a tax increase. if we cannot do that, what are the chances that we will be able to do its in the middle of a presidential congressional election? the tea party will be intimidating all the republicans. they will be running like santa claus. what are the democrats going to do? the last presidential candidate running on a platform of increasing taxes was walter mondale. that was not a successful strategy. you are asking half of the equation. our concern is how they will be paid for. i think you can guarantee that if we extend all the tax cuts, if we let all these through, up $3.80 trillion, at some point

we will end up paying for them. our concern is that the people paying for it to are the people who can least afford it. >> i do think that a major part of our objection is that we feel that it is going to be bad for african americans. the republicans have said, for example, on health care reform, one of the ways they plan to attack it is to the appropriations process, by spiraling the provisions. this is the first step. >> [inaudible] despite your ideological differences, do you share some

[inaudible] >> i hope we do sit share some common ground with members of congress, but how can senate, who believed that $990 billion is too big of a price to pay. extending middle income tax cuts and ensuring that the state tax is not reduced, that is a way to begin to move forward. i hope that there is some bipartisan consensus with the congressional black caucus on many of these issues. >> if you drive the data up so high comedy will have to say, we had cannot afford traditional programs that we have had. for example, low-income heating assistance. i could see that being a target for the conservatives saying, we cannot afford it anymore. section 8 housing, already it has been leveled out. i can see that being an ideal target.

public housing in general. what we see is that when you find a deficit continuing to grow, there has to be caught. the cuts would be -- even in our education and labor committee, when the child nutrition bill came up, they voted it down. healthcare for 9/11 survivors. there was no compassion. wages cannot afford it. red ink, cut it. we have seen in arizona where they are talking about and are rationing out. the governor just refuses to have certain kind of programs

funded through their medicaid program. this is the beginning. it is the tip of the iceberg. the congressional black caucus refuses to allow this to happen. >> thank you very much. let me close now by saying and reminding you of the fact that when president bush took office, he had a huge surplus, which president clinton and george that are treasury would hold. president bush moved forward with very similar types of tax cuts and what happened? unemployment rates went up and down debt the cent increase. we do not believe that we need to go back there. the same economic policies that have failed and the same economic policies that have created so much misery and so much pain and such high

unemployment rates and an increase in poverty in our country. for those reasons, we have presented our alternatives and we are standing in opposition to the president's plan. thank you very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> michael o'brien clearly tax cuts are the big issue. what do you expect to see on that in the coming weeks? >> we saw a pr pushed by the white house. cap off by a surprise appearance in oakland. -- by president clinton. >> what impact do you think bernie sanders this filibuster

will have? >> there really galvanized a lot of liberal opponents of this legislation. they saw it as some last-minute heroics. i think it could have the danger upper slaying some fence sitters to oppose this bill. but that lead into the politics behind the obama administration. they rolled up a big gun with>> house democrats were expressing some disapproval. where does this go in the house? >> i think it is difficult to say at this point. you will see a lot of wrangling, arm-twisting, deal making over the weekend to try to bring on as many democrats as they need to get this done. ultimately, the discussion early falls to speaker policy. some concessions on key issues like the estate tax, he might see a vote move forward.

>> one person is likely to pass both chambers? >> i would look for a version very similar to what we have now in terms of the income taxes and payroll taxes. a look said provisions for -- it looks like provisions for ethanol will be added as a sweetener. >> senate republicans say they will block every bill. anything besides those two expected to move this big? >> the big thing to keep an eye on is the don't ask, don't tell repeal that will be introduced as a stand-alone by senator lieberman. they are hopeful that a big tax cuts get done in an orderly manner, they will be able to move forward. that is a big priority for democrats. they need this one to call up their base after a very turbulent week. >> what about the larger defense authorization bill? >> it depends on whether the standalone moves. you might look for the defense

authorization bill to take back seat for the meanwhile. if the don't ask don't tell -- if it is the only option, harry reid might try to go for it, but it would be difficult given the debate demands that republicans are making. >> what do you expect to happen to the house version of the dream act? >> sinnett leaders have said -- senate leaders have said that they plan to bring it up for a vote some time. friday. >> michael o'brien, you can see is article. thank you very much. >> next, the ceo of general motors talks about the challenges facing his company.

then and looked at european economies and then -- then, remarks by the white house coordinator at for weapons of mass destruction. >> this weekend, no feldman on -- >> all those that claim the there was a search warrant, there was absolutely no evidence of any magistrate that ask for a search warrant. there was no record of a search warrant. >> listen for the argument on c- span radio, nationwide on c- span.org. >> the federal government is about $50 billion to keep the company from slipping into bankruptcy. this is one hour 5 minutes.

>> thank you. over the last two years, as i have served as president, we have had a lot of distinguished speakers and i have tried to be as dispatched and introducing them as much as possible even though they were my friends. i probably will not be dispatched this morning as dan was my business partner. i probably will be less despatched and i normally am. dan joined us in 2003 and rose to be the head of our global buyout business which is our most important business and was a member of our management committee and provided enormous bought -- value to carlisle.

when dan told me that he was going to be the ceo of general motors, i was not happy, honestly. i asked him if he knew how much money he was leaving on the table and he said that he did. i asked if his wife knows how much he is leaving on the table and then i said that maybe she does, but do your children know how much you're leaving on the table. he did this out of a sense of patriotism and it really helped the u.s. government get its money back doubt that there arey people who has made as big a financial sacrifice as he did to we've never disclosed and i will not disclosed it today, but it is an extraordinary amount of money that he walked away from. i applaud him as an american taxpayer, but it was a lot of money. [laughter] money is not everythi -- he

began life in minnesota. he went to the naval academy and graduated in 1970. he served in the navy for five years and when he left the navy, he went to work in the petroleum industry in england and there he got a master's degree at the london school of economics. it he returned to the united states to work for at&t. then he joined a little company called m. he became head of the southeast division. when carlyle was started, i recruited bill conway to join him in 1987. dan replaced bill as the c.f.o. and moved to washington and ultimately rose up to be the president and chief operating officer of mci. he was recruited away to the bid to be a partner in new york at a private equity firm and he became the ceo of one of his

portfolio companies. he d that for a number of years. then he became the ceo of nextel and transformed the company. he then became the ceo of xo and served his fourth company. he then left that enjoined carlisle in 2003. wh he left to become the ceo of general motors, i knew it was a daunting task. he did an extraordinary job. he was elected to the position on august 11 of this year and they have completed a historic i.p.o. -- the largest ipo in history. i doubt there is anyone u.s. singlehandedly put as much money in the coffers of the u.s.

government as he did. as a result of that i.p.o., the u.s. government has been repaid $23 billion. i refer to him as our $23 billion man. he has shown his extraordinary skills as an executive and a ceo. i doubt that the i.p.o. could have been done unless he was there to shepherd it through. already, he has shown extraordinary skill and we are very pleased that both day and is here today and i think as a taxpayer, we are pleased that he is now the ceo of general motors report -- general motors. [applause] >> i had a thought while david

was speaking. when i meet my old and the reward, invite david to the funeral. [laughter] this is really a pleasure and honor to be here today. it is hard to be unemotional about today. the are some many of my friends here and i have deep ties in this community, having served in various positions at the mci, which was the fountainhead of many of the changes that you see in the technology worldwide trade my friends from nextel. i was on the board at time warner, for many years.

and the carlyle group, which is great. to the gentleman i have known for 20 years, and my college roommates is here. he is a dear friend. he knew me when i had hair. which even my wife cannot say. to my room together for 3.5 years at the united states naval academy. and of course, my wife, who i could not have embarked on this adventure without her. how many veterans are there in the group? would you raise your hands? thank you for ur service. [applause] thank you, david, for the kind introduction.

it is great to be here. i flew in last night and yes, i did fly commercial. [laughter] i am not that dumb. i did the whole airport saying. i actually chose the enhanced pat-down of the entire body. take your best shot, big guy. i have been through its trade the road show was an experience on many different levels. but it was worth it. 18 months ago, a general motors was pretty much flat on its back. in june 2009, we filed for bankruptcy protection. that is old news now. just think about a for a moment. general motors, the icon of american -- american manufacturing, one time the holder of 50% of the u.s. vehicle market.

its standard bearer of what was termed the modern corporation. it would bankrupt. itas unimaginable until iraq -- until it actually happened great 39 days later, this is to help from the u.s. taxpayer and others, general motors was relaunched. critics davisery little chance of success. many thought we would remain in on the public dole for decades. others simply left us for dead. 16 months later, after emerging from bankruptcy, this new gm was relaunched and one of the most successful initial public offerings ever. i spen many decades in business, most recently in private equity. it was my job to assess companies, their jobs, their

prospects, up their management, and make bets on their futures. i can promise you that two years ago, there was precious few in this country that gavgm a chance to were willing to bet on its future. three weeks ago, people by the hundreds of thousands, did just that. they bet on general motors. they saw a company with a new business model focused on three things. designing, building, and selling the world's best vehicles. they saw a new company with a competitive cost structure, improved capacity utilization, leaner inventories, improved brand equity, and customers willing to pay higher prices for great vehicles. all of which resulted in

improved earnings and great cash flow. they saw and automotive company competing in a growth business. hard to imagine not too many years ago, one that was betr positioned than any other company in the world in the emerging markets of india, china, and brazil. they sell a new company with a strong balan sheet and plans to make it even stronger. they saw a new company position to break even at the bottom of the markets. to a dozen non was a 50-year low for the automotive industry in this country. we actually made money. the company would only make money at the high end of the cycle. if we achieved a mid cycle correction in the next year, gm is very well positioned to move forward.

the new investors assault a company being managed by a mix of new talents that was intent on the change and a team of highly skilled insiders who are running key operations around the world. most importantly, they saw a great new products in the marketplace, like the cadillac srx. it took nine market share points in one year. buick lacrosse. buick is the fastest selling brands in america and the last 12 months after its the gm to rein -- 12 months. it is the first really strong ego subcompacts that we have produced in this country.

they also sell a company that is selling more than it did a year ago with a brands. finally, they saw a lot of people beginning to believe in the new gm. a company that has learned from its past and is committed and determined not to make the mistakes of the past. at gm, we're building a culture that values speed, agility, and competitiveness. it will continually adapt its busine model to the rapidly changing world. it puts the customer first. this may not seem revolutionary you, but trust me, it is. [laughter] what does this mean? it means that we are working hard to set the pace with a new car like -- it was recently named 2001 urban part of the

year by decisive media. it is a segment leader. it features things that we will start to differentiate on. we have on star. we intend to make on start in every car on the road. you will see dramatic changes in the internet application to automotive and automotive safety. it means we are bringing customers the newest design and technology lika bolt. -- volt. it is like no other car on the road today. there will be four of them of stairs for you all to see. it is only $25 for a trip around the block. we are trying to raise more

revenue every opportunity. [laughter] this car will go 50 miles on a single charge. then it converts to a generator, at 86 horsepower engine and it will go another 300 miles. you can literally drive this car from washington, d.c. to los angeles. t to say that we will develop other cars, those are battery electric cars. we think they have a place in the marketplace, but they'll be more of a metro car. from the start, it was designed to change the way that we think about the automobile. we have made strong statement in that area. just in 2011, the accolades have been many and wide. car of the year award by automobile magazine. motor trend.

we were also named the truck of the year. that is very rare for an automotive company to have both car and truck of the year by motor trend. it was also named car of the year by green carded journal. we are confident that it will be one of the most important cars that gm has ever produced. in fact, when i think back over many people's lives in this room, the iconic car might of been described as the 1964-1965 mustang. i held my children will reflect back to that the volt was the iconic car of their generation. one of bill launched cars -- launch markets will be washington, d.c.. there are seven great we intend to start shipping next week for

commercial purposes -- purchases. it is a statement that we are thinking globally as well as acting in what we believe to be society's best interest. last month, we announce that chevrolet will invest $40 million over the next few years for various clean energy projects throughout america. why $40 million? these projects are designed to reduce about 8 million and ted metric -- 8 million metric tons of carbon dioxide emissions in the united states. that is the carbon footprints admitted from all chevrolet's that will be sold between now and the end of 2011. we wanted to make a strong statement that we're just not out for a fast buck. we want to be a responsible member of our society. this is a big and important goal and one we are committed to achieve. we think it is the right thing to do for our customers, our

company, and for the communities that we live in. it is part of gm's commitment to the environment and to a clean energy future. to be fair, this is not the result of me. i am a member of the team. many of these projects were started well before the bankruptcy. i think we have to give due credit and gratitude to the people that had the foresight at general motors to develop these great cars and trucks of darnell winning so many awards. i think it is testimony to the tenacity and the persistence and the focus of the gm employees to look for the dark days of the bankruptcyat the days leading up to the bankruptcy, and kept focused to deliver great products. there was a lot of turmoil around the industry. it was most impressive and it is

the source of inspiration to personally and a privilege to leave such a great team of people who are so committed to doing what is right for their company a for their country. in many ways, what it comes down to in the future, to give people li you -- we have to rebuild the trust in the general motors product line. it took many years of lilly not listening to our customer base -- of really not listening to our customer base and poor quality to destroy what was once a great damage. i will tell you today better quality is second to none. there is no foreign transplant ororeign competitors that produces cars any better than we do. these are world cla cars. that has been verified by

externaletrics. i am proud to be a team leader of a great company with great products. i hope he will reconsider or consider your next purchase, four of which will be upstairs following the meeting. gm is a company and as we went through the ipo and we knew we were going to have a special offering, everything from the press release, we survived a near-death experience. we deeply appreciate the support we got from the american people on a state and federal level and we will not forget that. for the first time in a generation, and i'm not kidding, this was a company that had many structural problems,

post-retirement health -- the list goes on and on. that has all been rectified. for the first time, we have a level playing field. as the 71 of our earlier lines, made the best car win. if that is the magic by which we are measured, i am confident of our future. we look forward to returning the public's trust and respect every day. we look forward to a bright future. withhat, david, i would like to turn it back to you. i know you want to ask me a lot of queions. [applause] >> i understand you drove over in a volt today.

what was it like? >> ecstasy. [laughter] i've only had my life threatened twice so far. i have security now which is something new for me. i felt secure with you, david. he drove the car. usually, i drive in an suv. i wanted to drive the car here. he was impressed. this guy drives professionally. it is not the propulsion system. we commonly referred to the geek-mobile as the prius.

i would not be caught dead in a prius. we have used 1.2 gallons of gas. 80% of the people in america drive 40 miles or less per day. you should be able to drive the average -- we should be able to drive -- it is going to be for sale as of two weeks from now. >> we have to under thousand orders. -- 200,000 orders. we liquid cooled the battery pack. it weighs 400 pounds. many of the battery electric vehicles will be air cooled.

we are forefront in the technology. we spent $7 billion for research and development. we put anoer $7 billion in engineering. the air cooled battery pack is estimated to last three-five years. pack for a years or 100,000 miles. we know the residuals will be good at the end of three years. when we come out with a battery electric, that could be a problem to residuals. >> when you are here, what car are you driving? >> would until you seehe new camaro coming out. i know this sounds like an advertisement. [laughter] the new camaro convertible, you're going to love that car, too. it has been a great seller.

>> what exactly did you walk away from a lot of money? [laughter] that would have helped your children and grandchildren. what was the motivation? >> i was asked that question last week. i doubt if they show this on television. he w quoting you. i think he said this, he mentioned a specific number. i know you told larry summers. [laughter] >> he was staggered when i told to him. >> are your recruiting him? >> today is his last on-the-job. >> i know.

there is more to life than money. i was not put on this earth to just make mone i cannot tell you, in my lifetime, there it's been iconic events. when i got married, my children, my grandchildren. when i walk on the trading floor once the deal was done, there were 400 people and they stood up and clapped. one of the traders on the floor told me, when they have -- when they had to delist general motors, he cried. when i went back detroit -- when i went back to detroit, there was an employee meeting of 2000 people. there was a man my age and he cried. he said, 18 months ago, i thought this company was gone. it is hard to describe -- and

those experiences, no offense to carlisle, it is a wonderful place. it is a wonderful, great people. i know that i made the right decision. this company, quite frankly, that is too important to il. the american industrial infrastructure is too important to let it go down. the implications here had general motors -- had general motors gone down, we spent $80 billion a year in our supply chain ford was not in that good a shape two years ago. if our supply chain had gone down, i think it would have caused huge disruptions for everybody. i do not know wh the cost would have been. it would have been a l more than a lot of people have projected, in my opinion.

sometimes you have to do what has to be done. i am not that special, but somee had to stand in. >> when you did the i.p.o. nt 1 around the world, will work -- and he went around the world, what were the impressions that you got? what do you think made the stk sells so well? you were going to originally prices in the mid-20s. priced at $33. viously, their work -- there was great demand. what were the main factors that propelled the interest? >> the fact that we have a great contract with the union and the substance and form have a competitive cost structure here in north america. what really intrigued and

surprised me when i went on the board in 2009, it was the market position. we will produce almost as many cars in china this year as able the united states. -- as we will in the united states. are continually gaining market share. we have the most enviable position in china. but we talked about our plans -- we all live here and believe me, if you think about this, when i was at mci, we would not run the same ads in a birmingham, abama, as we did in brooklyn. there areifferent regions. california is kind of a culture of its own. so is alabama. so is minnesota. so is china. we'll look at china in four

different ways. the big cities, shanghai, hong kong. and then we looked -- if you looked out in the western provinces, it would not sell in any industrial markets because we have to sell it for down in the $5,000 range. it does not have electric windows. that would free all of us t. -- phreak all of us out. it might hurt my wrist. we not only sell pulp market, but we will slow down market. -- up market, but we will sell down market. we have a new chevrolet that is coming out. it looks like a bmw. we stock all the cars in that sector up against the chevrolet

and we e right in the middle from a price point. we asked people to take those same cars and they drove them all. they put that car here and bmw here. it will write down the line. there are new cars coming, new models that will stand us in very good status. >> you will pay a total of about $32 billion to the federal government. how much money does the government have to get back to break even? what stock price would they have to sell the remaining shares in order to break even? >> they own 61% of the compa before. they own 27%. i just happen to know these numbers. [laughter] they own a third of the company. $33 a share is what they need.

that will mean that somewhere in the high forties or low 50s. the previous break even was about $42 a share. we sold for $33. >> do you give any advice to the government about when they should sell the remaining shares? >> no. it is a very clear and bright line. the administration has been great about this. they do not involve themselves in the boardroom or the management or the operation of the company. we had a shareholder meeting thisummer. ere were four people there. the u.s. governmen the canadian government's, the help trust for the union, and boaters liquidation corp. representin the bondholders.

it is not our business. if your financial advisor said you wantedo sell, you would not want these guys are saying, i will tell you when you are going to sell. it is not our role to tell the federal government anything. they determined how much they wanted to sell. >> they still can determine salaries and so forth. is that still appropriate? >> that is still true. [laughter] >> should go on to the next question? [laughr] >> i am visiting with the special paymaster this afternoon. not about me. we have to be competitive. we have to be able to attract and retain great people. we have been able to do that.

but it is largely out of a commitment. we have been able to attract pretty damn good people. we're starting to lose them in now. that is an issue for our shareholders. in their best interest, we should get some relaxation in. >> when you were asked to join the board, do remember the board before you became the ceo? did the government know that you're a republican? did they care? what impressions to take away from the company when you joined the board? what was the biggest shock? >> did you plant this, david? i would describe myself as a: paul republican. -- colin powell republican. >> there are not many of them

left, i guess. [laughter] >> there are at least t and it sounds like there are more. i know john mccain. he went to the naval academy. i consider him a friend, so i supported him, yes. i have supported democrats as well. >> when you joined the board, what was your biggest impression that she had not been on the board before. what was the biggest surprise for shock that you had? >> too often, too many things

were done intuitively. i thought insightful and probing analysis was necessary. there was one report where a couple of us were upset when they ask for it. we do $10 billion to $12 billion in sales per month. our capal budgets are huge. the development of a new ego engine -- ito-engine -- eco- engine was on its way. how many of you drive bmw's? that great engineering. you would be glad to know that gm makes your transmsion. that german engineering is made in detroit.

[laughter] but do you have to make everything? that was the an f nine in gm culture. it was the gm way -- it was the anathema in gm culture. it was the gm way. >> when you produce a car now, your labor costs are still roughly the same? >> yes. they are the same. >> some of your premises jurors, have you talked with them about -- some of your predecessors, have you talked with them about mistakes made? >> yes.

in some respects, i think a fresh perspective and someone who has been in other industries and seen other issues -- as you know, we still look at a lot of turnaround's and recapitalization. i am not sure that i was totally with less -- totally witless. i still meet wita subset of the prior management. i want to know whether this thing. i do not have to necessarily accepted, but i need to know what outside informed auto executives think about what we're doing, tendered auto executives. some is very insightful for me. the more points of view i get, the better i am able to make better decisions. yes, i have gone to their homes. i have played to be with them on

occasion -- not literally, but from an auto perspective. >> what would you say you're a two or three biggest judges are? would you stay up at night worrying about the most? >> i tell everybody that i worry about everytng. when i was on the floor of the -- we just ran like dogs for weeks. one of these reporters told me i looked like hell. thank you. that was just before the camera went on. [laughter] then i saw him in detroit when we rolled up the volvo. he said, "you look better, but yodo not look great." [laughter] i worry about the culture. i worry about our cost position going forward. i think management has to have integrity.

i do not mean that we do not have integrity. but i just put out a memo to all of our people that there will not be in salary increase this year. if the sushi it -- if we see issues where we are not compatible, we can address it. the structural cost of a 2% or 3% increase in a company that is in a cyclical industry -- it is unbelievable how predictably cyclical this industry is over the last 100 years. up, down come up, down. before the great recession, we actually intellectualized and said by more incentives in industries that will be impacted, but not as severely. in an up market, you look for

cyclical companies. this is a cyclical company and i deny the deputy to be a manager anymore. -- and i do not get to be a portfolio manager anymore. we want to invest without counseling and ratcheting in our capital programs. we had $20 billion in debt before the bankruptcy. we have less than $4 billion in debt today. the pension liability is $10 billion today. we had $28 billion in cash on our balance sheet and we're looking at the pension liability now. we have to have a robust balance sheet. people look at me like i am from mars now, coming from a private equity firm where we bought predictable cash flows against unpredictable cash flows and had a debt and we would pay the debt down. this is a different game. we're playing football, not rugby.

it is kind of the same thing, but different. you have to ship the business mol and intellectualize the problem much more than it was done before. if you look across this cost structure -- i want incentive pay. when meet with the union every four weeks to six weeks, that may sound strange to some of my former friends. the head of the uaw and the gm vice president, i have invited them to board dinners and to the employee meeting that i referenced before. i have them introduced. they are our business partners. i do not want a conteious relationship with the spirit --

with them. you have heard a lot of noise in the public forum about -- you guys going to go hard back at management? their prosperity is tied to this company's prosperity. they happen to have their representative between me and the average employee. but i have tried to breach that. i go to a plant a month. i tell you, it is so invigorating and affirming to walk through the plant and people are yelling at you. "hey, dan!" you cannot be trusted without giving trust. and you cannot have credibility. the immediate response is that i want you to think about this. and they say, "i have seen that from ceos and management does not get a pay increase."

they will not get a base pay increase this year. i do nothing that we can do that if we do not lead by example. it is about me. it is about the management team. it is about the relationship with the union. can we be trusted? i think we have to invest -- when i talk about product, will we have the right products? what do we want to be remembered for? i am probably a little thin skin having workedn private equity. i am not as tough as i used to be. [laughter] it was important that we have credibility in what we do. it extends into our products. what do we want to be remembered as? for example, when i look back to

the dumb things that management did coming out of post world war ii, we had an oligopoly. people bitch about the complaint about government involvement in general motors. in 1960, they said that they had too much market share and we should break them up. were they involved in the ?ompany didn'then of course they were. how do we want the company rembered? if you look back at 1960 and they were giving away posted- retirement health care which was corrosive to the cost structure. they give these job bank in perpetuity. it was such a burden on the company that it made us not competitive. and you say, who did that? they did it because there was no competition after the war out of europe because it was bombed

out. so was asia. we were roaming the globen a trade perspective. and these guys just wanted a piece. before they agreeith the labor contract that gm or chrysler negotiated as long as they did not get competitive advantage. they -- i have had people come to me and say, "well, what about the labor agreement from 2000 to 2025? -- two dozen 25 -- 2025?" i do not want to leave my predecessors -- and no one to leave my successors with that question. if somebody looks back to 2015

and 2010 and i passed opportunity to not only have leading market share and a dynamic position in china, but i also tied up with the number one manufacturer in china from an economic point of view -- have been to china and have met with the senior management at shanghai auto. that is a great partnership. and we went in 50/50 in india -- one in three people on the earth live in two countries -- india and china. we would be fools to pass this up. instead of committing the company to a bad strategy -- they put half a billion dlars into it. i know that sounds like a lot of money, but it is not that much in the grand scheme of things. i want that time it intohina and into asi in such -- in some respects, we can be considered global motors and not general motors. >> how much stock is held by people outside the unite

states? >> 8%. >> your market share in the u.s. is roughly what? >> last year at this time, we were 17.5%. we are now up to 19% >> and your market share in china is what? >> almost 30%r 40%. >> but that is -- almost 13% or 14% of. >> but that is almost what you're selling in the united states. >> yes. >> has anybody in the government called to thank you for getting $23 billion back in the coffers of the treasury? >> not all of it went to the government. the canadiens got a little bit. they own a very small amount. bu yes. [laughter] >> were they fuses or just --? [laughter] polite? >> i thought you were more effusive here today.

i suppose, when i am gone, there will be. but they are not now. i have a job to do. >> let me ask you one last question before we have a couple from the audience. what was the best aice that somebody gave you when you became the ceo? was it a business college or somebody -- to give you the best advice? -- who gave you the best advice? >> probably not to take myself too seriously. this job -- if i had shown of leicester, you would have filled that table. it is overwhelming the public exposure that you getn this position. i was surprised at that. so i think it was due not take yourself too seriously. >> we have time for some questions. speak up if you do not have a microphone. just speak up loudly. >> it used to be a status symbol

to drive a gm car, not a german car. listening to you, i hope that those days will come back again and driving a gm car will make us all proud outside the u.s. but my question for you -- about six months ago, the ceo of ford talked about the sinand how they are introducing all this new technology to help the driver in the car. do you think that is a different jeter -- a differentiator or is it something to do with the cost structure? >> it is the basic value

proposition -- good car, a great quality, and is durable. that is why we have made huge progress. the average residual -- what is the car worth up to three years to five years? gm has increased anywhere from 500 basis points to 900 basis points in the last year. we're comfortable with their competition. -- we are comfortable with our competition. you cannot be good one year or two years. you have to do it over five years or 10 years or 15 years. on star, when i gothere, it had not morphed yet. i had one of the senior nextel people go into one star. it was safety and security. the people were crushed and i was like -- this is "i have

fallen and i cannot get up" automotive equivalent. believe it or not, if you are driving a gm car with all-star -- with on star on it, i can tell you what your will pressures, your transmission food, the air in your car or your tires. -- your transmission fluid, the air in your car and your tires. i had a mercedes before this job. i kept having flat tire and there would not tell me which tired was. by the way, is it not warm in here? [laughter] i got up this morning and it was 32 degrees. [laughter] what we will do with on store -- you saw social media. we just loaded it into it. we do not want to create bad habits with distracted driving.

i met with the secretary of transportation must make. you will be able to digitize and download -- for each gm car, you have a unique phone number. i did not know that before when to gm. if someone is running errands and you want to get ahold of her if she never turns on her cell phone in the car, i can call the car and it would texture. it would verbalize to her. hurt texting and we would formalize five basic questions that she could answer yes or no or "i cannot talk now ." we are working on focus groups so that we can bring i without distracting. for example, we were driving out to annapolis. what restaurant do go to? as you know, we have gps.

while the car is moving, you cannot punch it in for six reasons. all we have to do is turn on on store and say that you want to go to the same restaurant in annapolis. she was sick, i will download for you. -- she will say, i will download it to you. i think people will look at our cars are all five-star rating from six perspectives. quality, in terms of the way we do supply chain all-around the world, we have gone to global architectures and global platforms. so the cars that we build in china or germany or the united states are basically the same. we test like no one has done before. the quality of the car has risen dramatically. so how do we differentiate? styling. i take an interest in all of our commercials.

i look at every one of them. i want to look at every design of every car. there are certain things that a co should do and there are certain things that they should -- that a ceo should do and there are certain things that they should stay out of. >> in advertising, you mentioned that your predecessor was on tv all the time with ads. we we see you on tv with any ads or are you not sure yet? >> no, you will never see me on television. going to something i said before, want to have a hand in them. i do not know how many saw the ads over thanksgiving -- we all fall down? [applause] that was a big risk for us. it reinforced the bankruptcy. but you know everybody has troubles in their life. we had trouble as a company, as a family. to say we've made mistakes -- we

failed. we appreciated it and we wanted to say thank you. i got letters and the mills that said, "-- and e-mails the said, "your humble." but you said thank you. why do the banks not say thank you? why did a id, who got $100 billion, not -- why did aig, who got $100 billion, not say thank you? i am very am bald and very interested. >> time for another question. -- i am very involved and very interested. >> time for another question. >> the culture for gm r years was the gm way. inouye for a long ti that you had more brands than you could stain -- you knew for a long

time that you had more brands then you could sustain. >> i talked to all the employees. the news was that we were in bankruptcy in 39 days. i do not think that we did irreparable damage to the brand. there is a segment of the population that use it as a bad storm that past. so we have to change. for example, wwent from four mols to eighmodels. i keep the front page, the cover of "fortune magazine"rom the mid-80's. and they had oldsmobile, pontiac, chevrolet, and buick. there we exactly the same.

i want brand identity. i want brand attributes. i want brand equity. now we have what i call swindling. when your car's look exactly the same -- my dad always said gm cars. when we were not doing so well, we had pontiacs and then you got an oldsmobile and then you to view it. what was the difference with the gm car? gm is not a brand. it is a holding company. chevrolet is a bnd. buick is a brand. now these lines are broad enough so that we can talk aboutrand avenues associated with styling and reliable value. that is the understated elegance of the buick. before, with it -- before, there were too closely bunched. we needed to intellectualize the marketing. to get your point, you say,

well, w many engine types to we have? we have 18 engine types. maybe i am not a car guy, but i was an engineer once. what is the difference between a 1.4 liter engine and 1.5 liter engine. it is one-tenth of a leader. [laughter] i know, but why do we have a team dedicated to 1.4 and another t1.5? then there is variants, whether it is terrible, gas, diesel -- whether it is turbo, gas, diesel. we have made it too complex. now we are going from 18 down to eight or nine. i know there are reporters in the crowd. what do we do if oil goes to two hundredrrel or

dollars per barrel? last time, we were largely suv- crossover-driven. now we have what we call a t three have -- a three -- a t300. you have the volt and that is impressive over the next couple of years. -- and the lineup is impressive over the next couple of years. so what do we do if it is $120 next year? that is the question before the executive committee. i have a strong point of view on that and i do not want to influence it. i do think we have a plan that is not in final form, but is giving prefer on how

reposition -- but is getting pretty firm, on how to reposition the company. it will boil down to not so much design and style, the top half of the car, but how do we drive the propulsion system? propulsion is the key to understanding billions of dollars. we have hydrogen cars that are really cool. if it is that clean, let me put my face down by the muffler, by the exhaust, and i d. and you could look at the guy thinking, oh, god. [laughter] its water. it is just water coming out. but the car costs $500,000. [laughter] in the chemistry of the engine, you have a lot of platinum.

platinum is more expensive than gold. the actual chemistry has to be worked out before we can develop these new propulsion systems. but electrification of the car is critical. we have the public -- we have the plug in-hybrid vehicle. we want them in every one of our models. we do not want the cadillac to be left. for example, the view across, which i think is the finest automobile for its money -- for la crosse, i buick bluecros think it is the finest automobile for its money. the government is looking at 60 plus miles per gallon for 2025. how do we achieve that across the portfolio? bill mcgowan, the founder of

mci, was a big mann my life and a great mentor for me. when he made me president, he said, do not try to look into the future. imagine yourself by five years and where you want your company to be and how to get there. this company takes so much investment and development to extend into three years or four years or five years increments -- you have to say, what will you do in 200025? -- in 2025? i do not think that they did in 1960 the things to seal the fate of my predecessors. there were good guys. there were victims of structural cost -- they were good guys. they were victims of structural

cost. >> i hope it was water coming out of the exhaust pipe. [laughter] i want to thank you on behalf of the economic club of washington. [applause] let me give you a gift. hold on. >> thank you. >> it is a map of the district of columbia. thank you all very much for coming out. [applause] 2 -- by america's cable

companies. >> "washington journal" continues. host: bruce stokes of "national journal," what is the european debt crisis matter to the u.s.? guest: because we are increasingly integrated as a transatlantic economy. there are more than 3 million americans work for european countries in this country. our second largest trade partner is europe, after canada. a huge percentage of the profits of corporations, for business in europe. --, from a business in europe. when the economy struggles, as it is now doing, we have to pay

attention to that and be worried about how it is going. host: specifically, is the entire euros on having trouble? or is this a country-by-country basis? guest: some countries are doing worse than others. ireland had to be bailed out. there is great belief that portugal may be the next in that line. some worry that spain may follow, although bench economists would disagree. there seems to be a domino effect going hundred on. -- going on. greece was the first country to go. if that continues, we cannot be totally sure that the french and german economies are not also be affected. host: how did the average debt to a situation where they would need to be bailed out, and how was the different -- how did the irish to get to this question were they would need to be billed out, and how is that different from before? guest: the irish had a run-up in

real-estate prices, and as a result, this frothy market, this overheated market, eventually collapsed. the bubble collapsed, as the housing market it in the united states. banks were holding mortgages that were under water at the property was not worth what they meant it for. the banks got in real trouble. the government stepped in to bail out the banks because they were afraid that the condom -- they were afraid of the economy imploding. the was on the shoulders of irish taxpayers could debt and deficit in ireland got too big and they had to be bailed out. host: why the talk about portugal as well? guest: the portuguese economy will like the contract next year. -- likely contract next year.

they have not maintained competitiveness with the rest of europe. and the housing bubble that you have in spain and ireland -- but they still have gotten over extended. portugal is a fairly small country. but the problems stop at ireland or portugal, this is manageable. very bigwever, is a country. if it spreads to spain, and that is a debatable point if that happens, we ought to be worried. host: bruce stokes our guest, with "national journal." this is his article, "why your matters c- -- why europe matters." but you report that u.s. banks

have $1.70 trillion, with a t, in outstanding loans in europe. guest: there has been concern in the past by german banks and lending to places like greece and ireland, and french banks and their lending, but what we have not paid attention to is after germany and france, the u.s. is the largest bank lender in europe. now, most of all loans are from places like the netherlands or germany, which are fairly stable and we think they are in good shape. but we would be kidding ourselves -- if the german bank loans go bad in places like spain, that will affect the german situation, and that will, by extension, begin to affect our banks. we have to be worried about that. host: wendy euro is owned looks at the u.s., do they see us as a debtor -- when the eurozone

looks at the u.s., to the seat us as a debtor nation? guest: we have the ability to print money if we have to. in the short run we can solve the problem. we are in a much better shape than in ireland or portugal or even spain or italy. i think the more immediate challenge reface is that a slowdown in europe could cause a slowdown in the u.s., could make it very difficult for the president to meet his goal of doubling exports over the next five years, which would help our economy, and we could see a slowdown as a result. host: these are facts and figures from the u.s. census bureau. i just want you to walk us through these a bit. in 2009, u.s. imports from europe and u.s. exports to europe, $281 billion, $220 billion, negative balance is $61

billion. in 2008, u.s. imports, $367 billion, $272 billion. there was nearly and $80 billion drop in some of these figures. host: we have to be worried about this. we saw in 2002, when the european economy slowed, and then in 2009, a drop-off in our exports. we have to be mindful that we need to somehow pay for all the imports we do into this country. if our markets in some of the biggest economies in the world, even a larger economy than the united states -- those exports begin to fall off, our deficit to become much worse. host: why do they call it a sovereign debt crisis? guest: because what effectively

has happened in europe is an increase -- in greece and ireland -- is that you haven't governments become more indebted than -- all governments are in debt it, but more indebted than they can sustain. in ireland, what you saw was private sector get transferred to the public sector, which enormously increase the public sector obligations. governments have to issue bonds to pay their bills. they are constantly doing this, all the time. and they are sovereigns, and terminology. it is a sovereign debt problem. what we have seen in europe is that investors are charging governments more and more to lend money. the comment way that people measure this is how much would you charge germany to borrow money from you and how much

would you charge agrees or ireland? -- greece or ireland. the irish and the greeks have to offer more to investors than the germans do. when those spreads begin to increase, the country is in trouble. host: bruce stokes is our guest, "national journal." dallas, a democrat, you are on the air. caller: how is it going, bruce? guest: hi. caller: is it possible for us, the rich as part of the united states -- are we able to help these other countries to bounce back and do it in ways that will not cause us to go into much more debt, or it is possible just to say that or we carrying a lot of this debt into other countries? host: thanks. guest: a very good question, and

to allay your concerns, we are not increasing our debt to help out these countries. the only way in which we directly help these countries, or indirectly, actually, is through the international monetary fund, which is part of the bailout and a grease -- in greece, will be part of the bailout in ireland. we are a very important member of the international monetary fund. when the imf lends to these countries, the money we have contributed to the international monetary fund has some obligations attached to it. but we already have passed legislation to meet our commitments to the imf. there is no need at this point to increase those commitments. but we should be mindful that that things go from bad to worse in europe, there may be more

demand from the international monetary fund, and then it is not beyond the realm of possibility that we might have to increase their contributions. host: is this endangering the euro as a currency? guest: i think there is a growing sense that the euro is in danger. we have to separate -- when people tell us that, there is a group of conservative economists who since the creation of the euro have said this could never work, and now they are coming out of the woodwork and saying, "we told you so, this could never work." they created a common currency with a common monetary policy, and there is an interest-setting body called the european central bank, but not a comment fiscal policy. we in the united states have a common monetary policy and common fiscal policy. at the time, people said, "book, you have to of both or neither -- look, you have to have both

or neither." the debate going on in europe now is do we have to create is the policy? that means lost sovereignty, said the taxation to the ability -- central taxation capability, a number of things that individual countries in the european union are reluctant to give up. but i do think that the challenge facing the euro is they may have to create a common as a policy or it --, and fiscal policy or some countries may have to leave, which may create other negative consequences. host: florida, republican. caller: the basic trade agreement is crazy. it should be a fair trade agreement. losing this amount of money in transactions, it hurts our economy when we are strengthening their economies. it needs to be equal or it is not going to work.

we have talked about this for 20, 30 years now. another thing is, a comment that you made, i believed it was about the euro not going to work in the euro is going to come out strong in the next year or two at least with no problems. we are going to be the ones that is going to be hurting. guest: keep up with things. i think you are right over time -- two things. i think you are right over time. trace needs to be cyclical -- traded needs to be cyclical. we have gone through a periods when we have had a trade surpluses with european union said, and more recently we have run trade deficits and they've run surpluses with us. balance, -- as long as there is the general balance, that is

fine. we should not mistake our trading relationship with europe with our trading relationship with china, which has been very negative for a very long time, or our trading relationship with japan, which is a totally different magnitude. but i agree with a color that the goal of trade policy has to be -- the caller that the goal of trade policy has to be worldwide that the u.s. runs a more balanced trade arrangement with the world. that is the only thing that could be sustainable. host: what is the fed's exposure to europe right now? does it have any? guest: we should not confuse what the fed did, which is not involved at the time the crisis. there was money -- got involved at the time of the crisis. there was money from european companies that might have been

based in the united states. there is a separate activity that the fed engaged in during the crisis, and conceivably might be called upon to do again, which is a swap arrangement with the european central-bank, where we would make dollars available to them in return for their currency. on paper, it would be no different. we would have assets back on our part and they would have dollars awhich they could use dealing with the crisis. it would be controversial, however. we shouldn't kid ourselves. what the potential consequences of this crisis going -- of the potential consequences of this crisis going badly in europe is that the fed would be asked to help out the european central bank, and even though an argument could be made that it would not expose us in any significant way, i think there would be people in congress would raise serious questions. host: i want to show you what we have from the federal reserve. "overseas firms getting federal

reserve money." european central bank, $8 trillion? guest: right, right. but we have to understand that that was not a gift, not a loan. it was an exchange, a swap of assets. now, one could argue, what of those assets they gave us to deteriorate in value, etc.? but at least in the short-to- medium term, i don't think that is a serious issue. the reality is that the fact that these numbers are out there, the fact that the caller has been asking and you have been asking, is a political problem for the fed. it is particularly a political problem for the fed to they have to do more of this. it is not beyond the realm of possibility if the european crisis gets worse that the demands on the fed could grow. let's be frank, it would be in

our self-interest because of what we have talked about before, that an impression of the european economy -- implosion of the european economy -- we would suffer. we should not kid ourselves about that. host: next call for bruce stokes, oregon. caller: good morning, steve. if you would give me just a little bit, we had the gentleman talking about trade agreements. i was a little miffed, because you can find things made in america -- i was a little amused, because you can findings made in america. there is machines and technology, devices, which we're going to tax, and yet we are told that we are our consumer society, that is our strength. but we don't seem to be able to find too many american products that are still made in the united states that we can purchase, even when we look for them at. guest: well, i think the caller

is onto something. when we make our own adjustments, we have been running, up until the crisis, 5.8, up 5.9% of gdp trade deficit. that clearly was unsustainable. it contributed to the crisis. we need a more stable tradable said, and that means we have to produce more for we consume -- more stable trade deficit, and that means we have to produce more of what we consume. that means we have to do a number of things. we have to have a weaker dollar for a long period of time. we have to have conscious policies that encourage production in this country. that would have to be preceded by a debate in this country whether we do it industrial policy or whether that is un- american to have industrial policy. host: bruce stokes is now a

contributing editor to "national journal." he began there in 1984. he is also a senior transatlantic fellow with the german marshall fund. what is that? guest: the german marshall fund was created in years ago by a grant from the german government to thank the u.s. government for the marshall plan. there were so appreciative of our help rebuilding europe after the war that they've made a grant to the u.s. government, which the u.s. government used to create this independent -- no connection to the government -- but to create this independent think tank that was existing to facilitate exchanges, intellectual activities, research on the transatlantic economy. now, what is interesting, a sign of the globalization of the fundthe german marshall is active in dealing with china, india, japan, because all the past to do with the transatlantic economy and cannot

avoid that. host: linda, go ahead. caller: hello. good morning to you. i would like to find out if bruce knows anything about, like, these -- every country in the world is going through this, especially europe -- well, especially us, to -- but the banks behind it. any foreign banks, to you know that? can you give me a hint or tommy? -- or tell me? guest: i am not sure what the caller means by "behind it." i believe that the failure to regulate the financial sector contributed greatly to the financial crisis. after that, we can blame the financial sector, we could also blame ourselves for not regulating it appropriately. host: the european countries getting in trouble as well

because of their so-called safety nets, their questions? -- cushions? guest: that is a very interesting question, because for a longtime conservatives in the united states have said that european countries are not growing as fast as ours because they are too soft on people who lose their jobs, they are too strong of a social safety net, no encouragement to work. in fact, when the crisis hit, the fact that they had a social safety net to stimulate the economy had turned down -- there were payments for automatic and they went to people and they spend the money and kept the european economy from going down as far as it might have otherwise. it is true that many european countries had a larger segment of the economy that is dependent on the state. but actually, a study by oecd, a

think tank of industrial countries based in paris, showed a couple of years ago that if you accurately count what we spend, not just our operations from congress, but tax expenditures, for example -- do we subsidize people to the tax code rather than to the budget -- rather than through the budget -- even the most generous of european countries, like denmark, only spend a few percentage points of gdp more on their social safety net than we do. we spend more than the europeans do. the question is, do we spend it wisely? we spent almost nothing in this country retraining workers. they spent more of their gdp returning workers. it is no accident that the danes have been more resilient in this crisis than the united

states, or some european countries that don't spend it that way. host: ronald tweets in -- guest: it is an interesting question. i think that one of the things we have lacked in this crisis is any sense of shared sacrifice. that question of goods back to what happened during world war ii, when people were encouraged to save as part of the war effort. subsequent studies, historical studies, suggests that well, a lot of things we did during the war -- can drive, people collecting old tires, contributing to the government -- probably has little effect on the war effort. but it mobilize the public and suggested we were all sharing and the ever -- sharing in the effort. what we have lacked in this crisis is the sense of a shared concern. at a personal level, i think it is not the case -- the reality

is that the government has probably reached a limit of what it is going to spend. we are probably not going to spend much more. we need consumers to spend more if we get out of the crisis, and we need to do it in a regulated way so that it does not become another bubble. host: mark, canton, ohio, republican line. caller: i appreciate your expertise, sir, on the transatlantic issues. i have two questions, what about germany. they seem to be the strongest economy in the eu. i might be wrong about that. but germans come from the anecdotal point of view, germans i talked to, they seemed relatively anxious to maybe break away from the eu because they seem to be carrying the brunt of the load for the other countries there. that is part wondered if i could get your views on that -- that is part one. if i could get your views on

that. and i could prognostic tight on whether there would break away. -- prognosticate on whether they would break away good and how can you justify the imf helping the other countries? guest: a very good questions. i would say that the frustration among the german public with the euro in particular is a rising. i have been involved in public opinion surveys, both of which showed that a majority of germans still want to keep the euro and not go back to the deutsche mark. more recent surveys have shown that the number may have gone down a bit. i think there is real frustration by germans that they, the german taxpayer, is paying the bill for this. i think that what the germans failed to recognize is that they would either pay the bill to help the irish or the greeks or, if there is a crisis in europe,

their own banks are fairly weak. they have not on the type of reform that most people think they need to. you will pay one way or the other. but i think the viewer is correct that there is growing frustration in germany with the euro and the european union. on the imf, it is interesting. there is this frustration, why should we be helping out the imf and bailing out other countries? that presumes that if we don't help those countries, and they don't reform, we are unaffected. the more likely outcome is if there was not the imf, we would have to be directly bailing out these countries and we would then become the bad guy, because we would be the ones imposing, as the lender -- you take our money, you have to fix this and that -- and it people blame us.

it is convenient to have the imf blamed in the stand -- in these negotiations. that is why they brought it into the irish bailout in the end of the day, the germans to not want to be blamed in the public eye. host: growing demand for american goods overseas pushed exports to their highest level. "the commerce department says the trade as it never to $38.7 billion in october -- trade deficit narrowed to $38.7 billion in october. exports rose 3.2%, the highest level since august 2008. sales of american made machinery and farm products and automobiles fueled the growth. imports dipped, with lower demand for foreign oil and 4- made cars." guest: i think we have to be

careful. monthly statistics a jump around. the decline for oil is probably a significant contributor here. we should always remember that a huge percentage of the monthly import bill is for petroleum. that is probably a sign of our own weakness, not a good thing. but it is good, we need to come over time, increase our exports and decrease in imports, narrow the trade balance. we need a relatively weaker dollar. one of the dangers of the european crisis is that if money flows to the united states because people are afraid of keeping money in the row, our dollar could strengthen and that could make these numbers worse. host: bob, maryland, please go ahead. caller: perfect intro. this kind of an accounting question, but it passed with

foreign policy and defense policy -- it has to do with foreign policy and defense policy when we sell these fighter planes to somebody, i suspect that the purchase price counts positively on our trade balance. but when we station troops in foreign countries, say, germany or japan, if they offset the cost of that, do those numbers show up in the trade balance anywhere? otherwise, how does foreign aid show? is it accounted for in the trade balance if there is no material exchange? guest: those are good questions. one of the criticisms of foreign aid is that a large portion of it often has strings attached, which requires recipients to buy computers or medical equipment or whatever, buy it from the united states. from the american taxpayer's point of view, that is a good thing. it helps the trade balance. from the recipient of foreign aid's point of view, it may not

be the most efficient use of money, because they might be able to buy it more cheaply elsewhere. on military equipment, a very good question, because we need to watch this for it closely. often those deals have agreements embedded in them or if we send jet fighters to a country, and obviously, the country would in theory have to give us x billions of dollars, part of the deal is that it has to be offset rate maybe lockheed martin or boeing has to buy something from that country. the impact on the trade balance, which would come up by the headline, look very positive, is almost completely offset by the language in the deal that requires us to buy something from india or saudi arabia or whatever. often we don't get the bank for the puck out of those deals --

bang for the buck out of those deals that we would hope for. host: christine in fort lauderdale. caller: i was one of the first to get a master's degree in economics in brussels. my first comment, the u.s. dollar. the dollar declines about 60% since the euro inception in 2000 for. -- 2004. how do we increase the exports? we don't produce. i suspect that half of this is gone forever. host: christina, i apologize. very quickly, a second point, and that we are running out of time. caller: second point is the trade agreements -- hello?

host: we are listening, go ahead. caller: the trade agreements were created for free trade of labor, boots, and capital. free movement of capital -- [unintelligible] trade agreements don't serve the purpose or advantage to equalize the standards of living. host: i apologize, we're running out of time. guest: i think the caller is right that without a policy to subsidize, although subsidies are part of it -- but to nurture manufacturing in the united states, a weakened the dollar will not in itself solve problems.

although we have to understand that it sends the right signals to the market that is better to buildings in the united states then import them. guest: well, i think in retrospect that that is one of the problems, that central banks are always afraid to take the punch bowl away from the party. i think that as alan greenspan's old phrase. let's face it, if alan greenspan, and i am not defending him, but if he had radically raised interest rates at the time of the bubble, there would have been a torrent of criticism of him for prematurely denying people the benefits of this great economic bowl. the lesson we should learn is that is often what we pay these guys to do and they should be willing to take risks.

host: springfield, missouri. caller: mr. stokes, i would like to talk to you about the panama canal. whenever that is finally widened, you will find that this will really affect our economy, with the interstate freight that goes across the continent now. we will bypass through the panama canal and will affect us did something for you to look into. guest: to be honest, i never thought of that. it is my own ignorance here, and i will look into that. very interesting observation. host: tennessee. good morning, dave. caller: i just had a comment and question. i agree, as far as trade is concerned, it has got to be cyclical. that has -- there has got to be

benefits on both sides, and we have to know more about the countries we are dealing with for benefits to take place. i hear a lot about regolith -- regulation, regulatory problems, and i don't think people are looking at the regulators enough. when you of got a central bank involved their names as what is going on -- their name it says what is going on. you have a central bank attempting to centralize power. i want to get your feelings on that, and figure out white more attention is not being paid to those responsible -- why more attention is not been paid to those responsible for the crime scenes. guest: the caller and i may differ on a basic philosophical premise. in the era of globalization, there are some functions that need to be centralized, and there are others that need to be decentralized.

one of the challenges that we and the europeans and others face is how to get the balance right. i do think the major economies need a central bank. the caller is right that we should be more rigorous in our demands on the central bankers to make the right calls. as we talked about before, in retrospect, it would appear that we did not raise interest rates fast enough for the crisis took place. we may have been able to take the edge off of that. that was a failure of regulation. but to suggest that somehow if we had been more decentralized in our monetary policy, we would have had a better job, i don't think that would be the case. host: bruce stokes of "national journal" is our guest. the topic is the european debt crisis. what is going on in england with the protests -- are we going to see that happen with other

countries as more and more budgets are cut or look at? guest: one of the things that we as a nation have to be a bit worried about is that europeans are going through a period of austerity going forward. there will be consequences of that austerity. when is the rising of tuition rates -- one is the rising of tuition rates in britain. there will be cuts in social welfare spending, cuts in defense spending. the already spent a lot less than we do, and we have complained about that for years. there will be less of that. the burden of defending the world will fall even more on our shoulders as a result of this. one of the great accomplishments of post-world war ii era is peace and stability in europe to to the extent that that depends on the social welfare net in europe, if that social welfare net becomes more porous

and more people fall through the cracks and there is greater political instability as a result, we have to realize that there may be some consequences here that will destabilize the transatlantic relationship in ways that probably won't be in our self-interest. ,ot much we can do about that but i do think there is a consequence. will we see that kind of social protest in the united states? my guess is not to that extent. there had been historically, at least in recent times, less of that than in the u.s. but we also or in uncharted territory. we have an unemployment rate that has been higher than at any time since world war ii. if that persists, we will see a type of instability. what we have accept political instability when we have these

huge shifts in -- what do we have accept political instability when we have these huge shifts in congress in short period of time? host: you have 30 seconds. caller: my question is about the moral hazard of bailing out , and thatonomistes creating political problems in other countries, and allowing them to spend, knowing that they will get billed out themselves? guest: great question. europeans are asking this right now, how much of a penalty should bondholders pay? the contradiction is that even suggesting that in 2013 bondholders will have to take a hit, the markets went wild and the government had to intervene to help out ireland. there is a timing problem here. i agree with the caller, though, that at the end of the day bond holders have to take a hit in

the crisis. host: what is going to happen next in ireland? guest: there will be essentially an election, very soon, actually. there is some strong belief that there will be a change of government in ireland. host: in which direction? guest: in the direction of people who basically are opposed to the deal they had a strike for the bailout. now, the irish government is still obliged to follow the requirements of the bailout. but by the same token, it is a new government and they could resist that a and this could

if iran wants and best in its energy sector, the to turn to china. if there are three major chinese companies. i expect they are under investigation by our state department. if it will be interesting to see whether those countries far unnamed and sanctions. if if not, then we will have pretty much adopted the policy of the last 13 years. what the state department does, they do not say they are intentionally violating the law, they say they are announcing a particular investment that they never got. it will be interesting to see whether one of the three major chinese oil companies is named and subject to sanctions. i want to review the

comprehensive iran act. has that already been done? >> ok. i will go through it rather quickly. i know we have some c-span viewers that may not watch the full 20 hours of this conference. this became law in july of this year. it should have been adopted by 2002 when i ran's nuclear program was announced. what does it do? first, it turns in the foreign banks that facilitate iran transactions or terrorism or transactions with the revolutionary guard corps and makes it extremely difficult for them to do business with the united states. the key to the effectiveness is to identify what is the

revolutionary guard corps and its affiliates. only 50 companies have been designated. there are hundreds. we need to designate more. the key part is sanctions on investments in the energy sector, the iran sanctions act applied those to drilling operations. this adds them to those who help iran refined petroleum or to sell refined petroleum or to provide insurance, financing, or shipping of refined petroleum. at a very minimum, what this has done is to force iran to stop being able to transport petrochemicals, to build

facilities to provide gasoline. i am told that will inversely affect engines in iranian borders. that is not a silver bullet or knockout blow, but it is, in a fact -- but it is in effect. iran has begun to reduce its subsidies to subsidize pricing on gasoline to tehran motorists. there are a whole list of sanctions that could be applied. some are major, some are minor. it would make my day at the state department would apply even the most minor sanctions. another deal with u.s. government contracts. it does not require affirmative action by a bureaucracy to enforce.

if you want to get a u.s. government contract and bid on it, the executive of a company must sign on behalf of not only your own company, but other corporations that you are not engaging in sanctionable activity. they were put forward very recently. i look forward to executives reading this over and calling all of their affiliates and getting the message that you have to choose -- do you want to do business with iran were doing business is difficult, or do you want to share the u.s. government's business? others include sanctions for those who export technology to the iranian government to restrict unbiased information. a ban on imports. this is from iran. this is something i have been

working on since 1998. madeleine albright allowed iranian imports into the united states. i went down to the floor and said there was blood in the caviar. i hate to tell you, but the epicurean in this country will have to get by with northern caspian caviar. [laughter] it is hard to tell other countries not to do business with iran when you cannot even stop the import of dried fruit and caviar. an important part of the bill deals with investment. it used to be that fiduciaries, including private trusts because they faced the risk of job losses saying a local government cannot have a foreign-policy or

that they have a fiduciary duty to seek the highest possible return. it adversely reflects that rate of return. we have liberated them from that concern. a lot of us are working state- by-state, locality by locality. the law is blot on how it is drawn. it could keep companies from getting state and local contracts. it is not that we will not sell your stock, we may not buy your product. that is as far as this law goes. there are a lot of things that were not in it. that is why i introduced the stop iran nuclear weapons program. i am pleased to say that senators casey and brown have introduced the same with a few changes in the united states senate. clearly we will not pass it this year. it is an opening effort for next

year. what does this do? first, it says whatever a u.s.- based company cannot do, it cannot do to their subsidiaries. second, in regard to the revolutionary guard corps, it pushes the treasury department to designate a lot more organizations and prohibits any commercial transactions. if you cannot sell paper clips to be a revolutionary guard court for their troops. [laughter] it deals with the sale of sovereign bonds by the iranian government, including the oil companies. the purpose of the act was to prevent iran from getting investment in its petroleum sector. they can achieve the same thing by borrowing the money and hiring the technicians at themselves. let's prevent them from either of those, especially borrowing the money. it sanctions those who paid in

advance for iranian oil sense that is a way of loaning money to the iranian government. it denies tax benefits, chiefly amortization on expenditures, to any organization or -- where any of their subsidiaries have violated the act. a controversial part of that i have not persuaded the sectors to include in their bill prohibits the export of aircraft parts to iran for the end of it -- for the reasons i have identified. it prohibits those who engage in activities from participating in contrast with opec. we achieve that administratively already. i am pleased to see the board of directors have gone in the right direction. it requires the 401k from

investing in firms that violate the act. it prohibits providing mining and milling equipment to iran. that could be used to mine uranium. it allows states to impose sanctions on insurance companies that invest in iran since insurance is regulated at the state level. it focuses our attention -- this is only in the house bill. i was not able to persuade the centers to include this. that is to aim at the world bank and the imf when they provide benefits to the iranian government. there are still loans being disbursed to the pipeline where world bank money is being went on terms to the iranian

government. likewise, a huge deal at the height of the crisis was an increase in special rights of to under $50 billion at the imf, basically underwritten by the u.s. taxpayer. there are 1 billion of those rights. we need to pressure these two institutions to change their behavior towards iran. we have a provision that only a tax lawyer would love. if you do best in a company engaging in the wrong kind of activities in iran and reinvest it in a company that is pure, you get no capital gains tax. that pretty much summarizes the bill that we have introduced this year and that we will reintroduced next year. that bill will also include every good idea i can get from

this room or anybody watching. the design of the bill is going to be a complete mess of every sanctioner we can impose all with the goal of getting the government in iran to choose between its nuclear program on the one hand and its survival on the other. i do want to point out, and i regret it, that any sanction will adversely affect the iranian economy. there are real people in iran that are blameless. it is the same thing we saw in south africa. we hit south africa with sanctions. we heard of the economy. most of the paint was felt the bite the blacks in south africa. nelson mandella has thanked us for the sanctions. i look forward to the day when a democratic iranian leader, the leader of a country that complies with the nonproliferation treaty, thanks

us. i will open it up for questions. [applause] >> who wants to begin? go ahead. stand up and do it. >> an issue that has been batted around here like a cat playing with a mouse is helping with the green movement. that can happen in two ways. it can happen by the government or by individuals. individuals in need a license from the treasury. a license has been applied for. there has been no response from the arizona. -- from the eurozone. part of your legislation might

include a provision mandating that treasury grants and licenses upon application, unless they can come up with a rationale that jeopardize the security of the united states -- they cannot just say that they disagree. >> i have been pressuring the administration on this. we ought to do it by legislation as well. you are absolutely right. our prohibitions on exporting certain things to iran was never intended to make more difficult communications efforts of iranian citizens. >> we have done it and we will

do it again. thank you for the question. >> the scenes efforts of the state level, especially in california, is there anything in the legislation that drives a large, publicly funded funds from iran? >> the bill already allows every fiduciary public or private to did best -- to divest. if you are running a union trust

fund or any kind of private pension plan and were worried that you get a the lawsuit from somebody who got a better rate of return by investing in terrorism, you are now protected from that kind of lawsuit. we have facilitated the divestiture by state and local governments to face an additional argument that they could not take part foreign- policy issues into concern. all ofake both arguments the table. now it is up to us to go union by a union, company by company, city by city, and state-by- state. i especially thank the comptroller of my state. >> i am a long fan of yours. we work together on the u.s.- israel energy cooperation act.

talking about that, i am curious in terms of buying oil from iran why the provision is just for people who were paying long-term interest. why can we not have an embargo? >> i began this discussion by painting the most extreme sanctions. if it were within my power to do so, i might very well go in that direction. what we have to do is not just get it passed congress -- part of that is what level of anger you face from europeans in the world. the second thing is as long as there is one country in the world willing to buy iranian oil, they will sell that at a lower price. if we can get them down to only

one or two buyers, that buyer would push them down on the price. the bottom line answer to your question and so many others as to why something else is not in the bill is i am not sure i can get this one passed. >> you have a ladder of things you would like to see this progress. you're trying to get a sanctions bill passed and signed. the second is enforcing the sanctions. they will fall apart without enforcement. is that sort of the strategy? >> it is not like i am all that incremental. [laughter] unfortunately there are 440 other members.

>> my impression is that you and your colleagues on the hill are pretty much in agreement. this is a bipartisan legislation. they are putting the brakes on. >> we have been trying to pass new legislation. we did not pass any until 2010. that reflects mostly the lobbying of the foreign-policy establishment. it reflects mostly in their ability to influence the senate where they have more influence than the house. we will continue to try to push. i guess i can think this administration for letting us get what we were able to get. we could not get it before. yet there were things that we would have gotten if they had supported them.

>> we are going to ask for three questions to be taken in order. we are over time. you can respond to this questions as you wish. >> i was at the hearings about a week ago where we talked about enforcement of the sanctions. one of the things you mentioned is that we were unable to get the cia to do a classified briefing. i know nothing happens that quickly. it is just one week lately. in general, should congress not be able to get something like that from the executive branch office without question? if we cannot achieve that, what chance is there of getting real cooperation? >> let's hear a couple more questions. >> i wanted to ask you on your legislation, there is something like $8 billion of judgments on behalf of victims of terrorism that involve the i iranian government.

they were unable to collect on those judgments. the u.s. treasury has not been very cooperative of the families of the victims. it would be helpful if there were something that would require the treasury and the board of governors to cooperate and identify, for example, money that comes into the new york banking system in u-turned transactions. there was money that was frozen two years ago. there is much more chance to think through the new york banking system every day. we could reall put a crimp in iran at's support for terrorism by doing something like that. >> we will take one more back there. claudia? >> -- in the u.s. system, it does not allow the imf and world

bank. there are essential programs in iran which involve u.s. money for everything from development and so forth. and you given any thought to taking any measures against transfers for those? >> i will let you respond to this questions. we are over in terms of our rental of this room. [laughter] >> as to the first question, there is an issue as to whether they should be taken off of the terrorist list. the -- many of us would prefer the state department make those decisions rather than congress legislating for a particular entity. all the other hand, the u.s. court of appeals has ruled that the state department has another job. the indicating clearly the most useful to the united states

organization that is on the list. i am not say they are the greatest state, i am to say they are the most useful of those on the list. what i ask for is a briefing for the state department and to hell is going for their review. that would involve the facts when they are done and the law. hud is the state department require that? the courts are looking at it. that was pretty weak. all the other hand, the cia briefing was arranged for the state department into what the facts were. the legal analysis is not available. for those of my colleagues that are interested, they know what they did and when they stopped doing it. i, again, i hope the state department reaches the right conclusion expeditiously rather

than having the -- rather than having to legislate item by item. at least the court thought they had not done a very good job. as to the u-turn transactions, i want to take a look at that to see how much pressure is put on the iranian government and the prospects for getting it. i have been supportive in general of those with judgments. at the same time, those with judgments against iran exceed by far all of the money we are ever going to get from iran. we want to make sure that people in is cut -- you want to take the iranian government's pike, but you want to make sure the slices are in some proportion to the claims. as to the united nations, i want

to take a look as to what they are doing in iran. i faced tremendous resistance world bank and the imf. i am the only person to have voted against the huge imf package that was in the economic crisis, simply because it would benefit iran. there are lots of issues on that. for meat that was critical. -- for me, that was critical. >> thank you so much. thank you all for coming. we have some questionnaires so you can suggest how we can do a better job next year. we will call on you more often for your questions. thank you so much.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> next, secretary of state hillary clinton on middle east peace talks. then, president obama and former president clinton meet with reporters. live at 7:00 a.m., your calls and comments on washington journal. >> just in time for the holiday season, "the supreme court" is

being offered to c-span viewers at a very special price -- just $5 plus shipping and handling. this handsome hardcover edition is the first book to tell the story of the supreme court through the eyes of the justices themselves. 10 original c-span interviews with current and retired supreme court justices including stephen breyer, sandra day o'connor, and sonia sotomayor your. it gives readers a personal and compelling view of the supreme court. 16 pages of photographs detailing the architecture and history of the supreme court's building. to order copies of the supreme court at the special price of $5, good to c-span.org/books and click on the supreme court book. place your order by december 15 to receive your copy in time for holiday gift-giving. >> now, secretary of state

hillary clinton talks about u.s.-israel relations and the way forward in the mideast peace process. her remarks come after the u.s. dropped efforts. it was a key policy demand for returning to the now stalled peace talks.

>> let me start by introducing someone who is an inspiration to israel, the u.s., and the entire world. you have led efforts to promote children's health in america. as secretary of state, you have crossed the world multiple times dealing with issues of utmost importance for our country. you are at the forefront of protecting women's rights and you have given courage to say many women who live in fear. now, you have turned your head to the middle east peace. well, that is the most difficult task of all and that is an understatement. i am sure i speak for everyone

tonight when i say how proud and thankful we are that you or the secretary of state. i personally wonder when you have time to brief period with todd's help -- i personally wonder when you have time to breathe. madam secretary, this is the first time you have addressed us as secretary of state. for that as well as for everything you do for our country and for the world, thank you. ladies and gentlemen, please join me in giving a very warm welcome to a special lady, secretary of state hillary rodham clinton. [applause] >> thank you very much for the

>> i appreciate the introduction, but nothing is imminent so far as i know. [laughter] it is a great pleasure for me to be back here as part of this very important for me. i appreciate your introduction. i appreciate the friendship that you have given to me and to my family. you have been friends for many years. as anyone who knows, he is unparalleled, but also is a champion for peace. he represents, in many ways, the best qualities of both israel and america. he is generous.

he is irrepressible. he is absolutely unstoppable. he has dedicated his energy and support to so many important clauses and helped some many people. but he probably has no deeper passion than the one we are here discussing tonight -- strengthening u.s.-israeli relations and securing a just and lasting peace in the middle east. i thank him and all of you. in particular, i appreciate your bringing us together to discuss the crucial issues surrounding the middle east. i also want to acknowledge all of the colleagues from israel who are here, certainly you will

hear in a minute from the defense minister, barak. there are other members of the government here. i am delighted that the prime minister is also with us. the prime minister has accomplished a great deal in a short amount of time under very difficult circumstances. along with president abbas, he has brought strong leadership to the palestinian authority and he has helped to advance the cause of a two-state solution by making a real difference in the lives of the palestinian people. mr. prime minister, welcome again to washington. [applause] >> you do not have to precede cables to know we are meeting during a difficult time in the

pursuit of peace in the middle thet but them i under staind frustrations of many feof your across the world. i want to focus tonight on the way forward. and have a resolution that since the conflict once and for all and what it will take to finally realize that the illicit but essential. i want to offer the deepest condolences of the american people for the lives lost in the recent fires in northern in israel. israelis are always among the first to lend a hand to an

emergency strikes anywhere in the world. when burns, said the offer help. it was remarkable to watch. turkey sent planes. egypt and jordan donated chemicals and equipment. the palestinian authority despite firefighters. the night his state was also part of the effort, deploying expert firefighters and thousands of gallons of chemicals and suppressants. it was testament to the deep and enduring bonds that unite our two countries and the partnership between our governments and people. the night is states will be there when israel is threatened. to israel'smmitment

security and its future is rock- solid and unwavering. that will not change. from our first days in office, the obama administration has reaffirmed his commitment for me and press -- commitment. for me and president obama, it is a deeply held personal conviction. over the last two years under president obama's leadership, united states has expanded our cooperation with israel we have focused in particular on helping israel meet the most consequential threats to its future. our security relationship has grown broader. we have not just work to

maintain the military and, we have increased it to new advances like the iron dome, a short range brought the defense system that will help protect israeli homes and cities. there are exchanges and joint exercises. for israel and for the region, there may be no greater strategic threat and the prospects of a nuclear arms in rahm. you just heard my husband speaking to that. let me restate the united states is determined to prevent iran from developing nuclear weapons. from our partners, we have implemented sanctions this fight is being felt in tehran.

they have faced the tough choices as the theme for this forum for them. we get stepped up efforts to block the transfer of dangerous weapons and financing. i ran and the proxy's are not the only threat to regional stability or to israel's long- term security. the conflict between israel and the palestinians and between israel and arab neighbors is a source of tension and an obstacle to prosperity and opportunity for all the people of the region. it denies the legitimate aspirations of the palestinian people. it poses a threat to israel's

future security prevent it is at odds with the interest of the united states. they have convinced some that this conflict can be waited out were largely ignored. this view is wrong and dangerous. the trends that results are in danger in the decision of a jewish and democratic state in the historic homeland. israel they should not have to choose between preserving both elements of their dream, that that day is approaching. at the same time, the evolving technology of war, especially the exchanging reach, means that

adobe is increasingly difficult city guaranteed the security throughout the country without implementing peace agreements that in these threat. there is growing support for violence ideology. it undermines the prosperity of the middle east. the united states look at these trends. we conclude that ending this conflict once and for all and achieving a comprehensive regional peace is important for

safeguarding israelis future. we also look at our friends the palestinians. we remembered the painful history of the people who never had the state of their own. we are renewed in our determination to help them finally realize there a legitimate aspiration. the lack of peace, the occupation that began in 1967, continue to deprive the people of dignity and self determination. did this is unacceptable. ultimately, it is unsustainable for bo. for all the people of the reading, it is in their interest to end this conflict and bring a lasting comprehensive peace to the middle east based on to

state or to people. for two years, yet heard me emphasize that negotiations between the parties is the only path that will succeed in securing their respective aspirations for them this remains true today. there is no alternative other than reaching mutual agreement. the stakes are too high comedy pain too deep, and the issues too complex for any other approach them. they had a long way to go and they have not yet made the difficult decisions that peace requires. like many of you, i regret that

we have not gotten far their -- farther faster. yesterday, i met with negotiator ourd underscored support. it is time to grapple with the core issues of the conflict. starting with my meetings this week, and this is exactly what we are dealing. we will also deepen our strong commitment supporting the state building at work with the palestinian authority and urged the state of the region to develop the content of the arab peace initiative and to work toward implementing his decision. over recent months, prime

minister netanyahu and abbas have met face to face several times prepare a i have been privileged to be present during their meetings. i am also had the chance to talk to each leader privately. these were meaningful talks that build new clarity about the gap that must be bridged. both sides decided to get there to pursue a framework agreement that would establish the compromises on of permanent status' issues and pave the way for a final peace treaty. reaching this goal one not be easy. the sides are real and persistent. the way to get there is by engaging in good faith with the full complexities of the core issues and by working to narrow

the gaps between the two sides. by doing this, the parties can begin to rebuild confidence, it demonstrates their seriousness, and hopefully find enough common ground on which to eventually launch direct nicosia asians and achieve that framework. the parties have indicated they want the united states can continue -- to continue our efforts. the united states cannot be a passive participant. we will force them to lay out there is used without delay with a real specificity. we will work to narrow the gap, asking the tough questions and

expecting substantive answers. in the context of our private conversations, we will offer our own ideas in a bridging proposals were inappropriate. we entered this with clear expectations of both parties. , me say a few words about some of the important aspect of these issues. on borders and security -- the land between the jordan river and the mediterranean is finance. -- finite and each side might know which parts belong to each. the messy love -- they must agree on a single line.

the palestinian leaders must be able to show their people of that the occupation will be over. israeli leaders must offer their people to recognize the borders that protect israel's security. they must be able to demonstrate that the compromises needed to make peace when not meet israel will merkel. -- vulnerable. it must deal effectively with new and a. emerging threat families and on both sides must go confident and live free from fear. on refugees, this is a difficult and emotional issue. there must be a just and permanent solution that meets thing means of both sides. on settlements, and this is an

issue that must be dealt with by the parties along with the other final status issues. the position of the united states has not changed and will not change. like every american administration for decades, we do not except the legitimacy of continued settlement activity. we believe the action is corrosive not only to peace efforts, but to israel's future itself. finally on jerusalem which is important for jews, muslims, and christians. there will be no peace without an agreement on this, the most sensitive of all the issues. the religious interested people of all faiths around the world must be respected and protected

. we believe their good faith, the party sinn mutually agree on an outcome that realizes the aspirations for both parties for jerusalem and safeguard its taxes for people around the world. these issues are woven to get there. considering a larger strategic picture makes it easier to lay the compromises that must be made on both sides. we are not moving forward in a backing. from day one, the obama administration has recognized the importance of making progress initially reenforcing tracks. negotiations between the parties in institutions as they prepare own state.ern their it is caught in some negotiators

and helps create a climate for progress. even as we engage both sides with an eye toward eventually restarting direct negotiations, legality and our support for the efforts. we recognize that a palestinian state achieved through negotiations is inevitable. i want to commend them for their leadership in this effort. under the palestinian authority, security has improved dramatically. services are being delivered. the economy is growing. it is true that much work remains. -- to reverse a long history of corruption and mismanagement. palestinians are crowded the progress they have a sheet.

the world bank concluded that if they maintain the momentum in building institutions and delivering public services, it is a "well-positioned for the establishment of a state at any point in the near future. the night did states is continuing our efforts to support this important work along with other international partners including the government of israel. to bring together key players to focus on solving challenges, we have launched an initiative, partners for a new beginning chaired by madeleine albright and walter isaacson. we are working with the authorities on a range of issues. i was pleased to announce the transfer of 1 senger $50 million

in direct assistance to authorities. this began drilling new and much needed wells. with recent israeli approval, we soon will begin several water in protection projects in gaza. these and other efforts to expand water treatment have already helped well about the palestinian families gain access to clean water the united states is working with the authority, israel and international partners to ease the situation in gaza and increase the flow of commercial goods. we are pleased with israel's recent decision to allow more

exports from gaza. it will foster legitimate economic growth and there. this is an important and overdue step. we look forward to seeing it implemented. we look forward to working with israel and the authority on further improvements while maintaining pressure on hamas. we recognize israel and renouncing violence and the fighting by past agreements. this is the only path to achieve palestinian dreams of independence. security forces did what bogart. where, and play

with new security that contributes to the economic position as they continue to be more professional and capable, even to israel to facilitate the efforts. we hope to see a curtailment of intrusions. four of the progress on the grounds, a stubborn truth remains. well economic and progress is important and necessary, it is not a substitute for political resolution. the aspirations of the palestinian people will never be satisfied. israel will never enjoy a recognized borders until there is a two-stage solution that ensures dignity and justice for all. this outcome is in the interest of israel's neighbors. the arab states have a pivotal

role to play in ending the conflict. egypt and jordan have been viable partners for peace. we will also continue our diplomacy across the region and with our partners. senator mitchell will be this week and ford jerusalem and then will visit another -- a lot of capitals. the arab states have an interest in a stable and secure region. they should take steps that show israelis, palestinians, and their own people that peace is possible and that there will be in tangible benefits if it is succeed. in make it easier for the palestinians to pursue a final agreement. their cooperation is necessary for any future peace between

israel and syria. we continue to support the vision of the arab peace initiative, a vision of a better future for all the people. this proposal rests on the basic bargain that peace between israel and her neighbors will bring normalization from all the arab states. it is time to advance this vision with actions and words. israel said -- should seize the opportunity while it is available. know how much the united states and other nations around the world work to see a resolution to this conflict, although the parties themselves will be able to achieve it. sometimes, i think both parties seem to think we can prepa.

we cannot. even if we could, we would not because it is only a negotiated agreement between the parties that will be sustainable predella the parties themselves have to wanted. the people of the region must have to decide to move beyond the path that cannot change and embrace the future they can shape to get their the -- they can shape. they have not been ready to take the necessary steps. going forward, they must take responsibility and make the difficult decisions that peace requires. this begins with a sincere effort to see the world from the other side eyes, to try to

understand their perspective and position. palestinians must appreciate israel's legitimate concerns. israelis must accept the lead tenant territorial aspirations of the palestinian people. ignoring the other side needs is self-defeating. to have a credible negotiating partner, each side must give the other the room to build a constituency for progress. part of this is recognizing that its trade the and palestinian leaders each have their own domestic considerations that neither side can afford to ignore. it takes two sides to agree on a deal and to size to implement a deal. both need credibility and standing with their own people to pull it off. this is also about how the leaders prepare their own people

for compromise. demonizing the other side will only make it harder to bring each public around to an eventual agreement. by the same token, both sides need to give the other credit when they take a hard step. as we grapple with the core issues, in each side will have to make difficult decisions. do they deserve credit when they do so. it is not just be the united states that acknowledges news that are made. to demonstrate their commitment to peace, prime minister netanyahu and prime minister -- president abbas should take the steps and focus on the four questions even in a time when we are not talking directly. to demonstrate their commitment to pace, leaders should stop

trying to assign blame for the next failure in focus instead on what they need to do to make succeed preventts unilateral efforts are not helpful and undermine trasust. the united states will not shy away from saying so. america is serious about peace. we know the road forward will not be easy. we are convinced that peace is necessary and possible we will be persistent and press forward. we will push the parties to grapple with the core issues. grapple with the core issues.