able to pay their bills because their unemployment insurance ran out. that can't be the measure of how we think about our public service. that can't be the measure of

what it means to be a democrat. this is a big diverse country. not everybody agrees with us. i know that shocks people. the "new york times" editorial page does not permeate across all of america. neither does the "wall street journal" editorial page. most americans are trying to figure out how to go about their lives and how we can make sure that our elected officials are looking out for us. and because it is a big diverse country, and people have a lot of complicated positions, in order to get stuff done, we have to compromise. this is why f.d.r., when he started social security, it only affected widows and orphans. you did not qualify. and yet now it is something that really helps a lot of people. when america d medicare --

medicare was started, it was a small program. each of those were betrails of some abstract ideal. this country was founded on compromise. i couldn't go through the front door at this country's founding. if we were really thinking about ideal positions, we wouldn't have a union. so my job is to make sure that we have a north star out there. what is helping the american people live out their lives? what is giving them more opportunity? what is growing the economy? what is making us more competitive? and at any given juncture, there are going to be times where my preferred option, what i am absolutely positive is right i can't get done. then my question is does it make sense for me to tackle it a bit this way or that way,

because i am keeping my eye on the long-term and the long fight. not my day-to-day news cycle, but where am i going over the long-term? i don't think there is a single democrat out there who, if they look at where about started in office and where we are now, would say we have not moved in the direction that i promised. take a tally. look at what i promised during the campaign. there is not a single thing i have said i would do that i have not either done or tried to do. and if i haven't gotten it done yet, i'm still trying to do it. and so my democratic friends, what i would suggest is let's make sure that we under this is a long game. this is not a short game. and to my republican friends i would suggest that i think this is a good agreement because i know they are swallowing some things they don't live as well. i'm looking forward to seeing them on the field of competition over the next two

years. thanks very much, everybody. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] >> senate republican leader mitch mcconnell says that a majority of his caucus supports the agreement with president obama to extend bush era tax cuts for two years. he spoke in the capitol just before the president's news conference. this is five minutes. >> well, good afternoon, everyone. let me just say we are pleased, as you well know and have been reporting for the last 24 hours, to have reached an agreement with the president and the vice president on how to deal with the issue here -- one of the issues here at the end of the session, which is toe make sure the american people's taxes don't go up at a time of 9 building 7% unemployment. i am very hopeful and optimistic that a large majority of members of the

republican congress will support this. i am hopeful that the democratic leaders will be able to convince their members as well that this is the way to go forward and the right thing to do under these circumstances here as we move toward the end of the 111th congress. with that, let me call on jon kyl. >> excuse me, leader. one comment. several of you have asked about some very specific provisions of tax law and whether it is included or not in what we might be doing. i ask that you give us and our staffs an opportunity to work through some of the issues that haven't been discussed by the president. give us time to work through those before asking us to tell you exactly all the things that are in or outside of the tax

package. i think we can conclude it fairly quickly. >> there are a lot of stories as there would be expected to be about who won politically and lost politically in this agreement. the way to look at it is what would be the best thing for our country right now. we believe our number one goal is to make it easier and cheaper to create private sector jobs. the best thing we can do right now to make it easier and cheaper to create private sector jobs is not to raise taxes on people who create jobs and on the american working people in thed middle of an economic downturn. that is why the right thing for our country is to support the tax agreement. it makes it easier and cheaper to create private sector jobs. >> the american people have two major concerns. one is they want us to deal with the issue of economy and

job creation. and secondly they want to get washington growth, spending and debt under control. i think the proposal that has been reached on taxes is an important one where the economy is concerned. i do believe if we are going to create conditions that are favorable for economic growth, we can't have taxing going up on our job creators, our small businesses. in this particular agreement, it preserves the current tax rates and hopefully will unleash economic growth so we can get people back to work. the second thing i think the american people want addressed as well is the issue of spending and debt. i hope that before this congress adjourns that we can come to an agreement on a spending bill that doesn't increase spending, that recognizes that we have to get our fiscal house in order here in washington. and i hope that we get a clean c.r. passed before congress

adjourns and put the other things off until next year when we have the opportunity to debate a whole range of other issues. >> i appreciate the president's willingness to work in a bipartisan way to give the kind of certainty that american businesses and the job creators of this country have been asking for by not raising taxes on anyone when there is 9.8% unemployment in this country. i appreciate the president's efforts to agree that that is the proper way forward as we work to try to revitalize the economy. >> we will take a couple of questions. >> are you considering this proposal and agreement to be final, or are there still concessions to be had by either side? >> well, the agreement is essentially final. senator reed and i will have to discuss how to go forward, and in the senate that requires a pretty broad agreement as to

how to go forward. it is his intention to bring it up first in the senate. my assumption is we will be voting on it soon. >> do you have the vote, and are there things that can be overcome? >> it is pretty early to tell who is going to vote how. i reported to you a few moments ago that the vast majority of the republican members of the senate feel this is an important step in the right direction for the american people, and the vast majority of my members will be supporting it. thank you. >> senate majority leader harry reid spoke with leaders saying the agreement to extend the bush era tax cuts for two years is not done yet. this is five minutes.

>> good to see you. we had a healthy discussion at the caucus. vice president biden was there. we are all appreciative of the work the president has done to move the tax debate forward. while this is not an arrangement me and the caucus would have made, we understand they are doing everything to secure tax cuts. i do commend the president for fighting for a lot of things, but protecting middle-class americans and small businesses from tax hates, payroll tax credit and income tax credit, and they are provided the safety net they need. this is only a framework.

it is up to the congress to pass it. some in my caucus have concerns about the proposal. i suspect some republicans will have concerns about it. we will work with the republicans over the next many hours to address these concerns. as always, our support for any tax legislation will be incumbent on its ability to strengthen middle-class families and small businesses. we have this impeachment going on. i will take a few questions, but i really have to start that because i am the one that has to start it. >> are there things the caucus wants to get added into this? >> well, the concerns are wide-ranging. some are dealing with matters other than taxes, frankly. but we weren't able to work our way through all this today. the vice president got there a little after 1:30. we went until just now. i have a chairman's lunch set for tomorrow at 12:30, but what

we are going to do is have another caucus so we can talk more about this. so we are working through the issues that people have, and we will continue doing that. >> how big is the estate tax in all of this? >> the estate tax is something a number of people raised an issue about. as you know, we have been fighting the estate tax for a long time. i have voted against the lincoln-kyle proposal on more than one occasion, or the variation of that. so i am not a big fan of what has been negotiated. but we have to realize where we are. we will see where the votes are when this is all done. but yes, this was an issue that was raised. over here? >> do you know how much this will cost, even a ballpark

figure, and do you believe any of it will be paid for? >> some of it is paid for, some of it isn't. the numbers, we didn't define a number. there were a number of things said. we had a number of economists there. gene spurling was there from the white house. i don't know if i can remember all the names, but mark zandy from the center for american progress, greenstein's group, and a number of economists talking about it. it would increase the number of jobs by about two million. what the vice president said clearly based on the stimulus people, talking about how many jobs it would create, he said i don't do that anymore. that is why they ask others to render their opinion. but it is something that is not done yet. let's make that clear. we are working through it all. one last question.

>> at one point it was said that the tax cuts would not be extended. can you tell us -- >> i am not going to say this for fear it would interfere with my caucus doing what they feel is appropriate. but i am going to do what i think is right when it comes down to it. i hope that answers your question. >> are you confident that you will sign off and your people will sign off in the end? >> no. i think we are going to have to do more work on it. >> do you think you will have to take things out or put things in? >> the deal between president obama and congressional leaders would extend all tax cuts for two years, reinstate the 35%

estate tax rate, renew unemployment benefits for 13 months, reduce the social security payroll tax. and it would extend the so-called patch that keeps taxpayers from being required to pay the alternative minimum tax. in a few moments, the group freedom works hosts a discussion on the federal reserve and the economy. in an hour, the urban institute forum on tax reform and deficit reduction. after that, a "washington journal" discussion of immigration issues. on "washington journal" tomorrow morning, we will talk about the tax cut debate with democratic senator tom harkin of iowa. we will be joined by republican governor bobbie jindal of louisiana, author of a new book titled "leadership in cries." and you can call in with your questions surrounding the legal issues rounding the weak election case to frederick

hitz. "washington journal" is live on c-span every day at 7:00 a.m. eastern. >> find great holiday gifts for the c-span fan in your life at our store. from books, to d.v.d.s, mugs, umbrellas and more. it is all online at c-span.org/shop. >> now a discussion of the federal reserve and the economy hosted by freedom works, a group that associate itself with the tea party movement. speakers include republicanive -- republican representatives, mike pens and others. this is an hour. >> there so many issues that are

relevant to our economic recovery, it strikes me that nothing could be more essential to talk about right now and the role of monetary policy and what happens when we corrupt that role in the economy. and we're seeing some of those down sides right now. as the president of freedomworks, i have had the opportunity to speak to t party activists across the country. one thing you hear consistently again and again from americans both in the election and as they show up across america this that we have to stop spending money we do not have. we have to follow the rules. we have to live within our means. what you have seen over the last three or four years is a substitution of that fiscal policy forbade monetary policy.

-- bad fiscal policy for bad monetary policy. the wall street bailout, and the housing belau before that, and at the time, the treasury secretary got a visit from the chairman of the fed to said, politically that they cannot do this. i need legislation and the treasury department to take the lead. passport to geithner's decision to let it expire recently, a political decision so that the administration could no longer defend t.a.r.p., and so they did back bail -- a back room bailout and the way they could not do politically. and in the most outrageous the imf andre using

american taxpayer dollars to bail out your. the bailouts have to stop. the expansion of monetary policy has to stop. we have to start living within our means and that is what this panel is about. i think that with the new congress, we will see important shifts in the conversation and and and not -- and an opportunity to do things that we could not do think -- before in terms of restoring rationality to monetary and fiscal policy. i like to recognize the president of the atlas economic research foundation. alex is also the founder and president of the hispanic american center for economic research. i first met him at a city college many years ago. beat -- we both have long. the time, by the way. -- we both had long hair at the

time by the way. [laughter] but elevate then the in level of discussion and bring the best thinking, the best university center, the economic departments, to give their opinion about how to solve economic problems of the day. we'll work -- we work globally. i attempted to say things about economics but i will not bore you with that. our share you a little of personal experience. we all remembered germany of the past. i come from argentina, live 30

years in argentina and 26 and the analyses. i saw how the manipulation of money and credit became an essential element to destroy the rule of law, to corrupt the morals of my native country. i have with me a group -- the most famous argentine dictator, one around, who started to use the political -- the central bank of argentina in a political way. but conservatives continued with the same policies the damage so much of the country. he in no way, teasing the opponents it took him out of power by the libertarian revolution of 1976, he wrote this. the federal power that make up a

legal body of the central bank's, throws this institution into the uncontested for wrecked a letter almost all the entire economic life of the nation. manipulating exchange rates, foreign exchange, setting income rates and policies, restricting our expanding credit from the comfortable inflexibility of bureaucratic decision making, paperwork, sign that relations, but one can increase or decrease trade with any foreign nation, create money or destroy industry, capitalize are undercapitalized certain activities, promote the building industry or repressive, incurred discourage commerce, in short -- the legal structure of the

central bank has attributes which openly contradict the constitution of the democratic nation. it allows us to handle all economic life and he called that this institution, almost diabolical in nature. i get passionate when i speak with this. and confident that it will not happen to the united states. but that alone does not have all the power that the argentine and central bank did, in a cannot work to the same destruction and weakening of the rule of law. people believe that in order to be successful, they have to be close to those it to the side credit policy and those who give it away parole law begins to deteriorate or have a wonderful

set of speakers today. thanks to their work, i am confident the analysis will retrain a strong dollar and a currency that deserves the name of constitutional money. thank you all for coming. >> as conference chairman, mike pence is a committed fiscal conservative who i've never seen waver from his core of conservative values, and most importantly, he was that one republican who stood in the breach in the very first days of the wall street debate and said no, i will not compromise on this issue. and at the time it was

incredibly unpopular and turned out to be the wisest thing he could of done. congressman mike pence. >> thank you, matt kibbe bien freedomworks. thank you, atlas economic research foundation. i am not jim demint. if you're consulting program, and i'm not agenda been -- i am not jim demint or paul ryan. but i am glad to be here. this is an issue with longstanding no leadership that paul ryan has provided, issues of sound money and the proper role of the fed. senator corker, senator demint, and i have joined the battle recently and we're grateful for the leaders assembled here to have this conversation. but having been invited to come over and pinch hit and be paul's

warm-up act, let me share a few basic thousand in yield to my betters. first, we live in the ordinary times. our economy is struggling in the city and on the farm. unemployment is us out -- is a heartbreaking 9.8% nationally. nearly 40 million americans on food stamps. we have a housing crisis and dismal gdp growth. as we gather today in the belly of the capitol building, it feels more and more to millions of americans that policymakers from capitol hill to the white house to even the central bank no less and less what to do about it. sound money is the very foundation of our prosperity. it must be addressed. before that, let me speak if i can about these times and about growth in general and then i will close in the few minutes that i have with a few thoughts

on sound money and the proper role of the fed. 14 million people looking for, so far president obama and democrats in congress are trying to borrow and spend the country back to prosperity. the trillion dollar annual deficit, at this runaway spending, a government takeover of health care, they attempted to pass a national energy tax, and approved one bailout after another. matt was kind enough to mention that. i helped to lead was an unsuccessful effort to do something other than taking $700 billion from main street and transferring it to wall street. let me say emphatically -- those of us that oppose the wall street bailout did not do so because we thought the policy makers in washington should do nothing. we just thought that was the wrong thing. and we stood firmly on that principle. my belief and my concern when i

came out against the wall street paid of was this -- if we passed it, we met fundamentally change deep relationship between our national government and the citizenry in the marketplace. sadly i believe that has occurred. one need look no further than the dog-franc bill, too big to fail now enshrined into law the land. we continue to bail out fannie and freddie to the tune of $150 billion with more expected. and the list goes on, although bailouts, and the like. taxpayer-funded bailout and a substitute for policies that will create real consumer demand and growth. i would submit respectfully that to restore a growing economy, we must in all of this runaway federal spending and go back to the practice of free market apology -- free market policies without apology. the free-market is what america

-- is what made america's economy at the best in the world and we need to be willing to stand on those principles of freedom. even though or economy is struggling and america seems at a low point, we can restore our economy but it will take courage and a new vision. everything starts with a sound dollar and with fiscal responsibility in washington, d.c. a word on fiscal restraint -- with the impending majority, there is no shortage of plants or energy to restore fiscal responsibility to washington. we have the pledge to america, and overtimes we have that awful proposals, blueprints, mr. ryan as a noteworthy road map, toward restoring fiscal discipline to washington, d.c. i co-authored a spending limit to the rigid spending limit of men may -- i co-authored a

spending limit amendment to the constitution except for certain conditions such as war, which will create a framework in which this and future congresses could live within our means and have incentives to grow the economy. in the midst of all this talk about fiscal discipline, let me say that to grow the economy, we must shrink the size of the federal government. but fiscal discipline alone will not suffice. it will not bring jobs and prosperity back to america. i think of a similar time in 1977 with margaret thatcher speaking to the economic malaise that set in great britain. of course we're not one to solve our problems just like cuts, just by restraints. it was not restraint the start of the industrial revolution, she said. it was not restricted inspired us to explore the north sea. it was incentives, positive,

vital, driving, individual incentives. and to that we must repair. what is true in england is true today. for those who would build the cities and, for the frontiers a midamerica most prosperous basis in the history of the world, i submit as i said in the detroit economic club meeting within a week ago, that the new republican majority must embrace of all the economic agenda built on the timeless rhythms of economic freedom. sound monetary policy, which we have gathered about today. tax relief and tax reform. access to american energy, regulatory reform, and trade. start -that is a start deal i can restore -- support. let me close with a few words on monetary policy and then yield to my bettors who have thought about this more than i have. sound monetary policy is where

birth begins. it is the foundation of our prospects. . a stronger dollar means a strong america. the american people know that we cannot grow and spend our way back to a growing nation. they scented deafening message of restraint to washington, d.c., and it does not look like the administration got the message, nor did the federal reserve. in 2008 and 2009, the fed pushed more than one trillion dollars into the federal system to rein in unemployment. yet the national jobless rate has been above 9% for a record time, 18 straight months. the second round of quantitative easing actually tried the use inflation to bring down unemployment. while there is no guarantee this policy will reciprocate succeed in reducing unemployment, the value of the dollar will be diluted.

despite promises from mr. burr 90 that there was a 100% guarantee against inflation, history teaches otherwise. as economist larry kudlow said, but that can print money but not jobs. i do not lay all the blame solely at the feet of the federal reserve and then i did not come to harshly criticized that institution or they're well-intentioned efforts. the problem, i believe, but the fed began in 1977 when congress imposed a dual mandate to pursue price stability and maximum employment. too often this conflicting mandates has been -- pitted short-term against long term. qe2 is an example of what happens when it is metal to much. i wonder returned the bed to its original single mandate, price stability.

we joined a longstanding effort of congressman paul and iraq -- paul ryan in this effort. and we've been criticized by all the right people on this count. but we started the national conversation about the proper role of the fed. i want to take this opportunity to publicly comment paul ryan for his longstanding and leadership on this issue. treasury secretary timothy geithner recently said the administration will oppose any effort to in the dual mandate, saying it was important to keep politics out of monetary policy. the be clear on this one -- speaking for myself in a broad range of members of congress for whom i have spoken, there no interest among members of congress in eroding the independence of the federal reserve. we recognize the importance of the independence of the central bank. but congress created the dual mandate in 1977, and getting the

fed back to its original mission of price stability is precisely how we get politics out of monetary policy, not the other way around. i submitted this time that the federal reserve focus exclusively on price stability and protecting the dollar. in doing that, we will place the onus for the fiscal policy where it belongs, and that is on either end of pennsylvania avenue. speaking now as a layman in this area, i have to tell you, we ought to be looking to policy makers to be making decisions that will encourage economic growth and create jobs. we ought not as has been the case since 1977 have the fall back of the fed that can free money supply preconditions that takes the pressure off of policy makers on capitol hill that ought to be making the hard choices to put up fiscal house in order in a brace the kind of reforms that will grow the economy increased opportunities

for every american. it is time the federal reserve focused exclusively on price stability. i like to note that in the midst of all that as happened recently, massive government spending, borrowing, quantitative easing in the light, a debate is starting a new over the anger for the global monetary system. my friend the late jack kemp t would probably have stopped me before i got out of the room to urge me to this adopt the gold standard. now. despite press reports to the contrary, i have not done that and do not intend to do so today. zoellich has as is to rethink that debate over goldeneye agree. about the proper role that it should play in our nation's monetary affairs. with that, as i said, let me

yield to my betters, but let me say that as we gather here today, again, i want to commend atlas and freedomworks. they're talking about things that are foundational in our society. i have been in washington 10 years and too often it seems that the event horizon that washington considers is the next headline, the next week, the next quarter, the next year. what we ought to be thinking about is the next generation. " we ought to be thinking about is how we can once again build american prosperity on the foundation on which it was originally built. there is nothing that ails the economy that cannot be cured by returning to the time-honored principles of pro-root tax policies, the sound dollar, regulatory reform, access to american energy, and expanded

trade. but i will leave one other thought as well -- in the midst of these difficult economic times, as we pursue these timeless and time honored policies that will always create economic growth, let's recognize one more thing -- let's recognize that our present crisis is but just economic and political, but moral in nature. any observer in these times in which we live should recognize that people in positions of all authority, from wall street to washington, d.c., have walked away from the timeless principles of honesty and integrity, an honest day's work for an honest day's pay, and the simple notion that you ought to treat the other people that we did you want to be treated. we have to get back to basics. public policy alone will not cure what ails the american economy and restore american economic greatness. it will take -- it was on the foundation of character of this

nation that our bounds prosperity was created. as we consider policies to strengthen the marketplace, but is also repair and strengthen those institutions, traditional family and organized religion, that nurture the character of the nation. for the foundations crumble, how can a nation stand? thank you very much. it is honored to address today and i appreciate the opportunity. [applause] >> thank you, congressman. nextel like to introduce dr. judy shelton, who is from my perspective, one of the best monetary economist in the world today discussing sound monetary policy, was the unique ability to translate complex ideas into crystal clarity. she is the co-director of the sound money project of the atlas economic research foundation, and also the author of numerous

books and articles, including "the coming soviet crash," "money meltdown," and other articles that you can see in the "wall street journal" andy "new york times." she will talk about this and we're honored to get that out to the rest of america where it belongs. most recently, judy has joined freedomworks as a senior fellow, and director of monetary policy at freedomworks foundation. dr. judy shelton. [applause] >> thank you, matt. sound money is one of those phrases that sounds good, it sounds right, the sounder the dollar, but what does it really mean to be in favor of sound an

honest money? in my days as a university professor, and i taught a course called -- called money and banking, and a graduate course on international finance. to teach anything, you have to go back to basics, to the fundamentals of what you are talking about. when we talk about money, we need to focus on those primary functions of money that you were all taught in your economics course at college. money is meant to provide a measure of value, a reference point bank, like ruler. we all may build different houses but we use the measure. this is a put, this is a yard. planning the height of the walls and a breath of the rooms, it is a common reference point that is measured as a standard when applied to money that allows perfect strangers, buyers and

sellers, to convey to each other the value of what they bring to the marketplace or what they seek from the marketplace, because money is the medium, the measuring stick to which you set a price, and price conveys value. it is the whole reason free markets work, free markets calibrate supply and demand based on price, and the prices expressed through the money, the monetary standard. so the standard has to be meaningful, it has to be accurate, so that all market participants understand the value of goods and services, and that enables them to make offer more choices, which enables free-market to deliver optimal economic outcomes, which lets holst societies by delivering maxwell -- which lets whole society is by delivering maximum levels of success.

the soundness of the money is a critical factor if you want a free-market economy to work. the primary functions of money, to serve as a medium of exchange, the unit of account, and the store of value, all arise as a result of people needing it this on a an accurate measure to convey those price signals so they can in gauge in commerce with each other. so they can bring to the marketplace whatever their talents and energy and creativity can offer, and reach their maximum but to joe for achieving their dreams, what ever they are. it is called economic freedom. on to open doors are the in richards of society's. they deserve sound money. they need that stable foundation to make the plans come at a bill that product, or develop that service, so they achieve their own aspirations and benefit society in the process. sounds a lot what like -- sounds

a lot like what adam smith had in mind. but the invisible hand cannot function properly to maximize economic opportunities and deliver maximum prosperity it the money does not provide an accurate unit of account and a reliable store of value. which brings us to the core principles of sound money -- you will find them in the back of this guide, which is being made available today as a joint project of the atlas economic research foundation in freedomworks. 100,000 copies are being distributed in the initial run because we want people to understand that money, sound money, should be seen as a fundamental right of a free people. the integrity of money should be upheld as a vital element of free markets and not be compromised to serve as an

instrument of government policy. if you had your guide, you can follow along, but these are the four principles of sound money. money should serve as an honest measure and a reliable store of value. money should convey price signals with clarity so that free markets can operate efficiently. when price signals are distorted through loose monetary policy, economic resources are misallocated and financial capital is misdirected. sound money forges a link between effort and reward by providing the dependable store of value over time. otherwise, why should anyone save money? inflation, even low inflation, makes suckers out of savers. money has to be trustworthy so individuals can plan ahead with confidence. remember, money must most

important function is to provide a useful tool for private enterprise, not to serve as an instrument of government policy. the founder specifically limited the money powers granted to government to prevent abuse of that authority, to prevent the debasement of the currency, they were well aware that currency debasement is one of the oldest forms of tyranny against citizens. and no special privilege for me to introduce the man who is here to help remind us of the views of an individual could in this guide, jack kemp, an american statesman, and economic conservative, a champion of sound money and an honest dollar. i like to invite jimmy kemp who heads up that jack kemp