handout, which deals with the question of budget earmarks. i think that what i'm going to try to do right now is just to stop and i'll point that out to you. you know it's there. i'm happy to answer questions about that. but we're getting down very close to the end of the session and we have the moment of silence coming up and we're going to want to stop approximately on time for that. so let me open it up for questions and i'll be happy to try to help you out as much as i can. okay. >> i have a couple structural questions and i hope since the next panel is changed that you might be willing to go a little bit into their territy as well. the first one has to do with the proposals by the house republicans to cut back, whether a hundred billion oromething else. doou see that coming in the

context of the budget resolution and things like the budget function since the appropriation process seems to be completely broken? i wanted to get your perspective on whether roll backs would be by budget function. secondly, the talk about two-year budget. if you take that seriously, if that would ha any structural changes on the process that u've talked about. >> okay. i'm going to try to move relatively quickly. in fact, the proposed hundred billion dollar cut in the budget is going to be on us much soon than you might anticipate, because we are funded -- the federal government is funded on a continuing resolution. and that, i forget even the date when it expires but it is not far in the future. so the first thing that this

congress is going to have to do is finish the process of funding for the current fiscal year on the discretionary side. how will they do that? to be honest, i have real idea. the simplest way is a cut in nonsecurity discretionary spending. the simplest thing would be to take all the nonsecurity spending lines and cut them by the same percentage across the board. you can't do that. the reason why you can't do that is that in keeping with the discussion earlier, there are a lot of activities on the discretionary side of the budget that are long term in nature. many entail contracts. for those of you who believe in the constitution, the constitution establishes the sanctity of a contract. so if you made a commitment last

year to build a building,and the federal government has sign contracts, you're on the hook for that building. so you can't cut that part of that particular line in the budget. so you go through, and this is the process, the kind of process that you go through every time you put together a continuing resolution for the federal budget. the first thing you've got to do is deal with ter of art is anomalies. you have to go through all the parts of the budget where, in fact, you're already locked in. take them off the table, because you've got to meet your contractual obligations on those and then you have to work through everything else. and if you have a spending target and the spendi ining tar is a reduction of, say, 10%, once you take everything that's fixed off the table you might very well be looking at a reduction of, say, 15%. usually the next step is you look at some things in the budget and you say, holy cow.

i am not going to cut that by 15%. and every individual can choose his own. by the time you get a room full of people and everybody takes the lines that they don't want to have cut by 15%, there's not much left. but first you -- then you exempt programs that you don't want to cut and the next thing you know, you're cutting by 30%, 40%, 50%. it is a very contentious process and it's the kind of process we go through routinely, as i say, when we do a continuing resolution now we're going to be in the process of trying to finish up the appropriations for this yr and i suspect it is going to be extremely contentious and extremely painful. >> you mentioned the recommendations by the president's deficit reduction

commission. what if any of those do you thin actually have a chance of being adopted? >> well, the cmission's recommendaons include, for example, a package to fix social security. i've got a discussion in the handout which i didn't get to of why i would say that we need very early action on repairing social security's finances. my understanding from the discussions within the commission was that there was a fair amount of agreement on the motivation to do it. there were certain possible changes to social security that caused a great deal of heartburn on both sides. one where it seemed as though there might be a certain measure of agreement was increasing the cap -- the taxable maximum amou of compensation that we

would be subject to the social security payroll tax. that's only one part of a potential solution. you've got to go a lot further than that. but people were able in that commission to relate to one another to some extent as to how you might be able to find ways to save money. there can be a reasonable amount of agreement for restraint on discretionary spending to the extent that you talked about it in concept and you don't start talking about specific things you want to cut. but it is likely that any proposal to deal with the bget problem if it comesto fruition, it is going to involve restraint, probably across the board. i shouldn't say across the board. it will probably involve restraint that will affect every agency, including the pentagon,

and ideally it will be done on a relatively targeted basis at places where you can find savings that you can achieve. you might find, this is, i think, the wild card. there was a great deal of interest on the president's commission in aax reform, which is to say and this kind of goes back to 1986 for those of you who are old enough that this means anything, we had a tax reform act that was enacted at that time and what it did was eliminate a lot of preferences in the tax law and to use that revenue to reduce tax rates. it is possible that even for some members congress who are extremely averse to tax increases, that they may be willing to go along with a tax law reform, which raises some

revenue but also reduces tax rates because it's the tax res that affect the incentives that people have to work and save and invest. it is possible that if you take all the various parts of the budget and you put them together, with a tax reform, that provides some appeal to people, possibly across the board but certainly on the republican side, so that that gets you some revenue and reductions in the -- on the spending side, reduce outlays, and you put the two together and you get enough spending -- enough deficit reduction that you start getting the debt under control, that possibly could be attractive politically. it is -- one of the things that makes this difficult is that it always works best if you do the whole thing at one time, because that way everybody is making a sacrifice.

if you try to target one part of the budget and you say, okay. we're going to start here and this is going to be our first piece of legislation, that is not going to be attractive to those who are losing, who are taking cuts in that legislation and everybody else won't be terribly motivated to pursue it anyway because it's not going to solve much of the problem. that's why we're probably going to look at if it is successful deficit reduction efforts are probably going to work through the entire budget including the revenue side. >> thank you very much. >> okay. >> thank you. that was a terrific stab at helping us start to understand this complicated issue. let meemind those of you at home in your offices watching c-span tt the document we've been referring to is available on our website. that's national press.org. you'll find a r bar across the

top of the home page and if you click on that bar, itl take you to the program page. scroll to the bottom and you'll find this document. for those in the room also if you want to go back and print out a copy if you didn't get one, it is available. for those of you not able to stay for the rest of the morning's program, i'll ask you to keep your seats for a minute. our president barack obama has asked we as a nation observe a moment of silence in memory of the victims of this weekend's horrific violence in arizona. in addition to the grievous injuries to representative gabriel giffords and others, six people were slain outright. i'm going to read their names as reported in this morning's "the washington post". christina green, 9 years old. dorothy morris 76. federal judge john enrolled 63.

fillies sneck 79. dorwin stoddard 76 and the last victim, 30. please join me for a few moments of reflection or prayer. [ moment of silence ] >> thank you very much. and now we'll move on. if you are here, come down to the front. we're going to move from the nuts and bolts dcussion of our federal budget into a discussion of the broader economy.

and to help us do that we're extremely please to have our next speaker, a reporter for "the wall street journal." he covers the federal reserve and the u.s. economy. previously he was with the "dallas morning news" a washington correspondent and before that covered the energy industry, technology, and business for the texas state house. he's also an award winning reporter. he has won awards from the society of american business editors and writers, from the asciated press managing editors, from the association of consumer advocates and we are particularly proud to note that he is a winner of the national press undation's thomas stokes award for best energy writing. he is a long-time friend of the national press foundation and we're very pleased to have him. if you are a fan of the national public radio show "market place" as i am his voice will be familiar because he is a regular

there and also appears on other television and radio shows. so very pleased to welcome him today and thank you for being here and being flexible with our schedule. this is terrific. we have i believe a few open seats at the table, so if anyone who is sitting on the sidelines if you have an open chair next to you please raise your hand. i see one. if one person wants to move over to the table feel free to do that. would you like to stand or you wanted to use the computer? okay. i think it's right here. anna, are you in the room? can you help, i think we're going to load a, maybe a list of websites. we are pleased to be here at the woodrow wilson center for scholarsoday. they have these beautiful facilities including the

computer and projector which are going to help with our next presentation. so our thanks, also, to the wilson center for their hospitality. and as our speaker sets up his presentation i will take a minute to welcome our paul miller fellows here this morning. this is part of a nine-month fellowship they have been awarded. these arl washingte all washing reporters who have not been in town all that long. they come to us one day a month to take part in the national press foundation's paul miller fellowships in which we try to help them become more familiar with the agencies and institutio that make washington work. this is part of their fellowship this morning. in addition to a pretty diverse range of other journalists and interested parties from around washington who braved the cold weather to come out and join us this morning. we're very pleased about that.

looks like we're getting booted up here. one more note. our previous speaker has made a point of saying that if you need to contact him with questions, you want to do an interview and didn't get something this morning please feel free to do so. his contact information is also on our website. national press.org. and many thanks to him. >> should any of you have occasion to want to interview lee hamilton our director in bloomington, the contact information for the center is

also in the press foundation materials and also on our website which was up there previously, center on congress.org. >> i will go ahead andget started. while we're pulling up the presentation, some of you can share. i actually have some printouts here at the table. i thought it would be useful to start off since we're talking about the context of the budget to discuss something very much in the news and will be for the next few months. the budget in the context of the debt and the debt ceiling and the effect of the debt ceiling

on the u.s. economy and that entire debate and we are really just now starting to see the debate pick up obviously about what this means for the economy overall if we were to have a default on the debt. obviously it's only a threat right now from people looking for spending cuts but it is a serious threat and one we've never actually faced. so the -- i'll pull this up.

this just for the basics to start f with a rundown of what the u.s. deb looks like. as you know we're heading just above $14 trillion of debt ceiling at $14.3 trillion. and you can see here that we've actually run through from the -- you can run the debt back to 1789 if you wanted to. there's always been some debt in the u.s. except for 1835 when andrew jackson was able to eliminate it entirely. there's always been some fairly low level of debt and as the economy went into the '70s we started seeing a creep up into the '80s. you can see on this chart what happens when policies aren't quite in sync as they should be

with taxes. and here you can actually see from the last 110 years we are running through basically even on revenue versus spending and there are dips here and there. but you notice right here in the 1970 period that you go into deficits and this is what happens when you lower taxes significantly without having the spending cuts to deal with it and this is what happens when you actually make the proper tax and spending changes that you need in the late '90s and the economy goes into surplus and then again when you are running two wars and lowering taxes and paying for social programs and then of course you have this big drop with the financial crisis when tax revenue plummeted and spending went up with the

stimulus program and we're starting to see the -- obviously we hit bottom but with the latest deal in december to extend the bush era tax cuts the deficit is still over a trillion dollars for the coming year and that's how you get into a figure like this where it just -- it clearly is unsustainable. now, there is a difference between -- you've probably heard a difference between the debt held by the public and debt held by tragovernmental accounts, debt held by the public about $9 trillion. that's people, regular people, investors, includes foreign investors. about $4 trillion out of that $14 trillion is held by foreign governments and foreign investors. so that is a significant figure when youonsider that about half of that $4 trillion is held by china and japan. japan obviously had surpluses

and bought up debt until its downturn from the u.s. and china is still buying it and is a leading buyer of u.s. debt. a few points to run through on this debt ceiling debate that we're going through now. the u.s. dollar as you know is the world's reserve currency. there is a reason that the u.s. is able to borrow to the extent it can right now because people see it as a safe haven durg crises and flock to the u.s. dollar because it's the safest place to hold money just because of the reputation of the u.s. government and the might of the u.s. government and there's an expectation that the u.s. is always going to pay it back. if you were to look at the entire volume of $100 bills in circulation, some are between 2/3 and 3/4 of the physical bills are held outside of the u.s. that's kind of an indication of what people think of the dollar everywhere around the world and

that's why the u.s. is able to borrow at such a large extent. the risk though is that you keep borrowing and don't pay it back and there is nothing wrong with short-term borrowing as long as there is a long-term plan to pay it back afterward and that is reelt big issue right now. interest rates are really low, for the u.s. government to borrow at ten years the yield a few months ago was 2.4% which is obviously a historical low but there is a reason it's advantageous for the government to go and borrow at that rate, build the economy back up. this was all the money borrowed during the stimulus program was done at very cheap, low rates. that's done to fill a hole in the economy whether in the 2001 recession, when the tax deal came out and the stimulus package that sent checks to everyone. same thing in 2003 and then in

another plan sending money directly to people and the big one of almost $900 billion in 2009. the problem is if there is no long-term plan to pay it back you run into the unsustainable deficits obviously and there's been a study that looks historically over centuries at governments that keep borrowing money and don't have a plan to pay it back. once you get at the point of about 90% of your total gross debt to gdp, the u.s. economy gdp is about $14.5 trillion and we are sically over that point now, it's been shown countries that are borrowing at a level that high end up having slower economic growth and nobody knows the exact reason why this happens. it all depends on each individual country and their own circumstances there but there is a sense that if you are borrowing at a level that high

your growth patterns go somewhere from being -- possibly growing at 3% to 4% per year down to 1.5% to 2%. that is one of the risks we face now. as you see higher debt investors will eventually decide you don't want to make your debt on this particular government. this is what greece went through. greece was well over a hundred percent of debt to gdp and the borrowing costs for the greek government went through the roof and you get to the point where you can't actually sustain the rrent budget because you're spending so much just to service the debt that you've got that that's when you get to the point of a default and investors then will charge even more than they've been charging before. so the u.s. right now as i said, we're right around 3.5%, interest rates have gone up. as the economy has gone up.

there is some fear that if you don't do anything about the deficit and the debt and leave this problem festering that investors will eventually start questioning the ability of the u.s. government to pay it back and you look at 4.5%, 5% borrowing costs, 6%. the reason this is just not for the government borrowing because it obviously affects how much the government is going to be able to do in other programs if it's spending so much money servicing debt but also beyond that in the idea of how these interest rates flow through to the rest of the economy and the market place the ten-year treasury yield is known as the benchmark rate and that flows through if you're ever looking for a mortgage it's often tied very closely to the ten-year yield and with some premium that borrowing costs in every other way e tied to the ten-year yield ether for corporations or for consumers. investors can turn quickly and

fiercely so they can decide and we never really know when investors are going to decide that the u.s. is not going to borrow, be able to borrow at the pace that it did fore. and a crisis can come up suddenly. we've known for years that greece was borrowing more money than it shld have been borrowing and we've known that its gdp, debt to gdp ratio was going over a hundred percent but only until investors as a group obviously decide that this isn't sustainable. do you have that sudden and fierce crashn that market? and nobody ever really knows. we learned through this latest financial crisis even though we knew back in 2004, 2005, 2006, that the housing market was going into an unsustainably high level for prices it wasn't unt 2007 that investors started to take note and then obviously suddenly in september of 2008 there was the very sharp

reaction to what was happening there. raising the debt ceiling is certainly a contentious issue but kind of an oddity for governments around the world particularly the u.s. it doesn't really make sense why an elected body should be able to go and make decisions on taxing and spending separately from the debt ceiling. there are no other countries in the world where you actually set a separate vote for raising the debt ceiling because just like we saw in december lawmakers came together and made the decision to increase spending and lower and keep taxes lower and didn't really do anything about the debt ceiling at the time but that decision alone is the effective decision that you're going to borrow more than you would have otherwise and postponing a decision like this on the debt ceiling for such an

odd circumstance just exacerbates the problem because it allows it now to be used as a political weapon of sorts. for those of you who follow congress closely and were watching the federal reserve chairman on friday speaking before the budget committee he was obviously to talk about the state of the economy and the state of the recovery but he also spent a fair bit of time talking about the debt and the deficit. there were a number of reports that he come out in the last few mohs but from private sector and from the debt, the deficit commission looking at this issue and i just wanted to run through a few of the points that chairman bernankerought up because they really highlight i thought fairly succintly some of the problems we're seeing right now in the economy and in

this debate over the budget deficit. you've all heard the difference between a structural and a cyclical deficit because there is no problem during a downturn of the business cycle in borrowing that's never really an issue. financial markets give plenty of leeway for the u.s. government to go and borrow in large sums during a downturn because the economy is weak. you're basically filling a hole in the economy and there is nothing wrong with that. the entire purpose is to get the economy moving again. the structural issue is what we're dealing with now when medicare and medicate expenses are growing unsustainably social security is obviously has its probms and the defense budget is what, a quarter of the federal budget, almost a quarter of it. you're looking at this problem and you have to do something

beyond the cyclical issue. the fact that tax revenue has gone down during this cycle and is going to come up is not the entirety of the problem. the cbo has its estimates and one of the things the chairman ran through were the plications if nothing were to be done about the debt and deficits. heays diminishing confidence on the part of investors it will be brought under control will lead to sharply rising interest rates of government debt and potentially to broader turmoil. higher rates would drain funds away from private capital formation and increase our foreign indebtedness with adverse long run effects on u.s. output, income, and standards of living. so the beginning part of the statement is self-explanatory. the high rates of government borrowing draining funds away from private capital formation, that is a really important point here because when the government is borrowing money and interest

rates on government debt go up people are still going to trust the government more, the u.s. government than corporation in terms of borrowing costs so as investors keep putting money into u.s. treasury bonds as the value of those bonds is dropping, the yields are rising, corporations are going to be crowded out from being able to borrow. and individuals will be crowded out from being able to borrow because investors will focus on safer government debt than they will on corporatdebt. that creates all sorts of problems for the econo if borrowing costs, n just the cost of capital but also the availability of capital for business that will severely slow down the economy. then obviously the foreign indebtedness with $4 trillion out of the $14 trillion held by foreign investments and governments. you have a number of issues with trade flows and the balance of

power right now that you're seeing in this debate over the yuan and doing something about trade with china. the final point here i want to bring up from the fed chairman and what his warning to congress was, doing nothing will not be an option infinitely. one thing he points out here, the prompt adoption of a credible program to reduce future deficits would not only enhance economic growth and stability in the long run but could also yield substantial, near-term benefits in terms of lower, long-term interest rates and increased consumer and business confidence. that is acally something that was debated in the early 1990s when president clinton was trying to come up with a plan to bring down the deficit and some would call it a deal but an understanding he had with chairman greenspan is that once you are able to bring down the

federal deficit and give investors confidence that the debt is not going to come out of control, then long-term borrowing costs for the government come down and as treasury yieldcome down and those borrowing costs come down, corporate borrowing costs come down as well. so the agreement between the white house and republicans in the '90s that brought the budget into balance was actually a very important factor in the boom of the 1990s and that really sharp period and strong period of job creation that we saw then over the eight years of the clinton presidency you're loong at about 23 million jobs created in the eight years following that and the bush presidency about a million jobs created so there is a fairly sta difference there obviously between the two climates that we saw. i want to pause there and first go to some questions that people have so we can talk about the

debt and then i'll go into some of the other metrics of the economy that may be useful. yeah? >> do you know how much of the increase in the federal debt over the last 20 years can be pinned on the tax cuts? >> well, you can actually see in looking at t federal deficit what happens when you have tax and spending programs that aren't paid for. as you can see the u.s. went into surplus in the final years of the 199s and once 2000 hit -- you had a combinatioof two things. first the economy weakening. it was a milder session but nonethelesa recession. unemployment went up to 7.8%. for eight months to have a recession is actually pretty

mild and not that bad in terms how recessions go. putting in the tax cuts at the same time as you begin fighting two wars, obviously creates a big hole in the budget and that's when you got from an annual surplus into annual deficits, $400 million and you can see that the debt goes from about $6 trillion up to 9 o 10 trillion over that period. a large part of that was due to having tax policies that weren't somehow balanced out with spending policies. >> when chairman bernanke is talking about structural problems as opposed to the need for raising revenue, also the fiscal commission's proposals for tax reform, my understanding is they're talking mostly about

spending cuts, not talking in the aggregate, actually significantly raising taxes in the u.s.? >> the fiscal commission is actually talking about both spending cuts and raising revenue somehow so you can raise revenue. the big problem with the tax code is there are so many deductions built in that you can't really measure it in the simplest way so if you were to remove say the mortgage interest tax deduction that's the most common one that's discussed. then all of that uld become -- so that affect obviously the tax base but that would lead to higher revenue. so you're not nessarily directly raising the tax rates. u're just removing a deduction. they are talking about raising tax revenue in that sense by removing a lot of the deductions and what chairman bernanke has been urging lawmakers to do is to -- it's not really the role of the federal reserve being independent to look at that issue and so he is saying somehow figure out either spending cuts or revenue

increases to deal with this problem and it's not jus about the cycle for the economy. when the economy is weak, the tax revenue goes down substantially because people are making less money. when the economy improves, it goes back up. but the structural problem is the fact that even when the economy improves, you're not dealing with the underlying deficit and it just keeps going out of control until you find some way to cut spending. >> have you charged your battery recently? i wonder if anyone's modeled for 1950 or '60 tax systems because as warren buffet pointed out we basically have a regressive tax system now. if it were truly progressive how much of this void would be filled if we had a rational tax policy for instance. >> rational is in the eye of the

beholder. you also had an incredible post war boom there that you're not -- you don't have the same kind of growth in the economy that y had back then so it's hard to make those comparisons. it's true what warren buffet said that when you get down to it, the wealthiest people in america are not necessarily paying the 35% income tax rate. you're often looking at the 15% capital gains tax rate because people who are at that level are taking in a lot of it through investments, through partnerships that are set up, through special investment vehicles that allow them to draw at the lower capital gain rates rather than the higher rates and so that's part of the discussion that the deficit commission started in some small way but i don't think they've done enough of that looking at that looking at the disparity between what should be the progressive tax

rate in what has been designed and what we're vooeg right now. >> do you see any indication that there is the political will within the congress to have a ration discussion about tax reform? >> there is the will to have a discussi, whether it's rational is another issue. there is i think a recognition from everybody on both sides that the current approach is not sustainable. once you at least get to that recognition you can start discussing the solutions but i think in every circumstance we've seen from the government when you have a problem you've known about for a very long time it usually takes a crisis before it is somehow dealt with. the crisis whether it's security or financial markets or in this case the debt is usually

something that everyone will talkbout until the crisis comes and having the discussion now from the deficit commission and from all these other commissions at least presents some bit of a playbook that you can use when the crisis comes. it's possible that there could be some miraculous coming together from democrats and republicans where they decide to deal with the problem. this was done in prior governments, through a government shutdown. maybe that will be the avenue to do it. for all sorts of political implicions there. the government shutdown isn't seen -- is seen as more of a litical exercise by financial markets than the more srious scenario, a default on the government debt and that means the fall on the government debt just to be clear, treasury secretary timothy geithner sent his letter to congress last week warning about this because there's been a lot more discussion from a lot of the tea party members coming in saying that they will, they're fine with the default on the

government debt if that's what it takes to deal with the debt and to bring down government spending and so the treasury secretary laid out in this letter that it's between the -- the u.s. will basically hit the debt ceiling sometime between the end of march and the middle of may. and the reason, he says, that he ofrs this kind of a loose timeline, one you don't know how much tax revenue is going to be coming in over that period and that could extend the moment of not being able to go and issue more debt. but once you actually hit that ceiling, the treasury is legally in theory prohibited from going out and issuing new debt to be able to pay back existing debt holders, issuing new debt to fund the government, and that when investors truly get worried. there is going to be some point before that happens when the warning signs go off on wall street where people say that the

politics are actually affecting the underlying problem here and there's not going to be a near-term decision to raise the debt ceiling. so the reason there is so much latitude is because there is a huge number of government funds that the treasury secretary can tap to deal with keeping the government open. you can actually hit the debt ceiling and not be able to go and issue new debt but then the treasury department has money on the books of the federal reserve so it can actually tap down an account that it has at the fed and use some of that money. there is a retirement fund with $90 billion. you can pull that out. the exchange fund, $20 billion in that. something called the federal financing bank with $15 billion.

so you can start drawing from alof these accounts just to keep the government operating and avoid that meltdown moment. everyone in financial markets knows that even when you get past that normal point where you think the debt ceiling is going to be hit you have some bit of latitude, probably a matter of weeks and even during that period there are other things you can do to deal with the problem and at some point the debt ceiling has to be raised in the next five or six months and if that is the moment that leads to some kind of negotiation, whether the $100 billion in cuts that republicans, incoming republicans have been asking for, or something more long term, then that's the opportunity here. as the fedhairman has said and a lot of other people have said it's not the short-term borrowing that is the issue re. it's the long-term borrowing and

even if you were to continue at trillion dollar deficits for a year or two that is actual noit seen as a big problem by investors who are looking at u.s. government debt. it is still the safe haven and still the reserve currency and if you don't deal with the problem of three or five or ten years down the line, then that's when if there is no long-term plan to deal with it then that's where the real crisis is. >> one of the suggestions in terms of raising revenue and it's a perennial question is addressing the mortgage interest reduction that's been brought up again this year. what is your sense, given the still fragile state of the housing market with the proposals not to do away with it all together but proposals to lower the cap on it and tinker with it in other ways? do you think that has any chance at all of getting anywhere?

>> well, the notion of loring the cap on the mortgage interest deductions actually one that i think has some potential for traction. instead of allowing somebody to deduct all of their mortgage interest, up to whatever their highest tax rate is 35% maybe doing that at 28%, that is really the uivalent of the discussion of whether to raise taxes on middle class families or the highest income families and the housing, people in the housing market say that getting rid of the interest, mortgage interest t deduction would be devastating to the market and if you were to do it right now it probably would be. one of the proems and their point is correct that people who have bought into the market have bought in with the assumption that this deduction wld exist and so in some ways, people who are buying a house think it's like -- it's a great benefit but that's in large part been built into the cost of housing. soeople who are going -- most realtors are sitting down with

you at the table and saying here is your bottom line cost after considering the interest deduction. that's probably not going to affect people who are buying houses at a miion dollars. there is some discussion about maybe putting the cap at mortgages at $500,000 so that would create some problems for people in california, new york, d.c., some of the high cost housing markets but it's not going to really block out that many people in the middle class. so that is probably going to be accompanied by some other discussion about the extension of the bush era tax cuts. but until you start with this idea of zero based budgeting we started to hear from the deficit commission, really starting with the blank slate and saying we're not goin to include any deductions then you can get to the point of having tax brackets from 8% at the low end up to 22, 25% at the high end if you remove all of those deductions that affect everyone. the same thing is going on in the debate about corporate tax

rates. you can reduce the corporate tax rate from 35% down to something else. maybe 25% by removing all the deductions but you already have disparities built in because of the esting deductions and a manufacturer may be paying 10% or 15% in taxes because of their deductions whether it's for investments or equipment into something else and a financial company is probably going to be paying 35% so a lot of this benefit would end up going to financial companies and there is a whole other set of politics involved in hat. >> there is obviously a lot of talk during the stimulus about how i think most economists seem to agree the stimulus helped prop up the economy for a long time but now that there is this political consensus formed around the need to cut spending is there any role for short-term

spending in the future from this point on to continue helping to prop up the economy? the only short-term spending would be tax cuts disguised as short-termpending and that is what we're seeing now with the tax cut extension and the reduction in social security payroll taxes. that's, when we talked about stimulus in the past decade or so in 2001 to 2003 and then in '08, people were getting checks from the government and that was just -- that was stimulus. republicans liked it because it was also a form of a tax cut and for whatever reason it doesn't make sense in terms of arithmetic but put something as a tax cut you don't consider the debt implications of that and we've seen in the '80s and the beginning of this past decade what happens when you don't actually account for tax cuts in the budget and you end up building larger and larger debts. there is some potential to offer

additional stimulus in terms of sendg ney to certain segments of the popution through what can be called the tax cut but you're not going to see any big spending programs coming up. >> since january of 2007, what have been the biggest ftors in driving up the debt and the deficit? what exactly has the increase -- i'm picking that four-year period because there is so much political dispe over the past few years on whether the deficit increase is due to the -- some people blame the stimulus exclusively and some people -- that's why m thinking january, 2007, to today. that is a good question because we can actually look at -- we were running a deficit going into 2007 and so you could see,

though, that the debt was at what, roughly $10 trillion when at the end of the bush presidency and we've added $4 trillion since then. the key factors in that huge difference are primarily the fact that theeconomy has been very weak which means lower tax revenue. that started, you can see the point where the recession started, this grayhaded area is the recession and when that started in 2007, december of '07, tax revenue started weakening and you could see the accumulated debt taking off. how we got from $6 trillion up to $9 trillion is the effect of two wars and tax cuts that weren't offset by spending cuts

and spending programs like the medicare/prescription drug act. that wasn't paid for. and people knew at the time that it wasn't paid for but there was some expectation just like in the '80s that it would lead to a much stronger economy and you did have a stronger economy in the '80s. i don't know if it'ss a result but accompanying this and so at least you had a recovery back then and you had pretty decent economic growth after some of the tax cuts in the beginning of this past decade b it wasn't great by any means. the average growth in the economy in the 2003-2007 period was about 3% a year which actually i considered average on par just to keep enough of the economy growing strongly enough to keep people coming into the labor force and keep unemployment steady. but unemployment was low out of the last recession. it was about under 8% and so getting unemployment down to 5% wasn't that much of a problem.

[ question inaudible ] >> the weakening economy is the primary reason because if you actually look at the total cost of the stimulus, just the stimulus, the january, 2009, february, 2009 package, that was less than a trillion dollars. so you're talking depending on how you account for it somewhere around $900 billion and we're looking at an increase into the debt of about $4 trillion over that past few years here. so the bailout actually is probably going to turn out to be a profit for the u.s. government. we heard a lot about $700 billion being spent and at the time even the bush administration was accounting for maybe $250 billioout of that $750 billion being expended and that was what their baseline calculation and certainly been coming down as that money has been paid back by the banks, all

the big banks have paid it back and most of the smaller banks are now on the way to paying it back now. and the outstanding program of course is general motors and that stock needs to be sold off and aig, which surprising most of us, looking like it's going to be able to turn a profit for the government once all of that stock is sold off. >> would you comment on the impact of the tax structure and the mobilization or rather the moving of american industry overseas, moving actually corporate headquarters and manufacturing plants? >> well, the impact of moving manufacturing plants overseas is obviously a jobs issue and if you are removing those jobs, steady jobs in the u.s., then all of the tax revenue from those workers and the steady jobs is going to be lost and the revenue from those businesses.

companies moving their operations overss to avoid u.s. taxes, that's a much different issue. and there is aigure for this from the irs and the jao and a lot of people have looked at it. i don't know the exact figure. but it's not something that is the underlying, a huge issue in the trillion dollar deficit that we're looking at but it is certainly billions of dollars, tens of billions of dollars that could be had. but you're also seeing right now a much different argument about the variations in corporate tax rates abroad versus in the u.s., canada, the uk, number of other countries are lowering their corporate tax rates and this is becoming a competitiveness issue and now we're starting the debate in the u.s. it's probably not going to be resolvedn the next two years but a debate about whether the

u.s. and corporate tax rate needs to be brought down to deal with that issue as well. but the point is certainly correct that some of this money is being held offshore and there have been -- it's kind of complicated how the proposal uld work right now but there are some efforts to bring some of that money back to the u.s. that's been sitting accounts abroad and tax it or avoid taxes on it just so the money can come back in and perhaps be used as capital to create jobs here in the u.s. >> could i ask a question? when they get to the point on the hill when they're staring the crisis in the face, and have to do something, is there any out that is going to resemble what the british model has been which is sort of a fixed formula for cuts and revenue enhancements? have you heard that talked about? is that something that might

happen here? >> i've not heard any specific discussion here about how they'd actually go about doing it. only that if you were to come to the point of a crisis, and we actually -- the interesting thing about this momen is we have at least several months if not years of preparation for what you would actually cut and there is some understanding that you have to do further cuts in the defense budget and secretary gates is already working on that and announced some of that last week so you have more of the frame work here rather than looking at a model like that. it's hard to draw a comparison like that. you can almos look at the states individually and see the individual states and what they would have to cut to make those comparisons to what's being cut abroad -- pension funds, retiment benefits, for public workers. those are the things states will have to do and make a decision on obviouslyobviously, because it's harder for states to borrow

money in perpetuity but i haven't seen any discussion on the hill about what to do on the crisis moment. and when you look at the september 2008 moment, nobody really knew what to do and when you hear chairman bernanke talk about how they came up with the $700 billion it wasn't quite out of thin air but the original plan was to buy mortgage assets and they were looking at a housing market in terms of total asts of maybe about $14 trillion and that's the size of the economy and they thought maybe 5% would be enough to do it. but i remember in the days leading up to that moment somewhere between september 15th when aig failed and the end of the week when lehman brothers and the end of the week people going to the hill, we had

figures of maybe $250 billion, $300 billion is what you would need to stabilize the financial system and nobody really knew. secretary paulson when trying to deal with fannie mae and freddie mac asked for what's popularly mocked as the bazooka to say give me a blank check to deal with them and if i have the ability to use it, then financial markets won't expect me to have to use it but that turned o to not be the case and so i don't think there's anymore blankhecks in that sense. >> how significant is the decision to raise the debt ceiling? i mean, just because the congress decides it's okay for the government to be completely overleveraged doesn't really make it okay for the governme to be completely overledveraged and that u.s. investors will have confidence in the economy. so, how -- just because congress

says, okay, you can raise the debt ceiling, that averts the crisis? how does that work? >> i guess you're looking at short term and long term crisis here. if you don't raise the debt kreeling that's a short term immediate crisis an all of the affects you would see from a long-term crisis happen right now because if the government can't borrow tn -- legally can't borrow then you ur just stuck and then if the government can borrow then but that's a warning to investors that maybe the u.s. can't sort out the political problems in dealing with this just like other countries in europe have dealt with this politically and managed to do it though obviously with a lot of trouble and difficulty in the uk and greece and spain and it lain ireld and all these places, and if there is a signal to investors that maybe the u.s. won't be able to deal with this then the cost of borrowing almost immediately goes up. and so, then you not only have

as a result of that default by the united states, not only a higher cost of borrowing but compounded the problem because you will be paying more to borrow just to service the existing debt even to raise the debt ceiling. i think the latest discussion is somewhere around $16 trillion so that you can at least get through the next 2 years and whoever wins in 2012 can deal with the problem next. but even if you get to that point, and you have gone through either a default event or something cle to a default event you have to do more cuts because you're just paying more interest to whoever bought the debt and probably countries like surpluses like china and sending more money abroad in that sense. so your question is more if you get passed that moment and do raise the debt ceiling then you get back to the discussion we're having -- we've been having all along about how do you deal with an unsustainable budget deficit?

somehow you then have to either raise taxes or cut spending to deal with that problem. because otherwise you'll just end up in another event. and the risk is that nobody really knows what the point is where investors and financial markets decide the u.s. should not be seen as an outlier in terms of borrowing. advanced countries can develop more than developing countries at 10%. right now, there's acally a distinction if you were to look at the debt held by the public, that $9 trillion figure, and the overall total debt at $14 trillion. the debt held by the public is the one that the congressional budget office actually uses for accounting purposes on the deficit. and we're right now i guess at roughly 60% of gdp so we're not that bad off. if you're doing a global

comparison you'll probably use the broader $14 trillion figure and puts us at 100% of gdp just somewhere between 95% and 100%. and that's where in other countries you have seen weakening economies as a result of it. but the u.s. gets -- because it's the reserve currency, because it's the strongest country in the world and the largest economy, it's given some latitude to be able to go and borrow more for a longer period because of the expectation it will come around. >> this is a topic of great debate, bu what is the risk of t china holding so much of our foreign debt? >> that's a very good question. there are i suppose economic implications and then political implications of this. the political implications are being tied to one country, certainly, a large country with

a big force in the world. that's something that you just have to assess how's that affecting diplomacy? how's that affecting all the decisions of the government outside of economics? and it's never a perfect pa parallel but if you look at the u.s. dependency on oil and you can see how the us. dependency on saudi arabia and on middle east countries may have affected foreign policy over the past four decades and that's certainly played a part. you can debate how much the u.s. would have gotten involvemented in iraq but you wouldn't have had a global coalition in 1990 and 1991 if there weren't all that oil there and the dependency for u.s. consumers and in the same way the u.s. is highly dependent on chi both for the products and for buying the debt and if china weren't buying all that debt you could reason that possibly other people would make up for it and buy that debt but by having such a buyer in the market it's certainly keeping the borrowing

costs do. you don't see very much likelihood of the big holders trying to depend -- uk, anybody using it as a weapon because it's -- it becomes almost like a grenade on themselves. if you were to try to weaken the u.s. economically by using that as a weapon, then you're -- the value of your own holdings go down, as well. so that's a hit to yourself but i suppe there's some theoretical point where you could get to that doesn't matter if you hurt your own holdings but there's very clear mutual interests involved in having that trillion dollars on china's books. >> given that we basically have two choices, increase revenue or cut expens and on the cutting expenses side of the equation, i forget the exact statistic but the mandatory programs i think you said was about 70% of the budget or so.

so, we're left with the 30% or so that are discretionary and those discretionary programs we count on for education, housing, health care for all the people who are coming out of the recession. can you address theikely impact on states across the country that are already having problems when the aide for the most vulnerable residents is perhaps cut if that's what's to happen? >> we are already seeing that to me extent. the federal government has been able to borrow for two years. the stimulus money was designed specifically to go to states and that's -- i don't rember the exact figure but if you look at maybe $100 billion, $200 billion of money going directly to states through various programs, and that was used to fill the gap in those state budgets, you are actually starting to see the very early stages of recovery in ste budgets from after hitting their bottoms.

you're seeing to some exnt sales tax revenue go back up and property values in some areas are starting to rise. at least stopped falling so a stabilization is important there and dealing with the gap of the federal government to kick in to cut the spending and that now in every dget cycle in the states you are seeing that $20 billion in california and texas needs to be cut and those are large programs and that's probably going to some tent push more people -- the weakness in the economy is already pushing more people on to medicaid, for instance, and that's creating another problem for the longer term piece of it, whatever figure it is, 60%, 70% of the budget. and so, any lawmaker when you're going out and doing interviews says we need to cut the department of education or we need to cut x part of the budget, you really have to turn around and ask them, how much are they taing about and ask

them for specifics because until you get to social security and medica medicaid, you are not dealing with the underlying issue. social security you can deal with on its own adjusting the retirement age and the level of benefits based on income but medicare is -- there's someope that what happened in the health care law will change theost structure of health care but we have no evidence and we have plenty of people here who can talk about this better than i do but until you actually see some improvement in that sense, you have to go back and say, what are you going to cut in the real meat of the budget when you get into medicare, social security and defense to deal with that. but there are other implications and all of that feeds back in if you're weakening expenditures at the state level, there are federal programs for people to apply for whether it's food stamps or any other kind of welfare program that we have.

and that raises the cost of the governmento it's a shifting sof soof some cost in that sense. >> on this shifting the age of retirement, that's probably a typical one ere people like us can certainly imagine working to 70s but the guys that built this building probably couldn't. i haven't seen any discussion of a two-tiered approach for this, for instance, manu labor retiring in the 60s and the rest of us who wear suits can carry onntil our 70s or whenever we want. has there been any discussion of that that you're aware of and how would that fix the problem? >> i have seen only some sideline discussion of it. not really in circles on congress. e deficit commission did try to design an approach to raise the retirement age for looking maybe 50 years down the line, and so, not necessarily doing it

for any one immediately and so, unfortunately, because the manufacturing base declining and construction base and all of the people who have been working those hard jobs you're talking about are in diminishing numbers in the workforce then you're -- if you were to postpone a decision to raise the retirement age you would affect fewer and fewer of those people but that's something i have heard but i haven't actually see any meaningful discussion about how to include that in policy beyond an income test or something like that. i wanted to run through a couple of things on the federal reserve, the people here who are paul miller fellows for the national press foundation going to the fed this afternoon. you'll hear a lot about the fed and its ability to expand its balance sheet and one of the things that you're hearing a bit about right now given rand paul is kind of the leader of the

anti-fed movement in congress and he has a new role on a subcommittee of the house financial services committee that is pushing this measure to audit the fed, to addnew oversight to the fed, to do a lot of things for the fed and the reason for this is in large part because of the fed acting what some people call as a fourth branch of government. central bank has a number of roles. it was actually first designed out of crisis 1913 to deal with -- to serve as a lender of last resort for the economy and for banks s that you don't have runs on banks, you can have stability in currencies. we have had -- this is the fed now is in its third it ration as the centralank of the u.s., the first ration and the central bank were so contentious in terms of federal power centralized in one place they were eliminated and wasn't until

woodrow wilson in 1913 that you had the fed created and there is certainly a movement now among conservatives in congress to try to what they say is rein in the fed but i wanted to talk for a minute about some of the things the fed does beyond just the normal sense. monetary policy is the first one we hear about a lot, moving interest rates to influence the economy. the fed brought interest rates down to zero in december of 2008. and what happened after that is, i think, the greatest source of contention about the fed, whether it should have been given all of the power to do what it does. what the fed normally has the ability to do is to g out and buy treasuries and it's got as the keeper of the u.s. currency and the value of the currency,

it can adjust the amount of actual money in circulation and what it did at the end of the 2008, once it had conducted monetary poly, brought rates down, is looked for unconventional tools to improve the performance of the economy given that we were basically falling into a deep dive. and so, late '08, early '09 you saw some big announcements and these are on the chart of the federal reserve balance sheet a little under $900 billion before the crisis and then you see it go up to over $2 trillion now. and that is money that you hear about the printing press. this isn't money that's actually being created but the fed has the authority, it is given by congress, the authority to go and create money electronically to buy assets and what it's done is b treasuries onthe open market and buy mortgage-backed securities and the purpose of

doing these things is to lower interest rates. everything the fed does in monetary policy is usually affect the interest rate channel of the economy by lowering rates or somehow improving demand in some form and so buying mortgage securities, lowered the interest rates on the securities and that's part of the reason why you had mortgage rates come down to 4.15% or 4.16% as the recent low and buying treasuries does the same affect and what the fed has done is gone from buying short-term treasuries, just basic government debt, that it does in the normal process, to buying longer term treasuries, all the way out to structured in the five to sevenear period and going all the way wellast ten years so the idea is to when you hear about quantitative easing is to remove treasuries, super safe government debt from

the market and force investors do go into other things like the stock market and a number of things and we have seen that, the performance of the stock market since the fed started discussing the latest round of quantitative easing has been pretty significant. the other end of it in terms of improving other parts of the economy like employment, you haven't necessarily seen. so i just wted to run throu this. you can actually see various -- i don't think this graph goes back any further, but the fed getting above $2 trillion and the fed balance sheet is probably going to peak as we go through, they're still buying treasuries for about six more months. obviously it will go above $2.5 trillion, closer to $3 trillion. and peoplealk about monetizing the debt and that's what we get

into. i want to tie this to the issue of the debt because the big fear is that if the government doesn't do something about the deficits, then the fed bought up the debt from the government and as you have more money and the -- as you have more money in -- sitting around in the ecomy the fed balance sheet up to $2 trillion creating money and putting it out in the economy. the problem is the economy's so slow that money isn't really moving around and it hasn't generated that much economic activity. ce it does start to generate economic activity in the form of loans from banks, then you have the classic problem of inflation, too much money following too few goods and at some point whether it's three years down the line or ten years down the line all of that money can lead to serious inflation and that's why you've heard about w does the fed pull this back? and somehow over the next whatever it takes decade or so,

once the economy has fully normalized they have to get the $2 trillion down to a more normal level of maybe a trillion or less and that's the challenge they'll be facing how do you support the economy in the short term as it needs it by putting whatev you can out there but also withdraw it in the long term and that's why we actually seeing so much more discussion about the fed balance sheet because interest rates at zero taking the front seat in terms of how fed the influencing the economy in a more normal period, say, back in the 2001 recession and the aftermath, the fed brought rates down. yocan bring them down from 6% down to 2%, and then leave them there for a while and then as the economy recovered, they brought them back up. back up to 5.25%, i believe. and the fed has a number of other roles that yowill -- those of you going over today

will hear about. it has supervision, bank supervision, overseeing the banking sysm, and also, in payment systems. it's responsible for making sure money moves around the country properly and that's why you have the 12 regional federal reserve nks working with the board of governors in washington. there are probably a lot of questions that you can come up with for the fed so if we have a couple minutes if there's any pressing ones that you want to ask feel free and il try to answer them. anyone? anyone love hearing about the fed so much that you want to -- >> i got -- >> and this may be a very bad question but i feel like in the last couple of weeks so i heard some discussion of getting the fed out of the business of keeping employment rate low, and i don't fully undetand

what the discussion is or what the practical application would be. do you have any thoughts? >> yeah. so the fed coming to monetary policy given a dual mandate in the late '70s and that's because instead of just -- a normal central bank, so if you look at the european central bank covering -- created in '99, covers all of europe, they have a single mandate to keep prices stable, so the federal reserve is normally looking for and the central bank normally looking far inflation of about 2%. sock wherebetween 1.5% and 2% and that's an ideal rate. you might wonder why don't you want prices to be stable near he ze ro and then no inftion and you run the risk of deflation and if people aren't expecting any inflation in the economy then you have less of an incentive to go outand invest and less of incentive -- more of an incentive to hold on to your money because there's a chance that prices could start dropping and you want to actually -- to

ve your money and once people start saving their money with the expectatio of deflation, consumer spending goes down, the economy ends up being weak and you run into the trap that japan is in right now where you just can't restart an economy and get it growing again. and so, there's been so much economic research on this issue that something around 2% is seen as the ideal level of inflation. and inflation is used in so many central banks as the single mandate because it affects both -- employment is almost like aecondary factor here. if you were to have stable growth in the economy with inflation at 2%, that means you are not overheating, you are gring at a good pace, you've been able to -- and the whole point of a central bank to provide some kind of stability to the growth in the economy. otherwise, you'd have market forces throwing things up and down pretty rapidly and more severe bubbles than you before so the fed has been charged with

not only inflation but also with employment because there's some fear that if you only focus on inflation then you're only dealing with a kind of a mechanal issue of just looking at the economy and bringin the interest rates up and down just to deal with inflation and there'a time when you might actually leave monetary policy looser, interest rates lower to try to spur more activity in the economy and consider what really matters to people are jobs. and the course of the bor market. and so, the movement now is created i think in part outf fear that a balance sheet of this size is going to lead to hyper inflation. we only really have the histor of germany to know how hyper inflation works in a clear sense like that. hyper inflation can work. zimbabwe is an example of an

economy that s been growing, was growing and the government basically took over the central bank and started printing more money to the point where i think you had 278 million percent cause the government creating money for its own needs and that's drawn as a parallel to the risk to the u.s., so obviously they're completely, completely different situations we're facing now. so the movement to remove employment from the advocates of that, whether it's paul ryan or ron paul, ron paul actually wants to remove the fed entirely but he supports the single mandate idea, is to really make the fed focus on just one thing that those people think the public should care about is keeping a stable value of the dollar and very low inflation and th counter argument usually from more liberal members and democratic members is that you

want some focus on employment, as well. interestingly, on friday, the fed chairman basically pointed out that there wouldn't be that much difference if you were to focus only on inflation because the fed right now trying to fight a deflation threat and keeping interest rates low and trying to stimulate the economy to prevent dlation and so price stability is being attacked in that sense. so very long answer to a complicated problem that they're running through right now, but for the near term i don't think it would have any practical affect to go to the single mandate for the u.s. fed. >> i apologize to people who have remaining questions. we have to draw things to a close. i suspect we can address those questions individually. i want to thank you very much today. we have a small token of appreciation from the national press foundation which is the

congressional chronicle, part of the c-span video library. it is washington, doorway. >> provide coverage of politics, public affairs, non- fiction books, and american history. it is all available to you on television, radio, and on social immediate networking site. fines are content any time to the c-span video library. -- find content any time on the c-span video library. created by cable, provided as a public service. >> from today's "washington journal, a discussion on authorizing the no child left behind a lot.

this is a little bit over 30 minutes. continues. journal:" host: our next guest is jack jennings from the center of education policy. define the achievement gap. guest: it has been a national objective for the last decade or so to try to close the achievement gap. some progress has been made. the gap is still very substantial between the different groups, especially african-americans and latinos. we have to spend more time trying to raise the scores of those kids. host: we have the details of the

study. one of your findings is that it could take decades to close some of these gaps. guest: test scores are going up in the country. with the achievement gap, he still have the management gap if the scores on the bottom are not going up as fast as those scores at the top. this course at the bottom are not going up fast enough in order to close the gap. we have to direct more attention to try to help poor kids, latino kids, african-american kids do better. those kids should have a better education. poor kids are not in the best schools and they do not have the best teachers. the demography of the country is changing very fast. the latino population and poverty population is increasing. unless we help these kids, we

are not going to take care of the needs of the country. host: you point out that arizona, florida, tennessee are showing the most improvement. guest: they are developing a means to deal with kids and giving them extra attention, the extra teachers. they are trying to bring up the bottom and they are showing some success. they are not alone. people are trying to do this throughout the country. this is a call to say we have made some progress. we have to make even more progress. host: we do want to give the phone numbers on the bottom of the screen to let you know about the sun upper -- about the setup. jack jennings is our guest. he is with the center on education policy. here are phone numbers. 202-737-0001 for republicans. 202-737-0002 for democrats.

202-628-0205 for independents. we have a fourth line for educators. you can: on that line. our guest is c.e.o. on the center of education policy. how long have you been doing the study? guest: this latest effort is within the last year. we have been able to look at all 50 states. there are a lot of things going on in education. the new congress will debate the funding of education and the no child left behind act, which is overdue for an extension. this congress is going to be busy for education. host: michigan, good morning. caller: good morning. do you think education as far as we're doing it now should be

changed, maybe a different way of educating our kids? host: let me jump in and ask your thoughts. caller: i think kids are learning a lot faster. i have 85-year-old and a 4-year- old. -- i have a 5-year-old and a 4- year-old. there is a different way of going about it. we need more funding. more funding should be put towards our kids. they are our future. we have to educate them so they can be ready for the future. my second comment was on gun control. with this terrible situation in tucson, i think less gun- control is better than more gun- control. the person that actually held the sky down was a ccw owner.

he was there before the responders were. host: thank you. let's go to the education point. he talked about funding. guest: the attention is on the shootings. on education, things are changing faster than people realize. the states are moving towards a common education standards. we have never agreed on what we want our kids to know. now almost all the kids -- all the states are saying they are agreeing on what kids should know. that means kids will be taught differently in the future than they are taught today. they will be taught different content. that is good for the country. the caller was talking about whether the means of teaching should change. i think he is on to something

because kids learned differently nowadays. their attention spans are shorter. they move faster. they get stimulated easier. teachers have to adapt to that. those changes are starting to happen. it takes awhile to bring about change. i think teachers realize that kids today are different than they were in the past. host: what about funding? what are you expecting from this new congress? guest: the republicans who have taken over the house have said they wanted to cut spending by $100 billion at the federal level. now they are saying maybe it will only be $60 billion that the cut from spending. they put the military off- limits. security is off-limits. medicaid and medicare. the only area of the budget they are concentrating on is an area

where education sits, with a number of other topics. last week there were saying that would cut it by $60 billion. if they do cut $60 billion and the cut all programs in that area evenly, it means about 40% or 50% cutback education. it doesn't necessarily mean it is what is going to happen in the senate -- and needs about 40% or 15% -- 14% or 15%. you need some agreement on funding. if the house starts out at a low figure, even if the senate wants to go to a higher figure, you wind up with a compromise of some type. the bottom line is going to be that we will see some kind of freeze in education, some type of cut in education. it is ironic.

business and other leaders are saying we have to do better. we have to do more and make our kids work harder. we have to have our schools competitive. host: caller now from california. wade is on the line. good morning. caller: good morning. i have been counseling for about six years. i attended private schools as well as public schools. my folks did not agree with the education i was receiving in public and private schools. we switched to privates -- public school. i think a kid needs more incentive these days. they have more incentive not to go to school then they have to go to school. as far as funding goes, you can look at outside the grammar,

middle school, and high school cutbacks that are occurring at the college will fall as far as tuition costs and what not. i go back to my incentive point. these kids need to have incentives so when they graduate with honors from high school that they have incentive to go to college to get a decent education that is decent tuition and that they are going to make something of themselves and not to do with for their parents but to do it for themselves and their future families. these kids need incentives to succeed in life. host: thank you. he mentioned incentives several times. guest: california is the epicenter of this budget mess we're in. it is not a good situation in california.

i understand his concern about funding. he does put his finger on an withrtant point motivation. kids can do better if they are motivated. that is why we have agents who come to the united states from abroad. they are so motivated and their parents are so motivated, those kids do better. motivation is important. the reformers have not figured out how to motivate kids better. what the reformers are doing now and our political leaders are trying to use test scores as a lever to motivate kids. i am not sure that always works. sometimes they stopped at the school level. we had to spend -- we have to spend more time to motivate kids and to get them to do better.

motivation and family background can trump everything. host: jack jennings is with the center on education policy. cep.dc.org. is the website one of the points of the study is that boys are behind girls in reading in every state of the country. guest: nobody knows why. in our study, which looks at all 50 states, we found that boys are behind girls in reading in elementary, middle, and high school levels in every state of the union. in math, boys and girls are about equal. about 20 years ago, girls were behind boys in math. there were theories about girls having structural changes in

their brain or positions in their brain which means they cannot learn math. girls proved those theories wrong. girls of caught up with boys in math. boys are behind girls -- girls have caught up with boys in math. the was a study that looked at the most industrialized countries. they found boys are behind girls in reading in most industrialized countries. there is something that has gone on in our society, some kind of change in these industrialized countries were boys -- maybe they don't value themselves as before. maybe jobs have changed. maybe schooling has changed. something is going on, a broad social change. we have not devoted enough time to it. we hope our report would force people to confront the issue and say that girls have to do

better. we still do not have equal pay for women in the job market. girls have to do better in terms of the professions they have not been able to break into well enough. girls read better than boys. girls drop out of school at a lower rate than boys. girls are graduating from college and a higher rate than boys. now is a time to ask these deep questions -- what is wrong to try to figure out how to educate and motivate boys better. caller: good morning. it is interesting to hear discussion. it seems relevant to where i live. i live in a small city. they have tried every solution, every strategy to motivate kids. you still see that regardless of where kids come from, high achievers, low achievers, and

you have people in the middle. growing up, a lot of the motivation is tied into relevancy. a lot of the information -- you see the goals and test scores, but it is not relevant to children. are things going on back home? in their own committee? it feels like it is for someone else. until people start finding ways to involve people and make it feel it has something to do with their lives, they will not participate fully. guest: that is a good point for a number of kids. some kids are going on to college and graduating from college and getting jobs. it is not universally true. there is a group of kids and there has to be a better connection. we have to straighten out our schools first. our schools are locally controlled. you could have a good school and in the next community, have a bad school. we have not figured out how to

teach kids the correct curriculum. we have these common standards. we have not figured out how to train teachers so that all kids have access to good teachers. we have not figured out our funding. you could have a disparity between five or six to one. they have a funding advantage. we have not figured out how to solve the problems of making the schools fairer and better for all kids. we have to worry about getting kids motivated so that they can do better in the schools. host: dennis, welcome to the program. caller: the concern i feel that is going on with the nation right now is that parents need to step up and educate at the same time as the schools are

educating. host: what do you think parents are not doing right now? caller: being more stern. host: how? caller: education comes in many different forms. the basics can be taught at home, as the same as your school. host: role of the parent, be more stern. and that is from a student. who knew? guest: i think there is a lot of truth to that. if they are motivated at home and have a home life with one parent -- look at obama. his mother made sure he would learn. she would not let them get away with weaseling out of his homework. even in a single-parent home, a

parent can make a world of difference in making sure the student is going to do his homework. parental involvement is absolutely vital. i am not sure the government can get involved in parental involvement to a degree that would affect masses of students. it comes down to parents deciding themselves that they have to pay more attention to how their kids are doing in school and asked their kids and make sure they are doing their homework. in our country, teenagers are frequently -- they frequently have jobs to make money to buy stuff. in other countries, they don't have jobs. their job is to do well in school. about if we're serious our kids doing better in school, that means we have our kids concentrate in school and have parents make sure they are doing well. host: we want to ask about

income levels and your study. what to do find based on income? guest: poor kids are doing markedly worse the more affluent kids. that achievement gap is not narrowing substantially. in the united states, we have a high rate of childhood poverty. this is higher than other industrialized countries. this is our achilles' heel. this is giving us trouble. poor kids frequently do not do as well in school. you need extra support for poor kids if you're going to make up for the disadvantages of poor kids, and we're not spending the money to do that. these test scores -- they do not show the role of poverty between the united states and other countries. when you consider the poverty, you find that we do pretty well with comparable groups, with

middle class white groups, we do pretty well with kids in canada, new zealand. when it comes to poor kids, that is where we do not do as well. other countries have a greater social equities that we have, when it comes to health care, employment. they have social supports that we did not have. here you're pretty much on your own. if you are serious, -- there is a good column by samuelsson and he points at that if we're serious about helping kids, we will not only make sure the schools to well, we will make sure that we reduce the rate of poverty and that will help poor kids with extra support. host: alabama, louise. caller: with all this stuff going on, we're trying to point fingers. my sister took a course on

commercials. and the influence the commercials have on people. i am wondering if we should not look at commercials more and more. i am concerned about this thing with mark twain and the inwn- word. are we going to take them out? host: two different topics. guest: with mark twain, the bible has some pretty strong passages that also would have to be censored. i think we have to take the past at what it is. that anyin wrote particular point in time. the house read the constitution last week. they tried to excise different parts that they did not agree with because they thought times

have changed. i think we have to look at documents from the past and look at our past with a full face and say this is in fact what happens in the past. there may be reasons for it. we should take a lesson from that. host: daniel is a student from san jose. caller: how are you guys? i have a question and comment. i am a student. i go to a great community college. some of us have experienced the economy as a student -- we are experiencing the education crisis in general. my question is this. i am wondering, it would be logical to consider

consolidating the educational issue which could be considered a security issue? is there an argument that the holdup? as far as standardizing everything, you would not have to have the parents accountable in their home life and also it would standardize everything, the curriculum, accountability. host: to it, danielle -- thank you, danielle. guest: she was asking for more standardization. we're going to some form of standardization. the states are are agreeing on common economic standards. host: you brought the story. it is in "the washington post" today. guest: there will be

standardization in terms of economic content and testing and some accountability. you cannot standardize everything. different kids take different ways of learning, different types of teaching. the united states is moving towards standardizing what is essential, which is what people should know and measuring how they know that. after that, there should be decentralization some teachers have much more freedom to teach kids depending on their needs. host: los angeles, democrat. caller: i have one comment and toto questions -- and two questions. what are your thoughts about the future of education? could you explain more about

your views on "no child left behind"? host: what tier from fort worth first -- let's hear from fort worth, first. rebecca. caller: we made sure that we had high expectations for the children. we had a great deal of staff development. you need to have staff that knows how to teach reading, math, social duties, and math. we have high expectations for the students. -- social studies. we communicated with the parents. they agreed that children were very successful. our school was one of 10 elementary schools that became exemplary of 79 elementary schools. host: talking about standards and high expectations. year earlier caller mentioned "no child left behind."

guest: if schools do have high expectations, that is an essential element to having a good school for all kids. what the caller described is a recipe for success. high expectations and treating kids with dignity. retraining kids -- retraining teachers so they are better prepared to teach better. with "no child left behind," that is a missed opportunity. with the last congress and the economic crisis, with the war's lingering and health care reform, there was not time to deal with it. iso child left behind" overdue. is the main national law that deals with education. it says states have to have

economic standards, states have to test kids in grades 338 through 8. there are consequences for schools and the have to change in order to become better. the problem with "no child left behind" is that it is a rough means of accountability. it compares one class one year to another class next year. "no child left behind" has to be changed to look at individual students and individual student growth from year to year. that would you can see that mrs. smith in one the great edit something to somebody's knowledge by the time they got to the next year. the lot is too crude -- the lot is too crude -- the law is too crude when it comes to

accountability. has to child left behind" be rethought. the president has put forth a good proposal to begin that conversation. there are political reasons and some other policy reasons. host: 10 minutes late -- left. good morning. caller: it has been an interesting program. a lot of the emphasis has been on the standards and accountability and discussion about students. so far, it rings true. an anecdote, if you don't mind. i wonder why there isn't more stringent discussion standards set for the teachers. .'m 73 years old we have six grandchildren, four grandchildren -- -- daughters.

i was asked what life was like when -- it was very interesting. it is a great question. are recommended to all families. once you go through that, you can have a lot of fun. four years later, i asked other grandchildren, i said let me turn the tables on you. what is left going to be like when you're my age to the all complained it is not fair foretelling the future. we had trouble getting it going. once we got going, they really rambled on. one said, we're all going to be stupid. it shocked me. she said, it is because our teachers are stupid. these are good schools by reputation. i said, why would to say that? "they do not know what they're teaching. they read from books."

host: that is an interesting point about teaching standards. we have an educator on a line. michael, atlanta. did you hear that last caller? that last caller mentioned teacher standards. you are an educator. caller: there is a growing move to tie teacher pay to test scores. there needs to be scrutiny and teachers. who are we going to replace these poor teachers with? there is not a huge movement of people in the united states who want to be teachers. the scrutiny that is placed on educators, the lack of pay. why would i become an educator? there is no incentive for good students in college. host: michael, thank you. there is the point about

incentives again. guest: there are two sides of the story. a teacher say who would want this kind of life to we don't get paid enough. if i know something about math or science, i will go into business and make more money. i think we have to deal with both sides. we have to raise standards for teachers. they should no more so they can teach better. we have to do this and it is beginning to occur around this country. the gates foundation, governors are all pushing the envelope said teacher evaluation is changing. evaluations are being run student test scores and performance and classrooms. that is beginning to change. we also have to make life better for teachers. we are not going to make the

finest in the country teachers like to do in other countries, like finland and japan. we're not going to get the best unless we pay them more than what they are being paid today. a number of us would not go into a school several blocks away from the studio because of the danger in that school, being able to park your car and to get into the school with safety. if we wanted to attract the best teachers, we have to pay attention to the lives they lead as well as how they are paid and demand a higher standard. host: robert, a republican. caller: good morning. i can tell you how to motivate the kids. i did it myself at home. kids are in school to get into the workforce. let's bring the workforce to them. when they get their report card,

let's give them a paycheck. a's would be $5. we did this. i know we cannot afford this. warren buffett and bill gates could kick in and it would bring their grades up. host: democrat. what are your thoughts? caller: we have a blizzard. host: good luck. be safe. can you turn the sound down? caller: you talked about the teachers and being able to -- what you think about the charter schools? we're trying to start a charter school here. the children will be taught by teachers with high standards.

we talked about we are in the war but we're bringing troops home. why can we start making cuts? when i was in school, we had music, with a theater, we had sports. but yet, the football is still going big and band is not there anymore. fear is not there and things like that to get the kids' minds activated -- theater is not fair. guest: paper performance is a mixed issue. there have been some attempts -- pay for performance is a next issue. there have been some attempts. it is not a sure solution. we'll see where it goes. charter schools are no better than regular public schools according so some major national evaluations that have been done. charter schools are no panacea.

there are no guarantee that kids will do better. individual charter schools can be very good for kids. there is no guarantee that they will be better for kids. parents tend to like them because they have a choice on where to send their kids. they like that. there's no guarantee that kids will do better academically. i wish them luck. there are a number of places that even get assistance. if they are willing to devote a lot of time and energy, maybe they will have a better school, but there is no >> as we are going live to tucson, arizona. >> doctors remained optimistic. the arizona legislature began its session under tight security.

unity and suspected shooter made his first appearance before a federal judge. >> as for the victims on this shooting, they are still in the hospital tonight. doctors report no change in her condition and they say that is good news. we are live at usc. >> there are still people out here showing support. doctors are telling us six others are in serious conditions. they are optimistic that everyone will come out of this ok. >> as for the congresswoman, they are still concerned about brain and flaring, but are cautiously optimistic.

she is still in a medically induced coma. >> of the cat scans are showing there is no progression of the swelling. we are not at of the woods yet. it takes three >> doctors tell us the congress woman is still responding to simple commands light gripping hands. all the victims are doing as well as they can under the circumstances and congresswoman gabrielle giffords closest friends and family have been rare side this entire time. they said the swelling typically peaks at around three days. they take days starting after the operation, which means today is the second day. tomorrow will be the third day where the swelling peaks and

every day that the swelling stays down is another reason doctors can be more optimistic on her help. -- honor health. >> a lot of people of commented that unc has been so transparent about what is going on there. >> that have another public press conference scheduled for wednesday and 11:00. >> a lot of you have contacted us wanting to know how you can help or whether you can send some kind of message. we want to let you know that the congresswoman's office has set up an e-mail account for well wishes. we will give you that address. her family has asked that donations be made to the community food bank of tucson where a special fund has been set up.

you can ask for the gabrielle giffords home refund or you can donate to another one of the congress woman's favorite charities, the american red cross. we have set up links with all this information at our website. 22-year-old jerry loughner in court today and we are getting a first look at the suspect since saturday shooting. he is being held without bail this evening in phoenix. his first legal challenge was actually getting a lawyer who would agree to take his case. we are taking a look here at the latest virus that we have of the 22-year-old suspect. that is a booking photo for jerry lee loughner, a person suspected in that mass shooting saturday morning -- and jared

lee loughner. >> we are at the federal courthouse where the suspect had his first in court appearance today. we have some sketches to show you here. judge lawrence anderson read his charges including two counts of first-degree murder for the andhs of judge john roll the congressional aide. when loughner entered the room he was quiet and obedient. he is in u.s. marshal custody without bond until further notice. one of the more interesting things about the case is the public defense attorney he is using. we are told by the public defender's office in arizona that actually went down the list of more than 100 public defenders and eliminated all those who were unqualified to defend and a death penalty trial. the rest of them actually

declined to represent loughner in this case, for various reasons. he will be recognized by san diego public defender judy clarke. she defended suspects like ted kosinski, susan smith, and a suspects. proceedings here on out will not be arizona judges. the next court date has been set for january 24. it will be in the same location but will be a different judge. >> a military official today revealed that loughner was rejected from the army because he failed a drug test. the official did not say what

kind of drugs. loughner tried to join the army in 2008. court documents have revealed a disturbing new details about the accused shooter, including a bizarre altar in his backyard that included a skull. the fbi was back at his house this afternoon. >> we are not exactly sure what they were doing there, but our viewers really want to know why loughner would allegedly do this. we got our hands on some court documents today, as well as summer really bizarre pictures of a supposed shrine in his backyard. ja the home red lobster -- at the home of jared locker, they are still collecting evidence.

investigators found a letter in a safe from congresswoman giffords from 2007, thanking loughner for attending any event. also, a letter signed by locker saying "i plan ahead, my assassination and giffords." he bought pistol last november from sportsmen's warehouse in tucson. there was a twisted in trying discovered in his backyard of an altar, a skull, and ceremonial candles. while it is clear that his family does not want to be bothered, their neighbors give us an opportunity to check out this shrine for ourselves. you can see a lot of greenery, nothing too visible, but everyone agrees is pretty bizarre. does any of this surprise you? >> not entirely. with someone that is as of kilter as he seemed to be, it is hard to be surprised.

>> neighbors are not too surprised about what is coming out about loughner. a website reports that loughner told a friend that he once shouted out a question to congresswoman giffords at an event. he reportedly asked, what is government if words have no meaning? the friend went on to say that loughner did not like her answer and said ever since, he thought she was fake and have something against her. "the wall street journal" reports that someone close to the case said he won't try to buy ammunition from walmart but was turned away, and another walmart eventually sold him the bullets. 1 e-mail written last summer says "he scares the living crap out of me. he is one of those people you see --

>> i don't think there is even one time you could have looked at him and thought he would do something like this in the future. i think once he was removed from pima and isolated socially, i think that is when the turning point was, that is when he started to spiral. >> loughner has the youtube channel and he talks about some of his favorites books, including the communist manifesto and "the wizard of oz." all of these items paying a better picture of what was going on inside his mind. >> when i was looking at that picture of the skull on the internet today, i noticed it did not say who took it or how, but it seems that somebody climbed over that fence to get it. >> it was posted on line by the new york "daily news."

it is not clear how they got the photograph. we were standing next door in the neighbor's yard and we could not see any of that. we do not know how they got in there but we know that the neighbor next door did see pictures also of that trine and he agrees it is really strange. >> president obama call for the company to baltic -- the country to pull together and support congresswoman gifford and the families of those who were killed. he praised the heroes who tackled loughner rick >> it is important to focus on the extraordinary courage that was shown during the course of these events. a 20-year-old college student who ran into the line of fire to rescue his boss, a wounded woman who held secure the ammunition that might have caused even more

damage, the citizens who wrestled down the gunman. part of what i think that speaks to is the best of america. >> president obama directed all of san prayer's to focus on tucson today before making those remarks and leading the country in a national moment of silence. >> the sound of the drumbeat echoed across the sky, calling for solidarity and for all together in front of university medical center. vigil candles burned with energy, symbolically bringing light to the darkness of this tragedy. once the drummer stopped, others began to enter the call and came to prate, thousands of miles

away at the u.s. capitol, president obama and first lady michelle also united. [bells tolling] >> then at 9:00 in the morning, they let a moment of silence for the 20 shooting victims, six of whom were killed during an assassination attempt against u.s. representative gabrielle giffords. among the dead, and 9-year-old girl, arizona's chief federal judge, and one of giffords aids. back in tucson, the tragedy has touched everyone in one way or another. this candlelight vigil, especially for congresswoman giffords, the only one whose life is still in danger. for now, they can only hope for the power of prayer to perform its own miracle.

>> a very difficult day for students and teachers at 9-year- school.stina green's they struggle to understand their friend's death. one girl offered comfort to christina's family. >> i am so sorry for your family and hope they can find the right path way to life because yours was taken short. i will miss you. >> mesa verde is holding counseling for family and friends tonight. >> the first funeral is planned for the first victim, christina green. the funeral will be held in a few days. the funeral mass is thursday at st. elizabeth ann seton church

at 1:00 p.m. the bishop will hold a special mass scheduled for tuesday at 7:00 p.m.. >> the tragedy in tucson, the focus at the state capital. governor general had planned to deliver her state of the state address, but -- governor jan brewer put her plans aside to address the crisis. >> our coverage of the newscast will continue in a minute. we will see president obama leading that moment of silence today as all those injured and killed in saturday's shooting that left representative difference in critical condition. that is followed by remarks from arizona governor and jan brewer and then president obama is remarks on the shooting.

in light of what happened on saturday in tucson, the legislative items previously scheduled for the house this week such as a vote on repealing health care legislation have been postponed. on wednesday, the house will meet at 10:00 a.m. to consider at least one resolution concerning representative giffords and those who lost their lives. we will have live coverage of the house floor proceedings here on c-span. also on wednesday, there will be a bipartisan congressional prayer service on capitol hill. one quote from a letter says as we attempt to comprehend this horrible event, it is important for members of congress to gather together and pray for the health of our colleague, representative giffords, and those who perished, and the other innocent victims who are still fighting for their lives. at the capitol building, blacks continue to be flown at half staff to -- flags continue to be

flown at half staff to honor the shooting victims. president obama has ordered the flag lowered on all federal buildings through friday. a couple of guests on "washington journal" tomorrow will talk about proposals that have come up in the aftermath of the shooting. the new york resented plans to introduce legislation to ban a large, high capacity clips from magazines for guns like that used by the shooter in arizona. schism crabtree -- susan crabtree will talk about options for tightening security, including ramp up police presence, a plexiglas shield around the house gallery, this continuing numbered license plates, easier access to armored

vehicles and whole body scanners on capitol hill. washington journal" airs every day starting at 7:00 a.m. eastern. >> there was a memorial for those killed and injured in saturday's mass shooting. >> arizona is in pain. our grief is profound. we are yet in the first hours of our sorrow, but we have not been brought down. we will never be brought down. [applause] >> defiant words from the governor and a moment of silence. she called on all state leaders to honor those killed by serving the state with courage and devotion. lawmakers and political groups now hope to move forward. >> craig smith is in phoenix with daily reaction to the

events. >> it was a legislative session opening like no other. the attacks in tucson change the tone of politics as usual to an examination of the tone of arizona politics. you could see the full range of politics here from conservative to liberal, played out under the eye of extra security. >> i am definitely concerned about the blame game that has already been going on. the share of down there accused the tea party and the state senator also accused the tea party, before they even knew anything about this guy. we are finding out he is not associated with any group. groups like the border action network up arizona at temporarily set aside and -- plans for repeal of the immigration law and to call for better ways to resolve political

differences. >> i think that what we need within that state is for all leaders to step up, regardless of their political party, and denounced the heightened level of violence that has been too prevalent. all makers have a full plate of the sort of issues that make for bareknuckle politics. immigration, ethnic studies, where to find the money to cope with the budget crisis. >> a lot of important news today, but we do want to take a break and see how the weather is shaping up. >> we will hear -- hear more about what happened on saturday in a few minutes.

president obama let a moment of silence about what happened on saturday in tucson. we are going to watch that now during this break. [bells tolling]

>> there was also a moment of silence at the supreme court today. among the six killed was judge john roll is served on the sixth district court of arizona. chief justice roberts called him a dedicated member of the federal judiciary. congressional quarterly reporting that the weekend shooting up gabrielle giffords has prompted a push by some lawmakers to seek legislation aimed at deterring future attacks on members of congress and their staffs. represented hinojosa of texas said there are pressing for legislation to increase the role of capitol police and perhaps in all other federal and local authorities. a 20-year-old intern of represented giffords received a standing ovation today for helping the congress woman after the shooting. daniel hernandez started working

with her just five days before the attack on saturday. he is a political science major and a junior at the university of arizona. he tried to stop the congress woman's blood loss on saturday and was recognized by arizona governor ann brewer at the state legislature today. you can see her address here on c-span just after 8:00 eastern time. members of congress and capitol hill staffers gathered today to mark the moment of silence.

>> we ask for your blessing and the families of those who were injured, and those who have been killed. >> we will leave this on capitol hill to go back to tucson. >> her school is holding the support meeting this evening. >> if you can see behind me, there are people starting to show up a little bit early for the event that will be starting in the next couple of minutes. there are flowers, balloons, and camels, pictures all along the fence from students, staff, and

members of the community who have come here to remember cristina green and to come and mourn. has been a difficult time for many of the students and staff at the school. they said going to school today was very difficult. they did have a moment of silence and they also discussed what happened in class. so of this did is we spoke to who were friends with christina green said they had -- some of the students said they had an opportunity to write letters to christina and also had a moment to remember what they missed about her. most of them said she was a friendly girl and they will miss her laugh and her smile. they are having a support group here that will last until about 6:30. it is open to the public. they are encouraging anyone who wants to remember her and talk about what happened to come out here to the mesa verde

elementary school. we will have more news coming up after this quick break. >> in light of the shootings, the legislative items previously scheduled for the house this week such as the vote on repealing health care legislation have been postponed. on wednesday the house will meet at 10:00 a.m. eastern to consider elise one resolution concerning representative giffords and those who lost their lives. we'll have live coverage on a house here on c-span. coming up at 8 eastern on c- span, we will see president obama leading a moment of silence today to honor those injured and killed in saturday's shooting. then remarks from arizona governor jim brewer and then president obama is comments on the shooting. -- arizona governor jan brewer. >> topics that today state

department briefing include the middle east peace talks and fuel subsidies. this is about 30 minutes. >> the state department does not have an official position on tonight's national championship football game. we can be prepared to do some tailgating. good afternoon and welcome to the department of state. i have several things to mention before taking your questions. today the deputy secretary and

the undersecretary for management pat kennedy led the observance here at the state department in our courtyard of the main entrance of a moment of silence in honor of the victims of the shootings in arizona this past weekend. we are mindful of the tragic events that took place in tucson and join all americans and praying for the rapid recovery of congresswoman gabrielle giffords and the others who reinjured, and of course we join in extending our deepest sympathies who died in the shooting and their families. the secretary has finished her first full day in the gulf. she participated in meetings and events today in dubai, including a review hosted by middle east broadcasting cos. she also visited the institute

of science and technology and met with the staff and families of our embassy in abu dhabi to thank them for their tireless efforts and met with the crown prince and prime minister to discuss regional and bilateral issues and emphasize the importance of the government's civil society engagement. we are obviously watching very closely the beginning of voting in southern sudan. voting will continue throughout this week and today the special envoy travel to polling sites south.hout the cel later this week he will go to darfur with a senior adviser.

we hope to have him in the briefing room tomorrow evening to get his first 10 perspective on the sudan referendum. it is a historic occasion in africa and most importantly for the people of southern sudan. all referendum centers open on time and yesterday had the necessary materials and trained staff. notwithstanding some instances of violence, the atmosphere was orderly and peaceful. there is a robust observer presence at all polling stations and we think it was off to a very good start. the usaid administrator has arrived in guatemala to get a firsthand understanding of the development challenges that face guatemalans society and to review the usaid response to

these critical challenges. he will visit programs in the highlands region, home to the majority of guatemalans rural and indigenous populations. they are working to implement u.s. presidential initiatives on food security, global health and global climate change in, guatemala city. they will discuss these presidential initiatives. this week we are anticipating enoys will come to washington to meet separately as part of ongoing consultations with the parties at the working level to achieve a framework of agreement on all core issues. for several days there have been media reports regarding an american citizen in and around

iran. i cannot report to you that u.s. consular officials in turkey have been in touch with this citizen -- i can report that the individual is safe and has not requested -- we offer consular assistance and none has been requested, so as far as we are concerned, this case is closed. we do not have the privacy act waiver, so ultimately it will be up to this individual and the family to determine if they wish to describe any further details >> they are safe where, in turkey or iran? >> or consular officials have contacted the individual in turkey. >> what is the individual's name?

>> we do not have privacy act waiver, so i cannot reveal the name. i am not at liberty to talk about her travel, but she we have been in telephone contact with her in turkey. she is safe and does not request any further assistance from us. i am going to leave it there. as to where she was, how she might have attempted to enter iran, i will leave it to give this citizen wishes to describe her travel, that is up to her. >> this is the individual who was rumored to have been arrested? >> there are various reports. as far as we can determine, one individual, one case, and she is not in iran.

[unintelligible] >> as we reported to you last week, we have been acquired through the swiss with the iranian government at the national level had any information. it was reported back that they did not. as to whether there was other interaction at the border itself at the local level, again, we will leave it to this individual to report what happened if she chooses. >> of iceland, can you talk about a meeting between the u.s. ambassador in reykjavik and the foreign ministry in terms of the justice department trying to secure informations about the twitter account? >> we can report that the ambassador had a constructive

conversation with the minister of foreign affairs in iceland and listened attentively to their concerns. we took the opportunity to underscore how seriously the u.s. government takes the unauthorized disclosure of classified information. are in -- our ambassador in sure do minister that -- applicable federal law. >> for all those questions i will defer to the department of justice. >> is there any justifiable grounds for the government of iceland to object to the disclosure of her twitter messages in response to -- >> again, all i can tell you is that again, our ambassador was

called then. the government of iceland expressed in the governor expressed his concerns. i believe it to them to express those concerns that they have any. the burn of justice continues with its investigation. -- department of government. >> so they do have concerns. >> i will leave it to iceland to describe that. >> whatever were their concerns, did they inform the ambassador of any attempt to contest or moved to quash the subpoena? >> i cannot answer that question without getting into the investigation, which i will defer to the department of justice. as to any legal steps that the government might take, it is up to them. >> when you say that the

ambassador listened attentively, did he offer a kind of rationale for why the subpoena was being sent, or did the ambassador refer the governor to the department of justice for further explanation? was it is an opportunity for the meserve to explain -- for the ambassador to explain -- you are saying a general response of how the u.s. use the wikileaks affair as some kind of investigation. it does not seem as if the ambassador offered a kind of explanation for why this was necessary. >> again, that is a matter -- is not clear to me -- the justice

department actions took place in this country. beyond that, i will defer to the justice department. >> to be clear, when the ambassador went into this meeting he did he offer some general comments and say i refer you to the department of justice for any further explanation? >> i do not know. [unintelligible] >> you are saying that they will be in town for bilateral meetings. does that mean they will be in the same building at the same time -- >> we are engaged with the parties on certain issues.

i would not anticipate that there will be any -- >> can you share with us how the meetings will be conducted? >> at the working level, we are engaged with the parties, working to narrow the gaps that exist on the core issues. that is something we continue to aggressively do with the respective sides. >> will they began from [unintelligible] >> i am not sure i completely understand the question. we had some activity at the working level before the new year. as we hinted to you last week, we anticipated there will be follow-up discussions. >> my question is, will the

sediment be the issue where everyone can -- >> we are working with the parties on the core issues that are well known. i don't know if they will address one issue or all the issues. towards the end of the week, i don't know the specific timing in both cases as yet. >> in terms of the core issues, there was an unusual step of issuing a statement yesterday that risk -- raise concerns about the demolition of the hotel in jerusalem. from their actions on the ground, it would seem as if nobody is any closer on the coronation, up -- on the coordination, given that partial demolition of this building went

ahead, despite your view and the palestinians view that such things should not happen and that such things should be decided final status negotiations. >> i would not say it was an unusual step where we have had a concerns about all of our actions on either side, we have not hesitated to express our concerns. the secretary said that the demolition of the shepherds hotel was a disturbing development that undermines efforts to achieve a two-state solution. >> is it fair to say that the demolition and your commentary on it illustrates that the two sides are no closer on at least that core issue? >> it is expressly the kind of meetings that we are going to

have this week, our efforts to move the parties toward a framework agreement and back to direct negotiation which is at the heart of the concerns that we expressed yesterday. we have made very clear that these kind of steps need to be resolved inside negotiating process is and not changing the facts on the ground outside of that negotiation. >> you said toward the end of the week. one reason why i asked was, as you know the secretary is traveling for much of the week and you described this as a working level. the expected the meetings to perhaps take place when she is back in place, and do you expect her to participate in them? >> i do not anticipate at the present time that she will be involved in these meetings. >> back to the demolition. understood that you believe it should take place, but even in

terms of all you have said to the parties in the last few weeks in terms of creating the kind of atmosphere necessary for talks, does an action like this signal to you that the israelis are making any effort whatsoever to create an atmosphere for talks? it is exactly the opposite of creating an atmosphere for talks. >> i don't know that the shepherds hotel has particular historical significance, but we have seen actions on the ground in the context of east jerusalem. absent the aspect of this being a unique structure, these kinds of activities have occurred in the past. we have expressed our concerns in the past and will continue to do so. would it be fair to say that [unintelligible]

after president obama visit there when he canceled the face- to-face meeting with the president? >> the white house is in the best position to characterize what he hopes to achieve in his travels. he is currently in afghanistan and i will leave it to the white house to catalog where he is and who he is talking to. >> the indian foreign minister arrived in afghanistan and said that india is at the brink of -- terrorists may strike india. what india is seeking is protection. you have any comments about what he told the afghanistan president? >> as we have said many times,

we have taken a regional approach to these challenges. the challenge of political extremism is not just focused on any one country. there have been attacks against indian interest in afghanistan, in india, and this is why we are deeply engaged across the region with afghanistan, with pakistan, with india, to try to attack this extremism that affects all of our countries. >> somebody wants india to be out of afghanistan. >> we have made clear that india as a regional and emerging global power has every right to have its own relationship with afghanistan and we appreciate

the support to the government of afghanistan that india has provided. >> can you talk about the meetings in kabul, and plays it give us an update on the search for permanent replacement to ambassador holbrooke. >> the search is ongoing, but as you say, the acting replacement has been in pakistan. he is in afghanistan and has met with president karzai. prior to assuming the role, he was himself based in kabul, so he has the opportunity to return and see the progress that has occurred on the ground and confer with general perce yes,

-- general petraeus and ambassador eikenberry. he has demonstrated that we are committed to helping build a stable and prosperous pakistan. he is the opportunity to announce a contribution to the pakistan citizen damage compensation fund as part of the $500 million of funds that ambassador holbrooke had previously committed to help pakistan. >> the search is ongoing and when the administration determines who will succeed ambassador holbrooke, we will let you know. >> [unintelligible]

said that pakistan is the most dangerous place today and is also a failed state. >> we are trying to help pakistan improve its government and its relationship with its people and help pakistan develop the tools and strategy to combat extremism within its borders. this extremism is first and foremost a threat to pakistan itself. there is no country that has suffered more significantly from terrorism and pakistan itself. it is a strategic country and is important in terms of regional stability. it is important to the united states and others in terms of its links to extremism and the risk of terrorism that does affect all of us, including the united states. we are committed to the long- term partnership with pakistan.

>> i feel fortunate that only the few really enjoy u.s. aid in pakistan. >> we are committed to helping improve circumstances on the ground for the people of pakistan from those areas that were significantly affected by the flooding, but we have a strategy that is focused on all of pakistan, including bringing greater economic opportunity to those areas where we have concerns about the presence of extremists that can affect pakistan on one hand. >> has your strategy suffered a significant blow with the governments to skit -- decision to describe last week as a mistake, to roll back the price -- the energy price increases?

>> not at all. a stable civilian government, supported by the people pakistan, is essential to be able to carry out the strategy we have worked out together. there are a number varies from agriculture to reform of state- owned enterprises. pakistan has to make progress in all of these areas. >> we quoted a ministry official as estimating that the roll back of the price increases would cost the government about $58 million a month. in one year alone, that exceeds the $500 million in the systems

that the late ambassador holbrooke announced. even if there are other aspects to economic reform, i think it is widely believed that economic reform in pakistan is partly contingent on its continuing to receive money from the imf. that is by most accounts called into question by the fiscal ramifications. are you willing to step up and provide money if the imf deems it unable to continue to do so? >> we have made our views clear to pakistan on the importance of these economic reforms.we will s the secretary indicated. these reforms are fundamentally important to pakistan's future and is related to the ability of pakistan to qualify for international assistance as just

outlined. this is vitally important, but we do understand that not only do you have to have the right strategy and pursuing these economic reforms as part of that strategy, but you have to have an effective government that is able to carry this out. >> you have also talked about giving aid not just to pakistan but to other countries in a way that is sustainable. it is working in terms of partnership. is the u.s. willing to expand discussions with pakistan -- it will definitely increase pakistan's revenue. >> there is no question that economics is a very important dimension of boosting pakistan and has to have a viable economy and access to markets. >> is this something that secretary clinton is willing to push with other agencies?

>> as i said, we'd take an all government approach to urge dialogue with pakistan. trade is something we continue to work within the u.s. government's and pakistan pickett's does the secretary believes pakistan should be afforded provincial treatment? >> i am just say we understand that the trade is an important dimension and part of our ongoing discussion that will continue. >> the washington post reported that the u.s. is going to announce aid to pakistan. >> the fact is that we have committed the significant amount of resources to pakistan over the last two years. we have tripled our civilian assistance to pakistan to $1.5 billion a year. that is a substantial amount of

money. it is at the heart of the ongoing road map that we are working with pakistan. i am not aware of any plan to change that. >> there is a bill pending that will give it -- [unintelligible] >> that is something we continue to discuss. >> did expect all of the special representatives of afghanistan to be [unintelligible] >> i will see what kind of details will have as we get closer to friday's event. >> that is something that is

under discussion. >> could you share the sure latest assessment of the situation in tunisia and are you concerned that these events my go across the border into other friendly countries? >> as we talked about on friday, we do not see a connection between what is happening in tunisia and algeria. the situation in algeria has improved to some degree. we continue to monitor the situation in tunisia and encourage everyone to exercise restraint. our ambassador had a follow-up discussion with the tunisian government today and again reaffirmed our concerns, not only about the ongoing violence, the importance of respecting

freedom of expression, but also the importance of the availability of information, and we will continue that discussion. >> are you cautioning the government of tunisian against any harsh measures? >> i did not see the two as being directly linked, but we continue our dialogue with the government of tunisia. >> are you aware that the government breezily closed all universities until further notice? -- recently closed all universities until further notice? >> to the extent that we understand the government has a to ensureimate right the safety of its citizens, we do have concerns about some of the steps that the government

has taken. >> specifically the schools? >> i am not aware of that specific step, but obviously there is a way of dealing with those who are in fact trying to incite violence while preserving for the balance of the population the right to assemble, the right to freely express and the right to have access to the internet. >> that is a fair characterization. there was a follow-on conversation last week. >> the tunisian president has

call them terrorists, the professor. >> i did not want to get into competing labels here. obviously we are always concerned about violence, but at the same time, we believe in the fundamental rights that people have around the world and that they need to be respected. >> do you have any updates on the ambassador's trip now that he is back? >> he is back, and he had the opportunity over the weekend to report to senior leaders within the department about his consultations in south korea, china, and japan.

kurt campbell is leading a delegation in beijing, having follow-up meetings with chinese officials, preparing for next week's visit by president hu jintao. we expect that north korea will be among the major topics discussed between him and president obama. >> [unintelligible] north korea has offered a dialogue to south korea. >> as we have said, we are open ourselves to dialogue and are