>> he singled out the individual mandate. this is the part of the law that says you have to carry health insurance or pay a penalty. and he says this is unconstitutional. he says congress has never been allowed to legislate that you must buy something that you wouldn't otherwise buy. he says what they're trying to do is regulate nonactivity rather than economic activity. >> what argument did the administration make that they could regulate that? >> what the obama administration says is that while it is technically nonactivity perhaps, what

you're really doing is choosing when you were get health care and who will pay for it. if you go without insurance, if you choose to do that, what you're saying is you'll choose to pay for it later out of your own pocket or quite possibly have the rest of the public pay for it. if you're uninsured, you may not be able to afford your care. they're saying the decision to go without health insurance is, in fact, a form of economic activity and can be regulated by congress. >> now, this was the case that was brought by a virginia attorney general, but there are other health care cases that are going to challenge the health care law out there, right? >> right. the biggest is in florida where 20 state attorney generals and governs are challenging it. that's the one that is going to lead the pack once the ruling comes out there. >> when you say lead the pack, that kind of makes us think a little bit that there is more coming down the road in terms

of appeals. eventually, does this wind up in the supreme court? >> i'm pretty sure that's where it is headed. the florida case, there is another judge who is a republican appointee, he has hinted he will rule the same way that judge hudson did in virginia today. those two rulings against the law, if in fact the florida ruling comes out that way, those are the ones that are sort of going to get the most attention as they go through the courts. >> with this ruling in virginia today, this is something the administration thought was coming. how big a blow is this to the health care law? >> based on what judge hudson had said earlier, the administration was bracing for defeat in virginia as they are bracing for defeat in florida. it is not a huge surprise. the one element that we weren't 100% sure of beforehand is whether he would strike down the implementation of the law. there he did not. he said he is not going to issue an injunction to people who are continuing to carry out the law. he is going to let it go

through the allegations process. >> on the virginia case, is there any decision on how soon the decision will be appealed? >> i'm not sure. i expect it will be appealed very soon. i'm sure next year the fourth circuit court of appeals will be hearing arguments. there is another judge in virginia in the western district of virginia who ruled in favor of the obama administration. there is already conflicting opinions for the appellate courts to sort out. >> peter landers with the "wall street journal," thanks for the update. >> you bet. >> now reaction from the white house on the ruling. spokesman robert gibbs is also asked about the tax package. this part of the white house briefing is 15 minutes.

>> the umbrella is there to mark the seat? that is interesting or the tourists should follow that direction. all right. mr. feller. >> i picked the umbrella, i'll leave the crickets alone. all right, sir. >> two topics on the health care ruling, the judge says that the you be checked empans of the power would invite unbridled exercise of federal police powers and not about health care but about the individual right to choose. abot

about health care, but it's about individual right to choose to participate. doesn't this indicate or validate a central argument of skeptics, which is that despite your intentions you can't require people to participate a lot like this? >> well, in a couple of port things for perspective, then. first and foremost, obviously the administration argued on the other side and i do think it's important to keep some good abt the fact that there are now 20 or so cas making their way through federal courts. the court -- this was the eastern district of virginia. 115 miles away, the western district court of virginiruled that november 30th, to uphold the same provision that the eastern district and its judge had ruled against. so i think the other cour the

eastern district of michigan on october 7th ruled in favor of the law as it was passed. so i -- aain, we disagree with the ruling. obviously, the individual responsibility be portions of the affordable camera are the basis and the foundation for examining and doing away with insurance company discrimination on behalf of preexisting condition. obviously, without individual responsibility portion of the low, you could not -- you could not find yourself dealing with preexisting conditions because the only people who would likely get involved in pursuing health care would be that very sick.

and i briefly, that would be enormously expensive. >> given that it is so fundamental to the whole lot any of these different court rulings, is that clear to you that this is going to go to the supreme court? >> i am not a legal scholar, ben. i think at it is safe to say because there is several other cases in the pipeline and because you've got disparate corporal aimed 115 miles away, that the bill will continue to have its day in court. i do think it is important that even this judge ruled that the bill continues to move forward in terms of its implementation. and obviously, the individual responsibility ethics of this legislation were to go into effect until 2014, so they sometimes work this through. >> just wrap up this part, what gives the weight of companies that ultimately will prevail if this case continues tgo to the attached >> again, i think -- i am

certainly not, ben, a lawyer in rms of the legal arguments that underpin each of the priests. but i would say challenges like this are nothing new in terms of laws that have come before the courts in the past in which -- in which our position as prevail. work confident that it is constitutional. and quite frankly, the three corset render decisions on this decision, to uphold our favor. >> democrats in the house are talking of targeting the estate tax provisions that they're unhappy with and maybe dealing with added an amendment or legislatively changing the language. as the white house urging those democrats not to do that if that could cause the whole deal to unravel? >> obviously, ben, the senate is going to vote on -- on a procedural vote that little bit later on this afternoon. i think the president is

encouraged by what we here in the senate and believe that the legislation will pass that hurdle and the one important step closer to passage. in terms of -- i'm not goin to get involved in sort of what the amendment process might be in the house at this oint. i think you have seen whether it was in here on friday with former president clinton or whether you have seen justice morning that this is something that has broad bipartisan support in the public. it's an excellent -- it's a good agreement. it's an excellent agreement on behalf of millions of americans who will see their taxes go up. those that are impacd in hang lost a job in this recession will have the security of knowing that their unemployment benefits won't follow the link to politics.

in the middle class willnjoy a significant tax cut in the payroll tax portions of this bill. so we are encouraged that we get cler and closer each day to having this agreement become law. >> can you talk about the initial reaction to the health care ruling? were you surprised by a? and how concerned are you about the fact that their are a lot of other lawsuits out there? >> again, this is the third federal -- this is the third federal court that is rendered a decision on this portion of the affordable care. and two of those courts have upheld it. so ihink we are confident that the affordable care act to move the appellate. >> is the next best for you? >> you know, the department of justice will have to make decisions about appealing this

particular case. my sense is that that appeal decision is something the likely make, but i would point you over to them. >> and just a question -- larry summers gave a farewell speech today at a think tank, and i'm just wondering how the decision-making is going on his replacement. do you still have to do that before the end of the year? >> you know, look, i would say that it is -- i am not sure that that is going to get done by the end of the year. obviously, a whole host of legislative -- lots of legislative work around the lame duck with a budget, taxes, start, "don't ask, don't tell," the dream act. there are a whole host of things that have taken up a bunch of bandwidth and a bunch of time and it's unclear to me whether that will get done before the end of the yer. jake.

>> it appears that one of the main reasons why the judge will decide -- ruled that congress exceeded its constitutiona power is because for what i can only imagine were political reasons, the word tax in terms of the penalty for those who don't have insurance, who can afford it, was replaced by the word penalty. and he said because the legislators who drafted -- >> let me -- i have been getting ready for this. i've not had a chance to read that and ignore folks and you are taking a look at it as well as the department of justice. i don't have a direct response to the judges, some of the individual reasoning mean i've got to have an opportunity to look at it. >> i mean, this is how it is. >> i'm not doubting what you're reading. i'm just saying i've not had a chance to read it or hav a chance to talk to counsel here about how they take care. >> all right, well, the question would be, was in retrospect a mistake to change the

terminology from -- i understand you' not ready to answer right now. maybe get back to me. >> i need sometime to have somebody take a look at it. >> canou get back to me on at point, though? >> i'll see whether they can, yes. >> you keep talking about two other cases where the judge ruled otherwise. and those, it's my understanding that those were democratic appointed judges a in this case by republicans. his politics playing into any of this? >> i., dan, don't know the answer to that. the judges clearly make different decisions based on different points of reasoning. i think our belief is that the health care act wil go forward and that it is constitutional, that it improves people's lives and particularly this is the

basis that it said, of the provision that allows us to filly address the lingering discrimination against those who have a preexisting condition. it also, by the way, you know, your health care, my health care, everybody has health care in this room pays the uncompensated -- the cost for the uncompensated care when somebody doesn'tave health insurance, gets into a car accident, becomes thick and then they're going to the.ear to the emergency room or becae of the seriousness of their illness and not having regular backups or primary care. all of that is -- that is paid for by you and me. we seek to address that in the affordable care act. that's why i think the progress we've made in offering tax

credits for those to afford to be able to have a minimum set of health care -- a minimum standard of health care that allows us not to pay for their health care in that sense, the health care that they need. >> can you tell us what the president's reaction was? >> i have not seen the president since the ruling. >> is there any annoyance at all, the signature item for the president and for this white house continues to be challeed, something the president says is critical for all americans, yet he continues to be challenged in a court? >> again, i can't speak to the motives that -- it would appeal only spaces -- i don't remember quite the coverage when both courts upheld the law, but that jt fromhe cheap seats. well, you do mention sometimes

when planes land safely, there is not breaking. >> can i take a crack at a question? >> you can try. you're sort of like the district court. one court ruled -- go ahead. >> the congress is about -- that wasn't about to take office in january is much more predisposed to oppose the health care law. do you worry about this one politically will help provide momentum for either starvation of the health care law through lack of funding for stronger action against the health care law? do you think this politically will be ammunition? >> i don't because i think the position that is held by those who seek to repeal the law i think has been their position both in the courts ruled against their position and when courts rule in a way that upholds their larger position. so i don't think that impacts it. i think it is important when you

hold these provisions back or when you these provisions, that the impact of that is, as i said, if you are somebody that cannot get health care because of preexisting conditions, to guarantee that when this is fully implemented in 2014, they go beyond what do that. that's a no win like this and i think that's important for everyone to understand. >> thanks, robert. given the signal that henry hudson has said in previous writings on this back in october, for example, which are then surprised if he had done anything other than what he did? >> within, i don't think this was the decision today was how he decided it was a surprise to anybody. >> are not a legal scholar and i'll accept that. but anyway, the president is -- >> i didn't go to law school like you did, chip.

that is worked out so well, you are here in the front row of the briefing. [laughter] >> sedan a well. i hear the theme music to l.a. law. [laughter] >> but the president was a legal scholar and still and he said you haven't talked to him since he came down. does he get personally involved in the arguments? >> not that i'm aware of with justice. obviously in a regular meetings with them, white house counsel bob bauer will update in -- will update him on where different courts are, you know, not long ago and turned those the western district of virginia. that was something we covered.

i don't honestly remember and i can go back and ask and see whether or not he has read. >> as he put in his 2 cents and make suggestions -- >> i'll take that question. >> u.s. diplomat richard holbrooke has died. he served as president obama's special envoy to pakistan and afghanistan. in 1995, he helped broker the bosnia peace agreement on friday he suffered a torn aorta and underwent 20 hours of surgery. richard holbrooke was 69. house majority leader steny hoyer said earlier that he expects the tax cut package to pass the house later this week. the senate moved forward on the measure earlier. congressman hoyer spoke at the national press club. this is an hour.

>> the house of representatives shall be composed of members chose ever second year by the people of the states. so says the constitution. at a time when some americans were pushing for our leaders to be selected for life, our founders made a revolutionary choice. they created a government that was bound every two years to listen to the people's verdict. we ought to listen to the people all the time, but the verdict we must listen to every two years. that has been a great source of our strength. it's also been the source of our greatest test as a people. no former government is more demanding than ours. that's why benjamin franklin called our government a republic if you can keep it. the behaviors that keep a republic are the civic virtues, i sacrifice, self-discipline and self-restraint.

they are the virtues that neighbors meet into a community and communities into a nation. they are the virtue ewes that cause us to look further into the future than just the next two years. our politics may run on two-year cycles, but our problems do not. we won't get to full employment in two years. we won't get out of debt in two years. we won't get our middle class out of this historic hole of inequality and lost opportunity in two years. in two years, there will always be another election and there are easier ways to win than taking on the long-term

structural problems that defy quick answers. it's easier to borrow and leave someone else with the bill. it's easier to rail against spending without cutting anything of substance. it's easier to stir up culture wars and cultural resentment. all of those tactics have proved successful, but they're also poisonous to our future. what a republic needs is leaders who are willing to look further even if it costs them. in 19193 marjorie voted for the budget and it cost her her seat in the congress. that budget helped quiet 20.7 million new jobs and the biggest surpluses in our history. history proved her correct, but it cost her her seat. i believe that history will say the same of so many of our

colleagues in the 111th congress who made political sacrifices to do what they believed was right. our form of government also demands i sacrifice from its citizens, not just in times of austerity, but at all times. it demands citizens who see through politicians promising everything at once. it demands citizens who understand that the contrived drama of the news cycle is trivial next to the slower, more profound cycles that shape our future. the cycles of he had indicating each new generation of children who have innovating technologies that inspire new innovations in turn or are struggling to bring our nation's books into balance. when we look at last month's elections, we see a great deal of anger and of fear. much of it is warranted. that anger can be valuable if it pushes us to confront

america's deep challenges, but not if it pushes us into two more years of zero some warfare in washington. that anger has been tempered and i believe that it can be. america is not convinced that either party has all the answers. on november 2, i believe the voters called us to find common ground on real solutions rather than simplistic sound bites. for real problems, problems like unemployment, economic growth and deficit and debt reduction, we need to seek common ground. november 2 certainly wasn't a victory for the democrats, but republican senator elect from florida was also right when he said we make a great mistake if we believe that tonight these results are somehow an embrace of the republican party. they were results from a public

that wanted us to share responsibility, to find common ground on our common problems, to put forward a domestic agenda that thinks in decades, not election cycles or news cycles. i believe that the agenda must be founded on job creation, the strength of our economy and our middle class and real fiscal responsibility. when it comes to jobs, i think there is a growing recognition on both sides that manufacturing must be a part of a return to long-term strength. both parties understand that manufacturing is one of the most important sources of well paying middle class jobs. both parties understand that manufacturing has taken a severe hit over the last three decades which saw the number of american manufacturing jobs cut nearly in half. and both parties recognize that reversing that trend is a critical part of being the kind of nation we want to be, a

nation of innovators and producers. a nation that competes and wins in the global market and keeps building so much of what makes the world run and happily the world wants. those goals are behind as you have heard me say in the past to make it an america agenda, a plan to rebuild america's manufacturing strength. and though the make it in america agenda has been initiated by democrats, it an agenda that appeals to the broad spectrum of americans who see themselves as principaled pragmatists looking for policies that work for themselves, their families, and their country. in the 111th congress, republicans and democrats were able to line up behind helping american investors get their products, inventers get their products to market faster making it cheaper for american

manufacturers to obtain the material they need to produce goods, helping veterans find jobs in the growing clean energy sector and more. labor unions and business alike join to support our manufacturing agenda because they share an understanding that it's not enough for america to innovate new technologies. we have to bring them to scale here in america. that is it's no longer enough to simply invent and innovate and develop here and then watch our ideas roll off assembly lines in other countries. that pattern has cost jobs and hollowed out our communities across america. because innovation eventually follows manufacturing, it has set us back on a range of products that will be vital to the 21st century economy, everything from computer chips to photo voltaic cells to

precision optics to electricar batteries. one of the founders of intel said if you continue to manufacture overseas, soon your inventers and innovators will follow and go overseas. both parties have an interest in changing that dynamic. so i'm hopeful that we can make progress on manufacturing bills in the next congress, bills to strengthen job training partnerships between workers, businesses and educators, bills to help job training programs to the jobs that manufacturers most need filled, bills to support american exporters, fight for a fair trade playing field for our workers and companies and hold china and others accountable for the unfair subsidy it gives its own companies through currency manipulation. the creation for an environment in which manufacturing job growth is both desirable and profitable should be a joint

responsibility. job creation will still be the measure of success in the next congress, but we also need a congress that's committed to investing in economic fundamentals and growing our middle class. from that perspective, i think the outcome of the tax negotiations between president obama and republicans is mixed. on the one hand, i think that extending unemployment insurance, cutting payroll taxes, and keeping taxes low on incomes under $250,000 are proven steps to grow the economy, help families in need and create jobs. but i simply do not believe that the deep debt that comes from republicans' upper income and estate tax cuts is worth their minimal impact on job creation. those cuts, in my view, harm our long-term prosperity with little short-term gain in return. they are found on the fiscal fiction that the billions

including from the best among us will have a positive effect on job growth. that's why this deal is giving democrats some pause. having said that, i believe that action is necessary and compromise was inevitable. in the next congress, we have to move beyond emergency measures. the recovery act, in my view, helped stop a depression, but now it's time to invest in the fundamentals of long-term self-sustaining growth, growth that is not founded on debt. i think the investment manager, jerry grantum said it real. "growth depends on real factors. the quality and quantity of education, work ethic, population profile, the quality and quantity of existing plant and equipment, business organization, the quality of public leadership, and the quality, not quantity, of

existing regulations and the degree of enforcement. the intelligence of our investment in real, lasting growth will determine whether we meet our goal of emerging from the recession as a stronger country. there is another reason why emergency measures aren't enough, the state of our middle class. even if our unemployment rate were instantaneously sent back to the 2007 levels, we would still be a country with a declining middle class and with levels of inequality we haven't seen in nearly a century. that is an issue about which all of us should be concerned. the middle class was struggling long before the crash hit. since 1980 in actual dollars, the average income of the bottom 90% of americans has not budged. over the same period, the

wealthiest 1% has come to control nearly a quarter of all income. and now our colleagues on the republican side of the aisle are going to the mat for a high estate tax exemption that will exclusively benefit 39,000 of america's wealthiest families. our challenge then is to foster smart growth that lifts the middle class. and whether we will reach that goal depends on whether we have the discipline to make and sustain a long-term commitment to making things in america, make it in america, and promoting science and education. if we do have that discipline, we can find common ground on investing in outstanding education and basic research. they have little economic incentive to perform on their own, smaller companies, but can turn a small public commitment

into enormous dividends. as we remind ourselves anytime we use the internet, a computer mouse or g.p.s., all of which were substantially enhanced by government investment and basic research. this commitment should not be a partisan one. even though the once bipartisan science investments of the america competes act unfortunately failed to win republican support in this congress, i am still hopeful that the partisan equation can change now that republicans share responsibility for our growth. that's especially likely when republican business allies remind them of the dismal economic outlook for a country whose investment and research in development as a fraction of the economy continues on a four-decade course of decline, a country that has fallen behind japan in patent application and is on pace to be overtaken by china as well.

and a country who is k through 12 math achievement continues to rank at the bottom of the developed well, -- world, that is simply unacceptable. it should be an especially loud wake-up call to see students in chinese school systems significantly outpacing american students on that same assessment, scoring 20% higher in math and 15% higher in science. so i'm hopeful in the 112th congress will see a stronger commitment to basic research and math and science education. i also believe we can find common ground on education reform that builds on the successful race to the top program to bring more accountability and data-driven results to our classrooms while at the same time providing the

necessary support to schools and teachers educating our most at-risk populations. this kind of commitment to research and education is the foundation of a stronger, more competitive middle class. it also is the foundation of real economic growth and of the new jobs we need. in fact, according to a study from third way, if our economy grows by 2% instead of 3% per year over the next decade, that difference will translate to an unemployment rate seven percentage points higher. simply 1% difference in the growth of our domestic product. another area for common ground on growth follows from the point about the quality, not quantity of existing regulations. congress needs to take a serious look at our international competitors'

regulatory policies and ask how they contribute to job creation. we need to look at the quality of our own regulations. so what extent are the regulations we have protecting the status quo and to what extent are they hindering innovation. are there places we can make it easier to start new places and easter to grow them by simplifying and streamlining the regulations we have. all of us have heard the cries of help from those who want to add to our country's free enterprise but feel frustrated by the government hurdles they confront. democrats must stand ready to work with republicans and they with us on research, education, reform, and streamlining regulations. there are, of course, some core principals which we should not and will not compromise. expecting and ensuring that the health of our people and our environment safeguard and protecting our consumers from

unfair practices that put them unknowingly at great economic risk. the rules we enacted for wall street were necessary to curb the irresponsible and unchecked actions that led to financial crisis. these rules will help protect jobs and savings from another devastating crash. they move our economy away from the damaging cycle of bubble and burst toward a pattern of more and consistent steady growth. for the same reason, we will protect americans' control over their health care. it puts our companies on a more equal footing against international competitors who benefit from lower health care cost. it frees potential enterprise to start business on their own without worrying about losing health coverage and it brings more fairness to the lives of middle class families who for years have paid more and more for less and less secure

coverage, coverage that has often failed to be there when they needed it most. in both cases, democrats have worked to create rules for fair play that protect and promote economic growth. if democrats want to be the party of the middle class security, we must also be the party of growth. we have built a remarkable network of programs to make america's life more prosperous, more dignified, and yes, more secure, from social security to health care reform. but if we want to keep that network in place, especially as our country ages, we can't neglect or devalue the importance of strong economic growth which help those progress stay viable. along with opportunities, we must also recognize obligations and limits. if we are to protect america's opportunities for the long haul

and maintain america's place in the world, we must find common ground to restore america's fiscal soundness. the threat of fiscal turmoil is concrete, not abstract. and it would be felt in the life of every american unsustainable debt eventually means skyrocketing interest rates and a tanking economy. that makes it harder to get a college education to start a business, to buy a house, indeed to plan a future. no other issue calls so strongly for leaders who understand the importance of hard choices and hard truths. no other issue calls so strongly for citizens who know what it takes to keep a republic. the wise i sacrifice today that helps our children prosper

tomorrow. i'm heartened that the president's bipartisan fiscal commission put a plan on debt, a debt that needs to be at the center of our national conversation. the commission plan, along with plans released by the bipartisan policy center and the center for american progress and others is a compelling summons to a realistic embrace of responsibility. reality tells us that we must address both spending and revenue. not until our economy is back to health, but certainly very, very soon. we have to reform entitlements to keep them solvent for future generations. that could mean some combination of raising the retirement agency with an exemption for americans who can't work as long due to physically demanding jobs, raising the social security income cap making it more progressive and sticking to the provisions we passed in the

health care bill. medicare and medicaid, while we have taken some actions, still require substantial attention. we must continually review discretionary spending including the largest area of discretionary spending, defense. defense spending is now higher than in any year since world war ii and it has exploded by more than 2/3 since 2001 without even counting the money spent in iraq and afghanistan. secretary gates has said the pentagon's "culture of endless money is now a grave threat to our military strength and national security. no discretionary expenditure shall go untested for need and effectiveness in the future congress." finally we're going to have to raise revenue, which can be accomplished as suggested both by president obama's commission and the tax reform commission under president bush by simplifying the tax code and

reducing both rates and tax preferences. a simplified tax code can save families and businesses precious time, unleash economic growth, remain progressive and help reduce the deficit. president obama has indicated that he is giving tax reform serious consideration. i would urge him to do so and to move in this congress on that issue. he has my support and i hope that's an area in which we can make bipartisan progress in this congress. in the realm of fiscal discipline more than any other, our economic future rests on our ability to find common ground. we have done so in the past. we need to do so in the future. if we continue to see the future in two-year increments, however, each party can continue to demagogue these hard choices until the crisis comes.

and that crisis would make even more painful choices on avoidable. the challenges are daunting, but i have spoken to many americans and not a single american have i talked to who believes they are beyond our ability to solve if we have the will and courage to do so. we have the toughness and the ability to overcome far worse and we still have those qualities in america. what i hear more and more, however, is the doubt that our politics are equal to our challenges. it is that base a doubt that we still no how to practice the civic virtues, the self-discipline that guided us through civil wars and depressions. and in the face of almost 10% unemployment, staggering debt, and historically struggling

middle class, we spend the next two years, if we spend the next two years in squabbling, in positioning, and in trivialities, we have proven the doubters correct at a terrible cost to our children and our country. when ben franklin reflected on the high difficulty of keeping a republic, he wasn't indulging in blind pessimism. he was challenging us, his inhair tors. i still believe and i think -- behindarityors. i still believe that people have the burden of self-government in hard times. i believe that government was founded on exceptional principals, but i also know that our exceptionalism is not a birth right, not an entitlement. it has to be fought for and won and held in every generation. and that fight is going to

define the years ahead. not a fight between nations or between parties, but a fight to live up to the grave responsibility placed on every one of us by our precious form of government, a free people, a democracy. no matter who wins the next election or the one after, that is the fight we must win or lose as won. thank you very much. [applause] >> and thank you very much for your time. we'll enter the question and answer portion. once again if you can identify yourself after you are called upon and wait for the microphone to arrive. for the first question, it is the prerogative of the organizer of the event, mr. robert wiener of robert wiener and associates. where is that microphone?

>> and, steny, thank you so much for coming to the club. it's a real honor to have you. as i said, the importance of it has shown that the president of the club ramped it up and decided to be the host of the event. we're thrill that alan verga has done that. >> the president, right? >> that's true, mark hamrick will be coming on next year. steny, you mentioned the fiscal commission provocative report but they and many republicans and many in the media have, don't acknowledge that social security is solvent and you remember my sorted background when i was the chief of staff of the house aging committee, that social security is solvent and paid for through 2037 and 25% at the short at the most even after that it doesn't contribute a dime to the deficit even on paper, so it isn't anything the deficit

commission can take advantage of other than taking money from it. how did social security become the symbol of saving the deficit and doing something instead of the real costs of iraq, afghanistan, tax breaks for the rich, and will democrats and the congress as a whole resist the sound bite to save the budget by cutting social security? >> well, thank you. first of all, let me say that social security ought not to be looked at as a way to reduce the deficit. your point is well taken. however, at the same time we need to make sure that social security is not only solvent through 2037, but solvent for future generations and, therefore, we must address its solvency within its own construct. i think that's what many have said. there are many ways to do that. frankly, social security is much easier to deal with than is medicare and medicaid which as i pointed out to you is a

very much greater challenge in terms of cost. now you mentioned as well the expenditures that we have made without paying for them. we fought two wars and have incurred about $1 trillion, none of which has been paid for. it's all been borrowed money. when i said the civic virtues of self-discipline, we need to make sure that we pay for what we buy and, therefore, we included in our budget a statutory pay go. i think that was a return to what we did in the 1990's and disciplined ourselves in terms of expenditures. i think we need to continue to do that. what i have said and many of you have heard me say, in the short term, in an economic downturn, you cannot do that because what you need to do is to give stimulus to the economy

and you can't depress it at the same time. and, therefore, you need to encourage that at times of economic stress. however, we incurred great deficits at the time of economic well-being. that has been the problem that we confront today. your point that social security is clearly something that democrats are going to make sure that is in place, is solvent, is there for future generations, will not be privatized and will be as generations have had it to rely on in their retirement. >> james reed, reporter at wrjw news, the campus radio for george washington university. my question is regards to the

new freshmen class in congress. the media has portrayed that many are members of the tea party. you said you will work with the republicans and conservatives in congress to get things done. my question is how would you plan to extend the democratic way, well, the way of making laws and the democratic process, how do you extend that to the tea party, in which ways would you do that? >> of course, you can't simplify that -- any of the parties because there are a lot of discussions within and the tea party is not a party in the sense that we know of it. all of them are liked as republicans so that what we need to do as republicans and democrats is come together and understand that these are, as i said, pragmatic difficult problems that confront us. not ideological problems, they're practical problems. it's been done before.

ronald reagan sat down with tip o'neill and addressed social security and made it solvent to that year that bob weiner talked about. ronald reagan and his people came together in 1986 and passed a tax program which said what i said needed to do, lower rates and reduce preferences. i think we can do that. i think we can do that because the demands to do so are compelling and immediate. i'm hopeful that members of both parties will come together and do that. i certainly intend to work with mr. bainer and mr. cantor and mr. mccarthy, all of whom i have talked to about this effort. i don't know most of the new members who have come on the republican side. i know all the democrats, all be nine, a lament believe fact about true, there are many more

republicans. let me say this i have been in politics for a long time. in 1964, long before, maybe before your parents were born, maybe not quite, in 1964, it was reported that the republican party was on life support and may not survive. lyndon johnson had a huge victory. in 1968, of course, the republicans won the presidency. in 1972, the democrats were assessed as being almost gone. we won one state and the district of columbia, maybe two states and the district of columbia. two years later, the president who won that 1972 election resigned in one of the biggest political crisises that has confronted our you country. in 1976 we won the presidency. four years later, you know it

went to ronald reagan and it goes back and forth. in 1994, of course, the republicans won a big victory in the house. in 2006, 12 years later, we won a victory and enlarged that victory in 2008. what is my point? my point is that both parties ought to get the message that, look, if you're not doing the right thing, we're going to change horses. i think the american people want us both to work together to solve problems that are real problems, not ideological left and right problems, but problems that they see in the terms of their jobs, in the debt that confronts their country. those are the two major issues in this election. we need to address both. >> mr. hoyer, what changes do you plan to make in the tax

bill before bringing to the floor and do you expect ultimately that they will be passed and ultimately sent to the president to be signed into law? >> the answer to the second question is yes. the answer to the first question is honestly what the senate passes first, they're going to pass something, they're going to bring it up on the floor tonight as you know and perhaps pass a bill, not perhaps, i think they'll pass a bill sometimes on late tuesday or wednesday. we will address that bill as you know. as i said in my speech and you have heard me say before, tom, i have real concerns that the suggested tax cap on the upper income returning to 2000 levels only where the economy, during those levels, did very, very well. but as a result of the republican tax program as you

know, they sunsetted their tax cuts and they would be reinstated in january. i think that reinstating those for the middle income people would have an adverse effect on the economy and ought not to be done. i don't think it would have an adverse effect on the upper income nor do i think that the change in the estate tax that is recommended, the so-called lincoln-kyl compromise, will add $700 billion, well, actually more than that when you consider both, the cost of that will be justified by any increase in the economic stimulus. there is much consternation in the house about the estate tax. i expect there to be some consideration of that. as you know, last december, a year ago, we passed a $3.5 million 45% rate which has sat in the senate for 12 months.

i think that's unfortunate that it has sat there because our republican friends raised correctly the issue of certainty. whether it's an estate tax, business taxes or personal taxes, certainty is a stabilizing productive facet of our tax system. we will see what the house will do on that. it will go to the rules committee. the ways and means committee will have some input into that and we will see what action they take. >> [inaudible] >> mr. axelrod said yesterday on one of the talk shows, he doesn't expect any significant changes in the house. >> i guess the issue there is what is significant. we passed a $3.5 million estate tax -- $3.5 million

>> i had a follow-up question about the estate tax. you said in your speech and q & a here you expect the tax cut bill to be approved and sent to the president. are the house democrats willing to stop it, to go all the way to the wall over the estate tax issue? >> what i have said repeatedly and what the president has said and what president clinton said is that i think the president believes and i believe that increasing the tax load on

working americans at this point in time on january 1 would not be helpful to continue to grow the economy. as a result, we don't want to see that happen. in order not to see that happen, you need to get a bill through congress and signed by the president. we're working on that. the legislative process is a process of give and take. i think that's going to occur. >> i just want to be clear on what you're saying. >> identify yourself. >> i'm phil jackson with cbs news. i want to be clear that you will bring whatever the senate passes to the house floor and but that you will expect some sort of estate tax amendment? is it an amendment and do you expect that to happen this week? my other question is is this about letting your members vote for something, vote against the estate tax provision as worked

out between the president and senate republicans or is this about actually wanting to change it and send it back to the senate so they would have to take it up again? >> a lot of us would like to change it. a lot of us believe there is a compromise available. we'll have to see where the votes lie. as you know, when and if the senate sends us a bill which i expect to be hopefully earlier this week than later this week, i think it will be referred to the rules committee, the ways and means committee and others will have an opportunity to suggest amendments to the senate bill and then the rules committee may really report out that bill with amendments. .

at the end of the day, it sounds like somebody really got it here. >> i think the country may take a hit. that is our concern. the country is in deep debt. the american public is very concerned about that. there is no simple way to reduce that debt.

it will take contributions from everybody, in my view. but certainly, our caucus believes that the wealthiest in america needs to help pay the bill. they are helping to pay the bill and they did that in the 1990's when we have the surplus. we do not think the proposal dealing with upper-income or the estate tax or useful in trying to get a handle on our debt. having said that, everybody in the legislative process takes a hit. the legislative process is usually a process where everybody thinks, jeez, i did not get everything i wanted. my experience of life, i have not gotten everything i wanted. that is life.

sometimes, when my wife was alive, we would sit down and say i want to go to this movie and she wants to go to that movie. and sometimes we went to my movie and some time we went to her movie. that is the way life is. >> if, as expected, the senate returns strong votes in favor of the existing legislation, does that make it more difficult for house democrats to amend it to? will you or the speaker bring the floor, even if it is apparent that there is not enough house democrats in favor of it? >> i do not want to anticipate that there will not be a majority of house democrats. there may be a majority of house democrats that mean that before the house senate bill -- may not before the senate bill as it comes over. but they will have opportunity to get input and we will have to see what the rules committee reports concerning the senate

bill. we have indicated that we want to make sure that middle-income taxes on working americans do not go up on january 1. we do not think that is a positive effect on the economy. furthermore, i will lots before the speaker, i will speak for myself -- i will not speak for the speaker, but i will speak for myself. on unemployment insurance, which every economist says is one of the biggest spurs to the economy that you could have, it is absolutely essential. unemployment insurance is a moral imperative. we have two million americans who have now lost their unemployment insurance through no fault of their own, simply because there are not jobs available. there are five people looking for every job that is available in our country. they simply cannot get jobs. we need to make sure that they

can sustain themselves during this time when we tried to bring back the economy so there are jobs available for those folks. there are a lot of things in this bill that i want to see passed. and we have an argument about other aspects of the bill. that should surprise no one who has grown up in any kind of a family. the only time you do not have a disagreement -- i have disagreements myself -- we try to figure them out and that is what we're doing. i think we will have a vote on the senate bill. with possible changes. i wanted to make that clear so you did not have me -- >> -- >> we will have it with amendments. we have to see what the process is. furthermore, we have not seen

the senate bill yet. it is difficult to comment what we will do with it yet. >> you mentioned a meeting with the physical level, including urging president obama to take up tax reform in the next congress. maybe you could expand on that. and where is the optimism for dealing with this -- and where does the optimism for dealing with this come from? the republicans took a house because of health care reform. if tort reform means losing politically, where is the appetite? >> i am not sure i agree with your premise, either on 2006 or 2008. i think would happen was coming in 2006, the american public felt that the policies of the republican party and george bush were not working. and they wanted a change and they voted for change.

in 2008, they voted for change. in 2010, i think what they voted gst was out of a great annex that the economy had not responded. unemployment was at 9.6% and they did not believe that the policies put forward were working. also, 1994, policies were not working in the standpoint of the american public. it led to the best economy along with the i.t. explosion. actually, the i.t. explosion facilitated by the fiscal responsibility that was pursued and the economic policies that we adopted in 1993. i do not except your premise as to why the election turned.

on your specific question, i have for long time believed that tax reform was essential. the last time we reforms taxes in a significant way rather than simply raising or cutting rates was in 1986. we focus on trying to bring a handle and reduce rates. i do not want to endorse part of the proposals made. but i enthusiastically endorsed reducing preferences so that people are making decisions on their business judgment, not their taxes. and i think it would spur economic growth to reduce rates,

which reducing preferences will allow you to do. i think both are essential if we will balance the budget in the next generation. >> -- >> the timing, i think a said this next congress. the only time you can only do that is when you can get bipartisan participation. it is very difficult for one party or the other to take a stance that we will try to take the medicine go down easier. these are tough decisions to make, subject easily to demagoguery. therefore, you need bipartisan participation. when ronald reagan and tip o'neill agreed on social security reform and then on tax reform, frankly, it was relatively easy. when you do not have bipartisan agreement, therefore, i hope

that david can and sandy logan, the chairman and the ranking member can work on this effort, i hope that president obama and democrats and republicans in congress can work on this effort. americans are spending an extraordinary amount of time and money on paying their taxes. it is not conducive to growing our economy. we need to change the system of picture near complexity. we have exploded, even in the last decade, the number of pages of regulation in the tax code, which is not helpful. we need to simplify it. we need to bring down rates. in my opinion, bring down preferences. this will be a major argument of the administration in the coming congress. >> we have time for two more questions. questions have been

predominantly coming from the right. let's work on the center and the left. [laughter] >> i want all of you over the to know that i do not necessarily consider you of the right. [laughter] >> i know part of this depends on what the senate does, but timing, you said wednesday you expect to get the bill back. few expect to put something on the floor before the end of the week? >> and one of the fact that every member would have to get home for christmas, -- in the light of the fact that every member would like to get home for christmas, including me, both harry reid and i come in terms of scheduling, are hoping to conclude our business in the house on the 17th. if we have to come back because the senate still needs to do work, we might do that at some point. but it is our hope that we will get out on the 17th.

has to know, the continuing resolution that is currently in force under which the government is being funded expires on saturday the 18th. i hope that not only the tax bill will be considered within that timeframe, but we must also consider what i hope to be, from my perspective, either a c r or an omnibus. i would prefer an omnibus which speaks more to the funding priorities that the appropriations committee in both the house and senate have already worked on. >> final question. >> congressman, my question is they did not give the required 14 votes for madam speaker to bring it to the floor. however, it did 11 added 18. 11 out of a teen is above 50%. that would have passed congress.

-- 11 out of 18 is above 50%. that would have passed congress. would boehner considering it to the floor? >> the majority leader in the senate and the speaker and the house, if they got 49 of 18, which was required under the president's executive orders establishing the commission for recommendation to move forward, the commitment of the speaker was -- she and i made the same commitment -- was that, if it that 14 out of 18 and it passed the united states senate, it would move through the senate first and then the house would put it on the floor. that has not happened. more importantly, i think the commission and the damage she

woodland commission -- and the dominici woodland commission and others have done something very useful. they have described the problem and the proximity of the crisis and suggested solutions. i would certainly hope that all of these commissions, their work product, would be taken into consideration by the congress and the house and various commissions and moving forward to address what i believe debate one of the most critical challenges confronting our country and particularly challenging for your generation. we call the world war ii the greatest generation. if my generation leaves you and my children, who are older than new, and my grandchildren, one

of who is about your age, in deep debt so that, in your time, you cannot respond either to national security crises, health crises, and national disaster crises, and you have no resources to respond, you will not think regeneration was great at all. notwithstanding the fact that it did not get 49 of 18 and will not move to the house as a not get 14 out 18 and will not move to the house as a package, in the long term, we must grow the economy.

if not, we will not be able to bring the deficit down. if we do not to bring down the deficit in the longer term, our economy will continue to struggle in the long term. thank you all very much. [applause] >> thank you for being here today at the national press club. the meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> next, remarks from lawrence summers. after that, and look at u.s. policy in afghanistan. then we will hear from michael hayden. later, a federal judge rules the part of the health care law signed by president obama is unconstitutional. >> tomorrow, stephen more of the "wall street journal" will talk about the tax compromise. then ethan rome talks about a

federal court ruling that part of the new health care law is unconstitutional. after that, author bob kavnecavr will talk about his new book. later, a report on teen drug use. awe will hear from the white house director of national drug control policy. >> in the sunday on c-span, the u.s. supreme court justice, in linen kagan -- elena kagan will talk about the confirmation process. >> white house economic adviser lawrence summers says that he expects low consumer demand to

be a drag on the u.s. economy for several years. he talked at the economic policy institute. he is stepping down as the national -- he is stepping down from the national economic council at the end of the year. this is just over one hour. >> i must admit that a number of people have looked at me and thought this was a little bit odd to have larry summers at epi. but there are a lot of things that larry and i have in common.

first, we're both named larry. [laughter] and we are both economists and we have both done a lot of work on the labor market, on jobs. second, we were both raised in the philadelphia area and we are about a year apart in age. third, he has two uncles who were awarded the nobel prize in economics. me? i have to uncles. [laughter] okay, i do not want to leave the impression, however, that there are not some fundamental differences between us. in my view, larry has abandoned some core fundamental values. when he moved to boston, he adopted the boston red sox as his baseball team. me? i'm still a fan of the fighting ls.lphi

i am really happy that he is here to offer this beach. he has had a remarkable career. in his early 30's, he was the chief economic adviser to democratic candidate, michael dukakis. he was awarded something very important in the field of economics, the john bates clark award, given every year to the most as any economist under age 40. he served at the world bank, the treasury, went back to harvard and was harvard president. then came back to be president obama is director for the nbc. -- for the nec. among all that, he is trying to tackle the recession. i am sure that he will talk about that some more. i give you larry summers. [applause]

>> thank you for the introduction. at of all the introductions of have ever received, that one is certainly the most recent period [laughter] -- the most recent. [laughter] i am glad to be at bpi this morning. for 25 years, -- at epi this morning. for 25 years, you have been a significant part of the importance of economic politics. it is by what happens to the

middle class that our policies have to be judged. success for the middle class means a better life for our citizens. it is central to america's continuation as a role model for the world. i want to say a brief word about what we have done over the past years -- over the past two years, to strengthen the economy. and then turn to what i see are the great challenges we face in the years ahead if the american economy will work for all people. just as scholars continue to debate how close we came to nuclear conflict during the cuban missile crisis, they will continue to debate just how close the american financial system and economy came to all out collapse in the six months between september 2008 and april 2009. what we do know is that, during

that time, the stock market fell more sharply than in the six months after black tuesday in 1929. will will trade declined more rapidly than in the great depression -- bull will trade declined more rapidly than in the great depression. -- global trade declined more rapidly than in the great depression. i have little doubt that we will be looking at a vastly different world today. yet, while the economy may be out of the intensive care unit, the patient now faces the long road of not just recovering from previous affliction, but beginning to address chronic ailments.

the slow process of recovery has caused some to conclude that perhaps we have entered a new and weakened normal state of affairs. it is a state where we must lower our sights, lower our aspirations, and not be able to pass on to the next generation the kinds of dramatic improvements in economic that was attentiopotential lead handed down to us. president obama disagrees with his future. we can and we will rebuild and renew the american economy. to do this, we need to do two profoundly important things in the years ahead of. both are necessary. neither is sufficient. first, we must generate for momentum in the economy to fully recover from the great recession.

second, we must put in place a framework that assures that our growth, productivity, and living standards continue to lead in a rapidly changing world. we must do everything we can to ensure that this recovery is as rapid as possible. without rapid recovery, all of our other goals will be compromised. there will be no prospect of reducing medium-term budget deficits while simultaneously increasing investment in human capital. there will be no prospect in remaining an example of the rest of the world. there will be no prospect of restoring and growing living standards for the american middle class. above all, there will be no

prospect of putting 8 million people who should have jobs back to work. what is holding our economy back? when unemployment has been above 9% for 19 straight months, when the job vacancy rate has hit near record low levels, when 8 million houses and countless shopping, callous square feet of office space and retail, sit empty, when capacity utilization in the nation's factories and byways and railways are as low as any time since the second world war, there cannot be any question that the constraint on our economy now and for the next several years will be the lack

of demand. i am under no illusion that increased the demand alone is sufficient to restore america's economic health. but it is unquestionably necessary component of a full recovery. unfortunately, the approaches we have become used to over the last 50 years to supporting demand in a market economy are not open to us today. short-term interest rates cannot be reduced below the current level of zero. in the face of excess capacity and excess debt, it is not clear that, even if it were possible, falling interest rates would be terribly potent in convincing consumers and businesses to spend more. traditionals wit approaches. it is always the case that, when

we export more successfully, we are more prosperous. but when the economy is demand- constrained as it is now, increases in exports have a far more potent effect because, with excess capacity, more exporting does not mean less of anything else. that is why agreements like the one we recently concluded with korea are important as is the of the support it has received. the president has a goal of doubling our exports over the next five years and pointed toward specific ways for achieving that objective. in forcing a tree agreements, relaxing export controls, standing up directly and diplomatically for the interests of american producers, and perhaps, most important,

insisting on global flora on the rebalancing of the global economy. promoting exports, however, will not be enough to ensure adequate demand. in the decade prior to the current downturn, the american household and business sectors, if you add them together, spent close to 2% of gdp more than they earned. they were net borrowers. as a consequence of the developments of recent years, this situation has changed dramatically. private spending now falls nearly 6% short of private- sector income. that means the private sector has swung in its deficit by

about 7.5% from a 2% deficit to an little less than a 6% surplus. that's when, all of which means less demand, is one -- that swing, all of which means less demand, is one of the reasons why we are suffering in the of this greatmath depression -- this great recession. even with all the fiscal measures of the last several years, told barring in the american economy has -- total borrowing in the american economy has failed to grow in the last two years. that is the first two years since the second world war where the total borrowing in the american economy has not increased. let me be clear.

even with our deficits, the deficits have fallen short -- which means extra debt. but the amount of extra debt is less than the amount of reduced borrowing by the private sector. increased federal borrowing has offset the leveraging in the private sector. that is why the recent attacks agreement between the president and congressional leaders is so important. in what could have been a sears collapse in purchasing power and ads for more fiscal support than most observers thought politically possible. it as unemployment insurance, a payroll tax holiday, refundable tax credits, and business expensing. that is why independent estimates of job creation over the next year or two years are being revised up by 1.5 million or more. these measures not only support jobs, but also are medium-term

goal of deficit reduction. by retiring allowances, a business expense and raises revenue collection after 2013. it accelerate recovery, the additional effect of these measures, which is the most important form of deficit reduction. it 1% in fermented gdp in 2013 or any year afterwards -- a 1% increment in gdp in 2013 or any other year afterwards reduces the deficit. these concessions were the price exacted by the congressional minority for the fiscal support

that will provide a significant impetus to the economy. but the clear. compromises that were necessary with a weak economy in 2010 should be inconceivable as recovery accelerates in 2012. the extraordinary gap that i referenced a moment ago has opened up between private saving and private investing. the tax compromise will help. but it is not enough. at a time when real interest rates, even over 30 years, are -- at a time when real interest rates, even over 30 years, are low -- what better time to invest in renewing and upgrading our nation's

infrastructure? working off a backlog of deferred maintenance and insufficient investment, a substantial and sustained effort to rebuild america should be the top of washington's priority list next year. these measures, taken together, will accelerate recovery. accelerating recovery and increasing demand will mean more workers with jobs, more employers in a position to provide training, more capital investment in capacity for the future, more revenues for state and local governments to make the investments that are crucial for them. without increased demand, we're not in a position to pursue our

longer-term objectives. individual efforts to save more lead to less total savings. more educated workers may get jobs, but with demand constraints, those jobs come at the expense of their less educated neighbors. with demand constraints, increases in productivity may exacerbate deflationary measures and increases in efficiency may result in more unemployment rather than more output. that is why we have to drive recovery and remove the demand constraint on the economy. at the same time, it is essential that we recognize the

fiscal and monetary policy or increases in demand never made a society prospers, fair -- never made a society prosperous, fair, or safe. you do not succeed by producing a exactly the same thing that other people are producing in the same way just that lower costs. use exceed by establishing your own uniqueness in -- you succeed by establishing your own uniqueness in products. think of the distinctive with that southwest or new corps or even wal-mart deliver their products and services. the united states has led the

global economy by building on its unique capacities. by building on our distinctive strengths, we continue to lead in the next century. there is no going back to the past. technology is the accelerating production and mass production, productivity in mass production, to the point where even china has seen manufacturing employment declined by more than 10 million jobs over the most recent decade for which data is available. we are moving toward a knowledge and service economy. another inescapable truth is that the world is shrinking. larry referred to baseball. when i worked in jakarta 30 years ago, i tried to follow the red sox. when the red sox play on tuesday night, i learned how they had done on friday because i needed to wait for the international "

herald tribune" to get there. it did not have the tuesday night game. the thursday night issue was delivered early in the afternoon in jakarta on friday. it is different than smaller world. what does it mean to adapt to this? just as the american no. prospered even as the southern part of the united states caught up, even as we drew a strength in a generation after world war ii as europe and japan's economy is or rebuild and converged toward our own, we will need to find ways to prosper and benefit as the emerging markets of the world take their place on the global stage. what should our approach be?

some suggest that we have no alternative but to compete with the world on price, even if it means striving to win races to the bottom. they would have workers sacrifice wages, benefits, and bargaining rights to hold onto their jobs. they would slash taxes on businesses, even as their profits rise in order to lure them to stay in the united states. they would shred social safety nets in the name of self- reliance. social darwinism? was that -- it was bad economics in the 19th century. it is no better in the 20th. by far, the largest part of the americans -- by far, the largest part of the activities americans

engage in and the things they buy remain low. recreation and education, insurance policies, hotels and houses, and i could go on. moreover, where we compete with other countries, our strength as collective. few of us can hope to succeed as individuals in a global economy where any particular task or skill can be purchased at very low prices like much of asia and beyond. rather our strength must come from establishing uniqueness, establishing that which is difficult to replicate, that which comes from more collective action. if any idea or machine or individual capacity can be transplanted, far harder to transplant, imitate, or emulate

are our great institutions, the national laboratories, the national parks, and the national highway system. great universities and great university city clusters. deep capital markets and tremendous traffic. where competition is concerned, the lesson for us as a nation is the same as the lesson for business. it is far better to compete by innovating, leading, and building on strengths than by standing still and reducing prices. let me highlight what i see in this regard as the three essential priorities for the years ahead. president clinton used to say that, in a world where ideas can move, capital can move. a nation's distinctive strength

lay in its people. our biggest failing as a nation over the last 50 years has been with respect to education. we were once the envy of the world. now we struggle to get into the top half of oecd nations. the duke of wellington famously observed at the battle of waterloo that it had been one on the field of eden. the bell for america's future will be won or lost in its public schools -- the battle for america's future will be won or lost in its public schools. there is a debate for those who want more accountability and those who see the need for more resources. in truth, no one who has seen the conditions in our urban schools can deny the need for more resources and no one who believes in incentives can deny the need for more accountability.

the race to the top, the administration has sought to provide resources and increasing accountability. these efforts will have to be greatly magnified in the future. even as we strengthened elementary and secondary education, but we must also expand higher education opportunities. the u.s. used to lead the world in the share of its young people who became college graduates. it is no longer in the top 10. worse yet, over the last generation, in coming? in this land of equal opportunity -- income gaps in this land of equal opportunity and college attendance have widened. i would submit issues of subtle discrimination. to take just one example, would

suggest to you that the least averse questions in america are in the s.a.t. prep schools that help some but not all students raised their admissions scores. this is why the administration has made major new investments to expand educational opportunities. since taking office, the administration has funded an unprecedented doubling of the pell grant program which will help more than 8 million low- income students. it will help them attend college. at the same time, there is the tax credit. in less tumultuous times, i would suggest to you that the largest increase in federal support for college attendance by students from low and middle

income tax brackets would be recognized as a signal and defining achievement. it is a reflection of the magnitude of the issues that we have grappled with over the last several years that this is not receiving the attention it deserves. education is closely linked with the second major priority for the years ahead. innovation, the other central pillar of economic growth -- for very long time, we have had in the united states a distinctive ecology that is the reason why we are the leading economy in the world. on the one hand, we have

recognized, venerated, and acted on the observation that it is individuals, edison, 4, gates, -- edison, ford, gates, zuckerberg, who would not dream of filing a grant application, who drive an enormous amount of the economy's progress. we have maintained a culture where it is still true today that, with all of our financial systems failures, and there are many, we're the only country in the world where you can raise your first $100 million before you buy your first tie if you have a sufficiently good idea. that is a great strength of our country. at the same time as maintaining

a culture that supports the entrepot nor, that sluice the rubble -- supports the entrepreneur, that salutes the rebel, that establishes major figures in business without college being complete, we also recognize that fundamental an ovation and progress will not happen without the public sector play its essential role. there would be no internet pa, not dar pharmaceutical industry without the nih. maintaining and increasing our american capacity for innovation thus requires both fundamental support for

entrepreneurial innovation and for the key foundations of science and technology. that is why we have to make it easier to patent a new idea or innovation, make it easier for entrepreneurs and small businesses to raise capital, make it easier for the most promising mines and the most promising entrepreneurs to come to this country from around the world. but we must also take the steps that will not happen with setup -- without satisfactory education satisfaction. if we are able to maintain what is distinctive about the united states, the simultaneous capacity for strong public

actions and for great entrepreneurs to emerge in the years ahead, you will be in a far stronger position to assure our leadership. the third and final thing that we must do is renew a fundamental public compact between the present and the future. perhaps the most important elysian that -- most important illusion that permeates our public discourse is the idea that budget deficits, as a way of financing government, is somehow an alternative to tax increases. it is not so. deficits are a means of postponing and magnifying

ultimately necessary tax increases or spending reductions. they are a tax on our future unless used to finance productive investments. i am not one who sees financial collapse on the imminent horizon. indeed, i believe that, at this point, the risks of deflation or stagnation in the united states exceed the risks of uncontrolled growth or high inflation. unless we change our course, we are at risk of a profound demoralization with respect to government. on one level, this means a decay

of essential public functions and a loss of our national self- confidence. at eight people -- at a deeper level, we risk a vicious cycle where and inadequately resourced government performs badly and leads to further demands for to be cut back, exacerbating performance problems, deepening the backlash, and creating a vicious cycle. that is why, while recovery is our first priority, it is essential that we establish long run parity between revenues and expenditures. this is a more complex matter

then is often supposed. -- a more complex matter than is often supposed. one of the things to come out of the economics profession over the last generation or so is the phenomenon known as devil's disease -- bammel's disease. in some areas, rapid growth as possible. in other areas, it is not. it always has and always will take eight teachers to teach 96 students for one hour in class's of 12. product -- in classes of 12. productivity improvement is not possible as in other ways. think of nursing care as another

example. to bommelscorollary disease is that there are activities were the disease is more pronounced to migrate to or be relocated to the private sector. for example, every five years, a share of gdp devoted to government spending on health care goes up by one percentage point. as we contemplate our long run fiscal future, we must contemplate this reality rather than to suppose that there is some past static pattern our revenues and expenditures that can be maintained indefinitely. that is why the work of the

bolls/simpson committee is so important. that is what president obama committed himself to health care cost reduction in the context of the recently enacted health care legislation. if there was never an area where president kennedy's doctrine demands man's problems were made by man and therefore can be solved by man, if it was ever any place that that can be applied it would be the budget deficit. greece and ireland are being called upon to make fiscal adjustments in the range of 10% of gdp. once our temporary fiscal support expires, we need an improvement only in the 2% to 3%

range of gdp to begin the process of putting our debt on a declining path relative to our income. president obama has already taken several important steps in this direction, and multi-year freeze, root out wasteful spending, particularly in defense. he -- the particularly welcome feature of the recent commission report is its bipartisan recognition of the idea that tax expenditures are just like expenditures and need to be held to the same standards of efficiency, fairness, and tough tests on government's intrusion

into the economy. they say that market's climb walls of worry. so it is with our nation. america's history, in a certain sense, has been one of self- denying prophecy, a history of alarm and concern, but alarm and concern averted by decisive actions to ensure our prosperity. one cia director warned of our largest competitor, that industrial growth rates of 8% to 9% per year for a decade would dangerously narrow the gap between our two countries. that was allen dulles in 1959, referring to the soviet union.

when the soviet union collapsed instead, the harvard business review of 1990 proclaimed in every issue, in one way or another, that the cold war was over and germany and japan had onwon. now we hear the same thing with respect to china. predictions of america's decline are as old as the republic. but they perform a crucial function in driving the kinds of renewal that each generation -- that is as long as we are worrying about the future, the future will be better. we have our challenges, but we also have the most flexible,

dynamic society that the world that ever seen. if we can make the right choices, our best days as competitors still lie ahead. thank you very much. [applause] >> ar procedure now is that we are first going to take some questions from the audience. we give out -- we gave out cards earlier. i think they are being collected. we will take a look at a few of those. then we will go to the press. let me first start with one of the questions.

in your speech, you pointed to the need for a greater education. as you know, the typical college graduates is earning today what he or she did 10 years ago. the stagnant wages were the case even before the recession. what does this tell you about the additional need for policies to deal with wage growth so that every worker can benefit? >> if our college graduates or are high-school graduates find themselves imbedded and a individualistic competition with workers from around the world, or if they develop skills for which the demand is going to fall because of a possible

replacement by technology, their wages are not going to rise. on that -- a necessary strategy for increasing wages is that we develop areas of unique strength that are less subject to international competition. that means the vast range of activities described in my speech, where the market is inherently a local, that also means maintaining the capacity for innovation so that our production is producing things that are not what the business strategists called strategizing

-- the modest sized businesses were that competition is going to the most brutal. it also goes to the quality of education as well as the quantity of education. we have seen an enormous emphasis on the measuring achievement, raising standards, increasing accountability on school systems, on teachers, on students. compound and i would predict that over the next two decades, -- i would predict that over the next two decades, we would see the same accountability come to higher education. if carefully managed, that will be a very good thing. >> another question. given all the developments over the next -- over the last several years, what has

happened that might lead you to think that economics itself need some accountability? and some change? >> look, i do not see how the events of the last decade can fail to have an important impact on economic thinking at a number of different levels. to take just three examples, in the standard introductory economics textbook, discussing about business cycles and the like, a financial intermediation is essentially not mentioned. there is a discussion of the interest rate, the interest-rate as it affects the mountain -- the money market, and as it affects investment, but the

issues around the financial mediation are not mentioned. obviously, what we have -- after what we have been through, financial intermediation will need to be much more prominent as an issue in mainstream economic thinking. second, mainstream economic thinking s still dominated -- thinking is still dominated by the production of widgets. it has a rising marginal cost. you have a competitive market. can the knowledge economy, the -- indian not -- in the knowledge economy, it has very marginal cost. think about publishing a book.

since about a program of software. think about the pharmaceutical product. think about what has happened to the ratio of design cost and production costs in automobiles. if you think about such a market, high fixed costs, low marginal cost, if you have standard competition, it pushes prices are back to marginal cost, and the firms will not be able to stay in business. in a whole set of ways, the canonical form of an industry is going to be different going forward. third, when i went to graduate school, which was some time ago, one other thing she learned about was -- one of the things that we learned about was the stability of the income

distribution. that was a reasonable reading of the data. it is a manifestly wrong the reading of the data over the last two decades. what is especially salient is there are significant movements and skill differentials in terms of the relative demand for college educated and high-school educated labor and the like. but a striking phenomenon in the data is the fratto quality that has happened to the top 1% with relative to the bottom 99%. what has happened in the top

100% relative to the top 10 of a percent. economists are only beginning to understand what the forces driving that car. that is also going to have to be a central part of economics going for word spread -- going forward. these events should force a very substantial reformulations. at the same time, i would caution that the fact that there is a lot to which economics has to adapt does not mean that everyone who has said that mainstream economics is wrong has been right or that every critique that has been offered has validity. i think we need to be rather

careful about throwing out the baby with the bath water, even as they recognize that any responsible synthesizer of what economics knows or thinks or needs to study will have very substantially revised their views over the -- driven by the experience of the last decade. >> in your top, you mentioned the substantial deleveraging process that is underway and will be going on for many years. several of deficit commissions -- several deficit commissions both recommended deficit reduction starting in fiscal year 2012. it means starting in october of to dell's 11. diaz think that that is too soon to start -- do you think that is too soon to start any deficit

reduction? >> the commissions also called for a short run the measures to increase demand. the right time to cut wasteful spending where you can identify wasteful spending is now. then you can make a separate decision about other kinds of investments with the revenues that you save more ways that can be used to maximize spending. isolate the objective -- i salute the objective of reducing wasteful spending as soon as possible even as i expected that the economy will be demand

constrained for several years to come. i believe that buy only operating on the demand side can you increase the demand and that the path of fiscal policy and the structural deficit is a very important determinant of demand. >> why don't we turn to the press? we will have people stand up and announced today are. come >> [inaudible] >> there is been a certain amount of employment of economic forecasters generated in the last several weeks, revising their forecasts. to my knowledge, all the forecasts have been up towards -- upwards by malice that run in the 1% range.

one said some of the commentary has missed is that many of the forecast revisions speak about 2011 a relatively -- relative to 2010. if you think about 2011 gdp, the average is the gdp in july. you increase the growth rate by 4% over the course of 2011. the average level of gdp in 2011 but only be increased by 2%. when people speak of the increment from -- those often underestimate what the prospective growth rate is going to be going forward. clearly, it is positive and in the 1% range. the other thing that the bill has done is that it has

truncated the left tail of possible forecasts. forecasters to have been revising their forecasts all assumed that the middle-class tax cuts would be extended. it's a process had broken down and there had not been a tax bill this session, in the middle class tax cuts would not have been extended. in that case, you lead a scene forecast revisions, but you would have seen that in the negative direction. the change as a consequence of this compromise is greater than the up towards our vision and forecasts. >> [inaudible] diaz think that it will be addressed individually?

-- and do use think that it will be addressed individually? >> economic prognostication is a hard. political prognostication is beyond me. it is inconceivable that the united states could allow any serious question to arise with respect to our debts. >> [inaudible] this been your last speech in your current office, [inaudible] what would you -- >> and the styles and regrets are slightly different. >> what was your worst major

decision? [laughter] >> i do not think -- the president has said many, many times that none of us can arrest or can be satisfied with anything like the current level of joblessness, with anything like the income gaps between what people could be earning and what they are. that is where one would have liked to have seen more rapid progress.

one does need to recognize and that relative to what was widely feared, the outcome has been a good deal better. i think one needs to let time pass to fully evaluate the policies that have been put in place. i tried to make clear, we have a great deal left to do. we have very important problems to solve. for all of our problems, one looks at the other major industrialized countries in the world, we have a relatively good hands to play. i remain quite optimistic about

the future. >> [inaudible] anybody who looks at the financial crisis, regulation or deregulation was the major factor. it looks like one of the highest items on their agenda is regulation. what do you think the role for regulation is in the years ahead? deal of progress regarding the financial sector? -- the you have regrets regarding the financial sector? >> i think it is very difficult to predict what will happen over time. to the size of the financial sector. there is no question that vast

success built up in the period it from 2001-2008. i think the volume of derivatives trading, for example, was 100 times as large by 2007 as it had been in the late 1990's. that is why in the implementation of the financial reform bill and its tough-minded implementation is going to be so essential. i said many times in the financial reform debate that it was a profoundly important one both for the issue of financial

reform and for the broader effectiveness of the democracy. there was $1 million being spent on lobbyist per members of congress. another lobbyist for working on that bill that every member of congress could be quadrupled. if that effort succeeded, it was going to be a very serious thing not just for what it meant to the financial sector future. that effort to -- that effort that went into blocking financial reform had not gone away. it has been turned toward volcker rule writing process. it is hugely important that the efforts not succeed. we will have to find ways to

assure that on the one hand, we bring substantial expertise to bear on these questions of financial regulation. at the same time, we maintain the kind of objectivity and distance that is essential to successful regulation. that will be one of the very important issues going forward. >> [inaudible]

>> i think i had said on occasion that i was one of the few people who came to washington to get out of politics. i will stand by that. with respect to the tax bill, look, i think is pretty clear that anything that leads to an upward revision in the forecast leads to a downward revision to the probability that you attached to another downturn. there is a further point that there was the risk and it was a risk that had been growing that somehow none of the tax cuts would be extended and that led

of had extremely serious impacts on the economy and would have had extremely serious impact on congress. >> a follow-up on dan's custom. if you had it to do over, is there anything that you would have done differently? would you even have come down to washington? >> there is no question that i would have accepted the serveent's request that i as his economic adviser. this has been an enormously consequential time for our economy. i have been honored to be able to play a small part to in it. and to work with what i think has been was a remarkable president and what i think has been a quite extraordinary team of individuals working to

strengthen and support to -- support the economy. what i liked the results to be even better than they have been on a number of different dimensions? of course. but i think the president is right to take pride in what has been averted. that is not easy for people to understand. but it is something that i think is very, very important. i will leave it to people who have not to directly involved to

do postmortem is on a particular decision. >> with respect to the current tax expenditure framework, on the estate tax, what was the president's position? why? it the position is not in the framework, why did they go with that? >> i think the president has spent extraordinarily clear in every stating his position of opposition to the estate tax relief contained in the del. all of the view that compromise was necessary to serve the most important objective of pushing the economy forward. his position was of opposition to the estate tax provisions,

but of willingness to compromise. >> [inaudible] >> i think the japanese example both disturbing and instructive. i think it carries less than that it is a serious mistake -- lesson that it is a serious mistake to be complacent partway through an economic recovery when substantial slack remains. it is very important not to be premature in the declaration of victory. a similar lesson is taught by the american experience in 1937 and 1938.

as tempting as as attractive as it is to focus on long run, as long as the economy is still well short of its capacity, it will be essential to pay attention to issues of demand as well as issues of supply, to pay attention to the kinds of spending that can directly create jobs. that is why i spoke about the importance of exports. that is why i emphasize the role of infrastructure investment. that is why talk about government's role not as misogynist source of demand, but in replacing the lost demand that comes out of the private sector.

that is an important lesson to learn from japan. >> but just wanted to get back to your point of counteracting the lack of demand. if there is a concern that a rise in long-term interest rates could offset some of the beneficial impacts of that, and on the in the stalls out question, what did you like most about being in the white house? >> reporters like you. seriously, i will miss the opportunity to work with remarkable president, a great team, and to be involved in the daily flow of events. at the same time, i look forward

very much to being able to step back and think about some of the very important questions we talked about today with the kind of perspective that is not possible when you are working on a daily -- when you are working in the daily grind of the white house. there are things that i will miss, even as there are great things that i look forward to. well as the first part of your question? >> the risk of a rise in the long term. >> you have to make judgments and we will have to make the judgments -- judges will have to be made over time in the context

of events as they unfold. as i said, at this point, the risks of stagnation and deflationary exceed the risks in the opposite direction. you do not want to find out how far you can push things. that is why i into size to -- i in besides having a framework and having a framework in place that provides that that growth to be matched with income growth. when you see interest rates rise and the stock market falls sharply at the same time, that is suggested that what is happening is some kind of major

concern about the supply of private capital. when you see interest rates rise and do see the stock market be stable or rise, it is more reasonable to attribute the increase in interest rate to an upward revision in the economic forecast, a sense of better prospects for business and more investment demand. it the look at the pattern in recent weeks, the pattern would suggest that what had driven interest rates was primarily the greater prospects. >> how confident are you that this package is going to be enough to give the economy that boost? >> i think i indicated that i thought the tax measures were very important. i talked about infrastructure, about a range of other priorities.

we were going to need to remain attentive to demand issues for quite some time to come. thank you very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> up next, we will take a look at u.s. military strategy in afghanistan. after that, remarks from the former cia director michael hayden. later, a federal judge rules that part of the health care block is unconstitutional. >> we spoke with supreme court justice elena kagan, who was sworn in the summer and is the newest member of the court. here is part of the interview, which airs in its entirety sunday night. >> talking about argument and listening to some of the recordings of last year's cases, it is interesting to hear your -- i am wondering about your intellectual relationship with chief justice robert sprague often comic your questions and

answers were very rapid-fire. i am wondering what you think about the intellectual relationship. >> i have extraordinary respect for him. he was the great supreme court advocate of his time. i always felt as though he could do better what all of us as lawyers were trying to do. he did it as well as anybody has ever done it. to make an argument to the supreme court. that is a little bit intimidating to know that the person questioning you has also stood in your shoes and has done the job better than anybody else ever had. i have listened to the chiefs argument and i've talked to a lot of people. he was fabulous. he is also a great questioner up there on the bench. he really challenges you. as he should, and he does not

let you get away with anything. he does not let you -- if there is something that you want to hide in your argument, he is certain to find it. i tremendously enjoyed are doing in front of him because you had to be at the top of your game. you should have to be at the top of your game. when i walked in and for my swearing and, this was in the summer before my grant public investiture, this was the swearing in. i was met by the chief justice and he gave me a little bit of a tour of the better rooms that the justices go to. the conference room that the justices meet ein. the dining room upstairs.

he showed me the robing room and the saudis would lockers. -- these wood lockers. we walked around to the building a little bit and he showed me some other rooms and maybe we took about 15 minutes and we ended up back in the robing room again. each of the nameplates had gone over one and now there was a justice kagan. it was very effective way to say to me, you are here now. you are part of the community. you're part of the institution. it was a very powerful thing to see.

>> you can see the entire c-span interview with the newest supreme court justice sunday evening. that is at 6:00 27:30 on c-span. clucks a panel examines the future of u.s. policy in afghanistan. they will discuss the president's decision to began troop withdrawal next july. we will hear from lt. gen. david barno. hosted by the nixon center, this is one hour and 15 minutes. >> i think we are going to start a little earlier. welcome to the nixon center. i am marvin kalb, a visiting fellow at the nixon center. once a week, we have luncheon conversations about major issues of american foreign policy.

today, we are dealing with afghanistan. we will all try to figure that out as the golan today. i have in mind a couple of time frames. last december, president obama promised that in july of 2011, the united states would began a withdrawal of its forces from afghanistan dependent upon conditions on the ground. that is an issue that has been somewhat superseded by another date and another issue and that is 2014. in lisbon, nato and afghanistan reached a deal that is by the end of 2014, combat operations by naida -- nato would come to london, and at that time, afghan police and army would take over.

within a couple of days or a week or so, president obama is going to come in with another report on afghanistan that has been in promised for mid december. i am aware that president obama has been quoted as saying a couple of times, that he is not going to be the kind of president who goes along with a policy for which there is obvious evidence of failure. he has made it clear to a number of reporters, including bob woodward, that he would be prepared to settle for a good bit less, but he wanted to be sure that the policy works. if it isn't, you have to change it. we are going to see exactly what this december review comes up with. we are fortunate to have three very knowledgeable panelist to help us understand this next up

in american policy in afghanistan. to my right to, lt. gen. david barno. he is now a senior fellow at the center for a new american security and he is co-author of a new report that is coming out today. i have my first question with the general. let me introduce to my left, the ambassador ronald neumann. he was u.s. ambassador to afghanistan in 2005-2007. to my immediate left, david sanger, the chief washington correspondent for the new york times.

he is a winner of two pulitzer prizes. we are delighted to have all of you here today. i want to start with the general. based on your study, what do you think we can expect in july of 2011? >> the president will probably give us a fair understanding of that letter this week. i do think we will see the beginnings of the first elements of transition next summer and afghanistan, bills will be very, very small movements. i think realistically, to get an understanding of whether the strategy in place now is going to work, we will not be able to have a good approximation of that until late summer next year. those troops did not close in

afghanistan until about september of this year. with our seasonal fighting season, there is less combat activity in the wintertime. the spring and summer are the real fighting seasons there. we will need to wait a bit to determine whether those 30,000 troops have begun to have a significant effect are not. >> don't you think that by the next spring, we should have a pretty good idea of whether they will or won't be the beginning of a withdrawal? >> i do not think the president will change his plan to start the transition next summer. how large will the transition be? where will it take place? it would be relatively easy to start a transition to afghan lead. i think it would be relatively doable today to see that transition start in parts of northern afghanistan and western afghanistan, where there is very

little caliban activity. -- taliban activity. >> thank you. ambassador, we are pursuing a counterinsurgency in afghanistan. my understanding is that for a successful counterinsurgency policy to work, you'll have to have somebody at the center of the government with whom the coalition can work. can have professional relationships with. there was a story today suggesting that our relationship with president karzei is not very good. how do you have a successful counterinsurgency policy if you do not have a good relationship with the guy in charge? >> that is a great question. it also goes campaign -- and

also goes to a second issue which is the responsibility we have to understand how our policies affects others. i say this because i think that part of our problem with president karzei is his problem with us. to say this is not this to say that he is right and we're wrong. it is the starting point of diplomacy is if you want to change something, you have to understand what is going on. that is why they hired diplomats. occasionally. what i believe is happening with president karzei is that he has great doubts about how long we will stay. we will see it the policy works. it creates a considerable amount

of doubt as to our fortitude. i do not think the issue is that president karzei does not understand. i think the issue is that when you go to hem and effectively say, we need to fire the people you trust and who you think will fight when the americans felt and we need you to gamble your survival on our staying until we get in place a government and an army, but we cannot tell you that we will stay. we will show you a lot of body language to suggest that we might not. you do not have a persuasive argument. >> president karzei was the one at his second inauguration who put the 2014 date out there. >> i do not believe that president karzei is in a hurry to have us go. but he is now very doubtful that we will stay long enough.

heat is -- he is on a post america's survival strategy. he is a perfectly valid model for that. the last communist president of afghanistan, some may remember, everybody thought he would fall within weeks of the soviet withdrawal. he lasted three years, sustained major assaults, costing thousands of casualties. that is what i see karzei rebuilding because he does not trust us. if i am correct, the point is not to argue that he is wrong court to -- that he is wrong and more to say that we are wrong nor to think that we can give him assurances of our staying because we are not all that sure of ourselves.

we can, therefore, look for the points of convergence, the things that we can both agree to do together rather than constantly pushing for changes that are so large they destroyed his ability to survive without us. there are alternative policies -- policies out there but they come from having a policy that includes -- >> thank you. david, one of the things that president karzei has said in the last couple of days is that he might not agree with the counterinsurgency strategy, may not understand it, whatever, but that is not his world. he doesn't feel that that is where america should concentrate its efforts. he believes that america should concentrate its efforts on the border region and in the sanctuary areas in pakistan. that, he says, is where the

heart of the problem is. president obama is going to come in with his report this week. do you feel that there is any likelihood that we will see a sincere discussion of the pakistan part of the afghan problem in this report? >> i doubt you will see much public discussion about pakistan. but i suspect that if one went into the much lengthier classified version of the report that will go up to the hill, he would probably see as much discussion of pakistan then you would afghanistan. think back to a year ago when the president set out his objectives. during a speech at west point, the speech that had a lot about afghanistan and very little about pakistan. he said in public that our major goal was to defeat all qaeda and its associates. that justified the war in afghanistan. al qaeda has 50 or 100 members.

the central concern when it comes to al qaeda is pakistan. there was a second court national objective that the president identified and when it goes up to congress you to see a line saying that this objective has been redacted for security reasons. it is no mystery what that objective is. that objective is to prevent pakistan's nuclear arsenal from falling into the wrong hands. that just does not mean the weapons. it means the materials as well. how does the pakistan part of this go so far? the president will be able to establish that he has made some significant progress in

afghanistan and parts of its. this is all a question of how you identify which geographic parts of afghanistan that you want to emphasize. he will be able to show that in areas where the search was in the early, there's been a fair bit of result. he will probably talk less about those areas where the taliban have begun to go in afghanistan, including some areas of the north. he is less likely to discuss the difficulty in getting a general and pakistan meet military to go into the hearts of al qaeda territory. the u.s. strategy there has been pretty evident. there were 53, 54 creditor strikes in 2009. -- predator strikes in 2009.

he did not have access to the creditors during much of that time. this year, we are well up over 100 strikes already. the year is not out. a nuclear -- on nuclear security, they did very upset when there are stories in the american media, a discussion on american television, about their nuclear weapons. president obama has tried to deal with that by saying that the u.s. does not have any real concerns about security. if you going to the documents that work in voluntarily released by wikileaks in which -- it is pretty clear that there is deep concern about the security of the nuclear weapons spread is three weeks after the

president's first declared his -- declared that he was pretty sanguine about the weapons, he gets a cable from the american ambassador to pakistan expressing great concern that they would not allow a group of american experts to come in and remove some highly enriched uranium that is under american control. they said that the reason was very simple. the more they read about concerns about nuclear security, the less likely they were to let the u.s., men and do this. >> general, when you were in charge there, was the issue of a sanctuary as much on your mind as they are today? did you have a sense that this

was a problem that was manageable? if you addressed, take control of that? >> the taliban today is a much stronger force, and much more capable force. if it appears to have very deep roots inside of pakistan. by the spring of two dozen 5, the insubordinate headquarters had a charge -- i saw a newspaper or a magazine. we saw a fairly significant change in the years thereafter. why did that occur? what is the genesis of that? i cannot give you a definitive answer. one theory, the lack of

confidence in american staying power. in the summer of two dozen 5, the united -- 2005, we only had 20,000 troops there. in the space of a few months, we sent a message that was interpreted as the americans are moving toward the exits. six months later, we saw a significant taliban offensive in southern afghanistan. some feel that they were not in areas that they work -- we were challenging them in. i do not buy that of view. a very different period of time and things changed fairly

significantly after that. it was a very good question. >> ambassador, you were in the hot seat at that time. >> happy to pick up on that. >> what is going on there? >> the taliban was rebuilding. we were not surprised. by the fall of 2005, we wrote cables which predicted quite explicitly a major taliban offensive in 2006. the writing was on the wall. by the fall of 2005, we knew that we were against a much larger threats and we asked for some help. we did not get much help. i asked for $600 million for

2006. after prolonged delay -- deliberation, i got 43. we were under strength. we did see the problem of the sanctuary is getting bigger and bigger. the bush administration gradually took the more seriously. toward the end of the administration, the private pressure on pakistan had done much larger. there are two problems. if we are going to -- this whole business of davis has increased their believe that we're going to leave. why should they be entering a

to-front war and they still see pakistan as their biggest threats? that is their view. what we do has an impact on how people respond to what we asked for. president karzei has had this view for years. if we would just put enough pressure on pakistan, they would flip the switch and the insurgency would end. that a view is conditioned, but i am guessing by the fact they had a great deal of control over what happens on the resistance. he does believe that if we pushed hard enough, they would close it down. we have never convinced him that that is not correct. we have to maintain a relationship that allows us to fight at the same time that we have to be able to put pressure

on pakistan to do more. that is an issue on which we have never agreed with president karzei. he got a little more comfortable when we began to see that there was a problem. he has felt for years that we are naive in our approach. i am not making that my point. i am telling you where he is coming from. part of what you see with president karzei is the frustration of a man who feels that he has been carrying a message for five or six years and the message has been validated by facts and the americans will listen. >> ladies and gentlemen, we are here with c-span. if you have a question, please indicate and i will try to get to as many of you as possible.

>> i have three questions. >> try one. >> where will we be in 5-10 years? pakistan is an existential moment. how do we deal with pakistan? >> let's start with the first question. >> it reinforces what we have talked about here this after an already. there should not be a zero endgame for the united states in afghanistan. it begins to solidify the afghans -- they have to make critical choices.

we have heard that on both sides of the border, the government's are making decisions based upon what will this decision look like the day after the americans are gone? they have no confidence in our staying power. they have no belief that we will be there five or 10 years from now. then they will hedge their bets in ways that undercut our vital interests. we need to have a commitment to long-term small american presence there. 250 thousand-35,000 is what we suggest. a enough to keep the afghan army trained. if that army takes on the fight with the taliban, while the american special operations continue to put pressure on al qaeda, that will not be over five years from now. the fact that we put this cloud the fact that we put this cloud of