the table, as i understand it. >> and if it goes out through certification plus the 60 days, we'll certainly look at every case. but we can't discuss any cases. >> sir. >> we were talking about the training along the same lines of where we've gone. how specific are we going to get? are -- is the training going to be that you shouldn't discriminate against others, or is the training going to be, you know, no name calling, no jokes, no avoiding certain people because of their orientation? can you give us a sense of, you know, will there be examples? and are we -- is that something that the services are supposed to come back with, or is that something that is coming from the -- from the dod level? >> well, first of all, that we've given -- worked with the services in putting together the guidance that they're going to be implementing. the services have been given even some vignettes that go through some scenarios. but again it goes back to leadership. and i'm not trying to wear out

that word, but it really does go back to how commanders -- because they're actually evaluated based upon their judgment of how they treat their people, how disciplined they are, professionalism, those things like that. so the training will be service-specific and it will be unit- specific, because you have some units that won't -- you know, they won't need certain things, depending on what the unit is. hoss, i know you've probably got a -- say something. >> i think you've covered it. >> i'm wondering, though, is saying, you know, good leadership and good discipline going to be specific enough for that marine unit that, you know, may already be saying some of that? is there -- again, i think you said there are some scenarios. so is that some specific examples, then, of what would be acceptable and not acceptable behavior now? >> i'm trying to understand how to go at this to give you what you're looking for in an answer. but there are already behavior and conduct standards out there. they are reviewed to make sure

that they cover the entire waterfront of all of these issues. we've really not found, to my knowledge, anything that has been lacking there. in other words the standards are still valid. >> general hummer. >> i can add -- [inaudible] what we're developing is a standardized commander's tool kit. so it has the various things in there for the training. and the reason that we've brought the services together for the last several weeks was to develop a great foundation to standardize the training, then from which the services can go and put their cultural pieces on it. but there are vignettes that are included in the training, and that allows the leadership to present those vignettes and then allows the discussions so that people can get a better understanding as they go through that kind of normal course of events of talking through vignettes.

>> can you tell us what's in the tool kit? what exactly is there? >> or an example of a vignette? >> they'll get various types of training materials, conceivably could be the service commanders video showing the leadership from the front. they will also get the power point slides that have the policy, and specific for the various tiers, and then the vignettes. >> are the vignettes the ones in the back of that -- [inaudible] -- book? >> very similar. some of the same, very similar. >> about all of those, right? are they are -- >> i think they are, because there's a purpose that they were in there. i think the crwg, as you well know, did a very, very good job through the survey and then through their recommended implementation. >> but that's part of the training, is the discussion of those vignettes with the -- just rank and file, with the troops? >> yes. using the vignettes to spur the conversation.

>> tom, and then back there. >> dr. stanley, you said you were a marine commander at one time. let's say you're in helmand province at a combat outpost. you call your ncos together. what would you say to them about the way ahead allowing gays to serve openly? what would you tell them? >> well, i don't know if i'd want to use that construct right now. i guess what i would say is that we are serving on the tip of the spear. we want to take care of our marines. it's important for us to not only watch our -- each other, but i mean this is a family, and quite frankly, i'm pretty close to you when i'm out here, because i'm depending on you. what's changed?

i'm concerned about something else. i want to come back alive and i want to bring you back alive. and that's the focus here in accomplishing the mission. and although we complicate it sometimes by orientation, i want to accomplish this mission, bring you back alive. you got a family, you're coming back too. and again, that gets into we're talking about things of orientation -- of a person's sexual orientation as opposed to what we should be focusing on, which is a mission and taking care of our marines, in this case. and i'm going to take care of my marines. >> if an nco says to you, "sir, i don't want to serve with someone who's openly gay, i don't want that person in my tent," what would you say to them? >> we're going to take care of our marines. >> yes, ma'am. >> [inaudible] -- the original training, is this going to become an annual certification or annual training, like suicide prevention or something like that that the troops will have to go through? >> we haven't talked about that, but that's up to the commander in terms of how they do that. we haven't talked about -- we are talking about implementation right now, which is where we're moving toward. what happens annually and where

we go from here, i'm sure we're going to be having that book open. if history is any indication of things, there's going to be a need for not just this but continual -- i know in terms of professionalism; the training and development of those who wear our uniform is a constant. schooling, education, it's just a constant. >> okay. if there's no de facto moratorium in place, can you explain what the reason is for why there have been no discharges in the last three months since the secretary changed the policy on having three of three, the two of you plus the -- [inaudible] -- chief overseeing a discharge? [inaudible] -- lack of discharges -- >> well, i think it's been -- i don't want to categorize it as a lack of discharges, but -- >> well, one of the reasons -- >> yeah, it's been a -- it's been a very deliberate process. it's a -- the process is deliberate now. it's -- there's more scrutiny with the general counsel, my office, a service secretary as you go through the process in terms of whatever you're going

to do. and when you raise something from wherever it was before with a commander doing -- you know, processing discharge, you are -- automatically add a level of review that elongates a process. so i'm not saying there won't be discharges, as we -- the question came up earlier. i'm saying that, as we are right now, there is a lot of review that goes on within the process. >> would you actually -- would you actually discharge somebody right now in this climate as you're moving towards repeal and certification? would you actually do that? >> each individual case is judged on its own merits or demerits. and so, quite frankly, the answer is yes, if the case merits it. and there are a number of circumstances that could lead to that, each case. i can't talk about any individual case, but yes. >> i'm sorry. could you just clarify? like, what would a circumstance be? i mean, you're making it sound like that there would be -- have to be something additional than just a simple violation, a

statement or something. what would the circumstances be that would lead you to feel that it was appropriate to authorize discharge? >> i can't tell you what a specific circumstance would be because when you look at the gestalt of any case, when i review a package -- even now before we had this discussion dealing with any number of different issues, there is not one particular string that you pull that deals with that. it's the gestalt of all of what that individual is or is about. and to be able to come out and say this fits the absolute what-that-is or what-that-wasn't is inaccurate. you may not like it, but that's it. >> okay. julian, last one. >> well, just to try one last time on that, if you -- [laughter] -- if you had a package -- >> never mind, julian. we're done. [laughter] >> -- if you had a package of somebody who would meet the criteria to be readmitted to the military for -- and you were deciding whether to

discharge that person, and he otherwise you know kind of from the gestalt of his package that he would be let in after he's released, are you going to at least slow-roll those ones just to -- it seems like there's a lot of bureaucratic waste here to proceed and kick out some people throughout the year who you're going to readmit next year. i mean -- >> here's where we are right now. the "don't ask, don't tell" law is still in effect. and we are obligated to follow that law. and to say anything other than that at this time would be inappropriate. >> all right. thank you all. [captioning performed by national captioning institute] [captions copyright nati

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> this weekend, almost 10 years after the attack on the world trade center the national security analyst this interview. oslo this week in, the continuing growth of the military conflict. and the complete schedule at booktv.org. listen to historic supreme court cases on c-span radio.

>> at the inception, he is going to create a commission. listen to the argument on c-span radio purda. >> timothy geithner talked about the future of the u.s. economy and that he is confident this event. he said he was confident that the u.s. was headed towards economic growth. charlie rose moderated this event. >> pleased to see you. tim geithner joins me at an appropriate time. a little bit later, the u.s. government will be releasing the gdp numbers for the last quarter. we will not know them by the end of this conversation, though.

gdp numbers for the last quarter. we will not know them by the end of this conversation, the. -- though. when you talk about 10 geithner and ben bernanke, you talk about two people who had bn on the firing line since the beginning of the economic collapse. bernanke remains at the fed then tim went to the secretary of treasury. he may not be a ndidate for president obama's basketball team at the center position, but he is called in the white house "giant twtim." his legislative accomplishments include health care and reform. the is that the challenge of saying to everyone about economic reform and about the disaster that we face, it could have been a lot worse.

we now see in the united states and growing economy and we see unemployment beginning to add jobs. he would be the first to tell you that there is a lot that remains to be done. warren buffett told a couple of days ago when we were talking hisut coming out here that th grade for tim s an a-plus. he is a relatively tough credit. if you look at tarp and look at the tanks in which ty had tough calls to make, those calls seem to he paid off. there remains a lot to be done. i would like to begin by welcoming timothy geithner, the secretary of the treasury of the united states. [applause] we will have an hour, but i would also le to get your questions.

we will have an opportuni to include your questions. question per se, sometimes define what is on the minds of people. what are you hearing here at this conference? what do people want to know? >> i have not been here in several years. it feels very different. i think there is more confidence now that the most acute part of the crisis is behind us. i think that is even true globally. i have only been here for 24 hours, but what people have been hal is me about farare europe doing? how about the u.s. and china? and how confident are you that the american political system will be up to the challenges we still face as a country? >> i want to touch on all of

those. tell me how confide you are that the american political system can look at the challenge of economic growth to reduce unemployment in a lonterm very difficult and very large debt. >> i spent a lot of time around the world talking to my counterparts. i would not trade their challenges -- i would not tra our challenges for theirs. we have a very tough set of choices to make especially on the fiscal side. but we are in a dramatically stronger position to confront those challenges. we are in a relatively better position to confront them. were still a younger country and the other major -- and the other major economies. our productivity growth is

unique among the major ecomies. it was very strong to the crisis. we have a much more open economy. we have a more open immigratn. we have better positioned to benefit from t extraordinary talent around theorld. it's been with the challenges we face, we are in a better position to deal with those challenges. the great strength of the american political system is that it has always risen to the challenge. sometimes it takes a little time. it is sometimes a little messy. it is never perfect. america always act. if you think about the last two years, if you try to put in context that underlying concern about whether washington will move soon enough on these long- term thanks, washington at a

time of crisis did it do exceptionally important things in the last two years, t just in financial reform or even in health care reform, but in terms of starting, i think, the most promising set of reforms in education we have seen in a long time. we are beginning to see a substantial increase in investment in basic science and research. those re changes in reform -- i know they are messy, but the reforms were necessary. it is the american system that deliver those reforms even at a time of a deeply divided country during a time of crisis. even with acknowledging the formidable nature of our challenges ahead still, our confidence is high. i prefer our studios of many

countries. >> any regrets about the last two years in terms of whether you did enough about whether the stimulus should have been changed or should have been larger? >> we did and what we thought was necessary at the beginning. we looked at the experience of countries around the world and the president, to his enormous credit, decided at substantial political cost that he would try to move aggressively at the beginning and use the full arsenal. because of that, we broke the back of the financial panic very quickly. it started to turn in march of 2009. use of birth comeback exaordinarily quickly given the financial shock. we knew that looking at

experience that the typical mistakeovernments made in crisis is to stop to send, to shift to restraint. we were not ing to make that mistake. we knew that even with strong policy measures at the beginning, that we may have to come back and reinforce those measures. change their shape. that is exactly what we have been doing. as the crisis receded and the nature of the challenges shifted, we tr to shift the thrust of policy to focus on things lik long-term investment and infrastructure. those are the things you need for long-term growth. >> units and there was a recovery. that recovery seemed to stall in the eyes of some people. are you sure in your assumption as to where we a and where we are going with respect to the u.s. economy? >> let me tell you what i hear

from businesses and investors in the united states. there is much more confidence now that we have a sustainable expansion. it is not a boom. it is not an expansion that will offer the possibility of a rapid decline in the unemployment rate. there is ch more confidence that we are able to avoid the risk of slipping back into recession or even a long period of low growth. i think that confidence is justified. if elected held sentiments have changed -- it really began in august oseptember --u.s. seen justifiably more confidence that we will be growing at a reasonable rate. economists now say the economy will gro between 3% and 4%. >> you think that is reasonable? >> i am not a forecast or an

economist. what matters really is what the average expectation of the market and what is its distribution. what is most encouraging about the sentiment these last few months is that people have been most concerned about the risk of a low-. a long term growth. they seem much more confident that we will be growing at a reasonable pace. our job is to make sure that happens and make sure we do not risk leading the economy with an unacceptably high levels of unemployment for a long time. >> wt you think the business community and the committee that will be feeding consumer demand is looking for? are they looking for certainty where are they looking for something else to say to them it is time to make an investment in capital allocations, it is time to hire people? >> if you're seen that already.

private investment in the united stat in capital equipment and software grew at roughly 15% last year. it is still growing quite rapidly. you are seeing businesses start to bet on the fact that the world is not going to be growing. we have had 1 million private sector jobs in the last 12 months or so. you are seeing both of those trends start to gainomentum. i think it is worth looking at the big strategic imperative in the unit states. we are at the beginning -- i still think the early stages of what will be a very long time of exceptionally rapid growth in the emeing economies around the world. the ited states is exceptionally well-positioned to benefit from that and take advantage of it. the things those economies need

to grow, american economiesre still uniquely good at. the united state should be tried to make sure that u.s. companies and foreign companies to invest in the united states and that they are going to be a substantial participant in that huge wave of growth ahead. you're seeing it happen now. u.s. exports are growing quite rapidly. china is growing at twice the rate of growth of the rest of the world. things that have been traditional with the american economy -- the basic dynamis of the economy, education, the adaption to change -- i still think they seem encouragingly strong. that is what the presidentaid so much attention to animation, education, investment, and the broar reforms to make that possible

the early shape of the recovery should be encouraging. >> some of the numbers have been revised. do you worry about inflation in those emerging nations? >> anybody who is a central banker in an emerging economy -- those countries have been growing quite rapidly -- are seeing more pressure. they are facing a more complicated set of challenges in making sure they can contain inflation and dealing with a big surge of capital flows driven by optimism over how strong growth will be. those are world-class challenges. they are familiar challenges to policymakers. some countries have decades of experience in managing those challenges. it would be easier for them to manage this challenges if you

saw countries like china and other emerging economies softened their link to the dollar. if ty do that, there will be more flexibility to manage those inflation pressures and not risk getting behind accelerated inflation. for the global economy, given that two-thirds of the world's major economies are in the early stage of coming out of this recession, i would not put in place and on the global level at the high list of concerns. just to start where you began, the most important thing n apart fm the united states is doing what needs to do to repair the damage caused by this crisis -- i am the always the first to admit, the u.s. made some substantial mistakes in how we ran our financial system. ey caused enormous damage to

our credibility and to the american economy. will be living with that for a long time. >> when you say that, you are talking about the failure of enforcement of regulatory authority? >> we just ran an indefensible the antiquateda th antiquated financial system. it is an obligation that we acknowledge that mistake and make sure we do everything we can to fix our challges here. apart from what we do, which is important to world affairs, i think it is vy important to see europe -- and they will do this. i have no doubt they will do this. we have to make sure they put in place a framework that allows the countries that have

difficult reform challenges to let those reforms take hold. i am confident they will be able to do that. >> you are confident they can manage this problem? >> i am very confident. they have no alternative but to deliver on their commitment to make sure they are standing behind those countries and their financial systems because they recognizehere is no alternative to the reforms. for those reforms to work, they need time to -- funding is the oxygen of economies in the finance system. it requires that kind of commitment from the rest of europe to deliver. >> let me stay with that for a second. are you convinced they had done enough so far and that they will be prepared? i in your conversations with central bankers and finance ministers, that they are prepared to handle the problem of sovereign debt whether it is

greece spain, portugal, or italy? >> i do not think any of tm would say they have done enough. they are now in the process of trying to shape the escalation on the financial side. there is a question for the european authoriti. they have made it clear that they are going to hold it together and not take risks that uc reignited. >> what impact did have on the u.s. economy the sovereign debt issue in europe? >> i think it had a significant impact in slowing the recovery at a delicate time. most of the world was sti quite scored by the trauma of the crisis. the memories were still quite wrong. -- quite raw. when they sell this erosion of the political system outside of

the united states, that destabilized confidence. use all equity prices in the u.s. fall to 15% in a short time. that was a shock to the american economy. fortunately, in part because europe move to fix it, that was relatively short-lived. after that brief loss of momentum, the u.s. economy started to regain a little strength starting in august or september. >> presidents are cozy and chancellor merkle and said they are confident the bureau will survive. >> i will leave that to them. i share that confidence. >> when you look at the biggest issues -- lest they japan for a second. standard and poor's lowered its rating for japan's long-term debt. what does that say to you? what does it say about other countries in the industrialized world?

what does it say about some possibility of the united states? >> i think i would rather speak to the u.s. question. >> are you surprised with the japanese? >> if it is a very high-savings economy. they had a high level of debt. but japan's main challenge, and this is tr everywhere, is how they are going to grow in the future. how to make sure they achieve a vel of growth as the population ages back in support them. i think that americans in policy understand that, and i think it t recognitionnc across the political system that our financial system is

unsustainable in the long run. it will require further changes to bring it under control. we are in the process of figuring out how to build a consensus to make that happen in a way that is going to be fair and preserve strong fundamentals for future growth. our system has a lot of strengths in terms of how we make fiscal policy. it has some important witnesses and challenges. our strength are the president is obligated to put out a budget that lays out policies for two yes. those are evaluated by an independent authority, in this case, the congressional budget office, that has to judge what they produce relative to the economy as a whole. when the president lays al his budg in a few weeks, you will see our view of the best way to bring thideficit down over

time to a level that is sustainable and how we can do that without hurting not just the near-term expansion, but focus on education and renovation. the fact that we have to do that is an important strength of our system. our challenge is that is just the beginning of the process. congress has to legiste policies. our real problem now is tha we do not have a device in the american political system that allows congress to commit itself credibly over a mui-year. to policies that will offer an enforceable commitment to bring down the deficit to a sustainable level. that is our challenge just to come back to a question you asked a few minutes ago, when businesses and individuals in

need is the ability to understand over time help we are going to lve that. we know we have to solve it, but the ideal thing for incentives and for confidence and certainty as to lay out a path for how we are going to solve those things to allow people to plan and adjust. the early -- the earlier we began these reforms, the earlier people can adjust to them. these are within our capacity to solve. >> the political capacity to solve? the political will to deal with the long-term entitlements are at the core of our deficit issues. >> the program is not fully invested at the moment, but it is coming. there is no alternative to it. there is no way to avoid it. we cannot grow our way out of its period if you look at our position relative to that of the rest of the world, it is going to be easier for us to bring

ourselves down to more sustainable levels. we just need to make sure we can start the process soon. >> do we have a real conflict between the necessity of growth because you must deal with unemployment and a deficit issue and a debt issue that goes to the long-term? are they in conflict said that you have to say to everybody, "we are trying to get the growth think going and then we will deal with the deficit and the debt." is that the mantra of what you're sayin >> yes. i think that as you do this, you have to make sure that you do not hurt the recovery and take so much risk that you do a lot of damage to the early expansion by shifting to prematurely to substantial restraint. we are not want to let that happen.

there are people who do not want to hurt the economy, but they want to move quickly to do deep cuts. it is not irresponsible way to do it. it would undermine the objective. we have to have that process start more gradually. i think we can do that, but as a strategy, you have to be able to lock in political things people can count on and be comfortable will bring down those long-term deficits. >> that is the political debate in washington today. >> it is starting. the hard thing i am thinking about fiscal reform is not the accounting question of how you narrowed the gap and hello you need to get it, but how to do it in a way that will not hurt growth or incentives. it has to be fair. it has to be fair to the broad community of your citizens. that is always a political

challenge. under the system we have, we have to find a way to make congress commit itself to a multi-year framework to bring down those deficits. >> if you have a congressman called you up and ask you to convince them that it is the thing to do when they feel so strongly about spending and the second big issue is the long- term debt. >> no one who lives in the united states or sits in washington can avoid the fundamental reality of the fact that we had this unsustainable gap. we do not have unlimited resources. i think people realize that now. when we talk about investment in education or research and science or even infrastructure, we have to do that in a way that is affordable, responsible, and consistent with the impaired did of bringing down the deficit. we have to pay for things that

cost money not ignoring their basic costs are hoping they fix themselves. those of the constraints we have to live with. the reality is much more widely accepted in washington that it was over the last 10 years or so. you do not hear people in washington s tax cuts paid for themselves -- pay for themselves or that we can grow out of those things. the critical test of credibility for us should be can we find a way to lock in multi-year commitments so that we can began helping people adjust and what can we do that in a way that will preserve basic incentives for investment so that we are not hurting what has been big classic fundamental strength of

the american economy -- innovation, education, things like that. >> what is going to grow the u.s. economy? >> the basic fundamentals of growth are going to be the quality of talent you produced to the education system. they are the capacity of government to make sure its is investing as only governments can do. the market will not produce on its own the right level of investment in basic science a research. improvements in the basic quality of public infrastructure which have a lot to do with the cost of running a business in the united states. your financial system does a better job of allocating capital to where the returns are higher. >> there is still money from the original stimulus program are as for structure that has not been spent.

-- for infrastructure that has not been spent. >> the funds have been committed. a substantial number had been spent. that will not be sufficient to repair and rebuild the basic public infrastructure that all economies need to operate more efficiently. there is a very strong case for a long-term multi-year commitment to make sure that roads, highways, etc. are brought more into the modern era. >> david cameron stop to say hello to secretary geithner and told him to tell the president that he had great admiration f the state of the union speech and he was going to recommend his speech writer take a look at it. my question is what happened? inerms of competitiveness, therare things the president

should have been thinking about. should he have said, "this is a way to connect the dots in terms of growth, in terms of the economy, and at the same time do things we need to do for the long-term help of the united states," or did he wake up and say, "we are really in trouble with competition?" >> these things are part of wt he began at the beginning of the administration. of course, they were eclipsed in the public eye in terms of putting out the financial fire in the early task of designing a reform to make sure americans have health care. >> in terms of this preoccupation or the public dissension? >> i think the latter. it is one thing to say it was not just an economic crisis, it

was an economic recession more seris than americans have seen in generations. it happened in a country that is still quite divided politically. we have a very determined, quite formidle opposition that shows a matter of strategy to stand apart from this early and pierre tiv of managing the crisi and reform. i think that made it harder. the basic core of things about innovation, education, an investment -- what he is doing now is building on those. you can see evidence of this. it is really important, not just in america, but outside the united states, to see examples

of people in washington trying to solve basic problems. some of them from the center, ideally. u.s. seen ithe last two-weeks of the year a pretty encouraging capacity to actuallyetome things done that matter a lot. i thinkhat helps confidence. what we have been trying to do -- and we started this process in september when the president proposed reforms to investment -- is to find things that republicans support and can do with us such as corporate tax reform, so that we can help build more confidence in the united states. there are people watching and willing to come together and solve some problems. again, there are lots of things that divide democrats and republicans. there are people in both parties who want to make sure those contrasts are sharp and

compelling to their constituents. we have to find a way to rebuild the capacity to act because we cannot legislate now without democrats and republican the things that matter to our growth in the future require congress. there is nothing we can do at the executive branch. >> had been changes -- there have been changes at the white house in terms of the chief of staff and economic advisers. it is said that many of them work for president clinton. it is said that this economic team is more sensitive than the previous. you are now the captain of the team. but these are more in line with the views of tim geithner. >> that is true. [laughter] >> was part was true? but you're the chief in charge

of the team? >> it is an excellent, a talented group. i think the basic center of gravity around the team reflects the president's basic values on these things. i do not think they have changed. i think what has changed is that we have been able to put the worst part of the crisis behind us and we can now focus our attention on things that matter to long-term growth. >> part of the message of the government is that we have made sure that we can survive and now we must focus on the future. quite the immediate, urgent, overwhelming priority for us -- nothing was possible without it -- was to break the back of the crisis as quickly as possible. the president was going to spend a huge amount of political capital without much support in making this change is early. have been growing now for six quarters.

it is right to try to shift the center of political focus do things that are about education, animation, and investment. those things matter for the long-term. >> it was said by peter becker in the new york times that you and the preside have bonded, therefore you have a unique place to define him. christine ror said he was a moderate, middle-of-the-road guy. is he is essentially a pragmatist than what is that where he is in your judgment? >> absolutely. he recognizes what we all do at t test the policy is what is going to work to make a difference in people's lives. the quality of opportunity we give people. the tests for all of this should be what is going to make a

difference? what is the most effective way, stepping back from politics, that is going to make a difference? this president is doing fundamentally necessary, important reforms like in education, health care, or energy. he is doing so in a way that recognizes that the job of government is to help shake the incentives and make sure this basic as for structure and network allows the economy to function. if you want to call the centrist, that is fine. >> what would you call it? >> i do not think i can characterize it. i will leave that to him to do. >> i will give you one other endorsement of our president.

there is a huge gap. you see it all across the world now between what the economy requires and what political systems are comfortable trying to do. it is the basic test of leadership as it heads of state to try to figure out how to make possible politically famous that are in essential economically. u cannot let the political constraints and out there prevent you from living on things that matter. that requires the willingness to take risk politically and spent a lot of capital. he has been enormously supportive from the beginning of recognizing that you must be willing politically to take this risk early or you'll be living with much longer-termed damage

and cost two things that matter to economic health. that is enormously important. >> would you say that most of the measures that took place to thwart the crisis and create a recove out of this threat of the greatest depression since the great depression simply were matters of things that work and not a question of a philosophy about government and the economy? >> people tend to look at the competing strategies when dealing wh a financial crisis and try to categorize them as two extremes. you might call it the liquidation strategy. let the market solve it. there are some people, to use the pejorative, they say you should use the nationalization of strategy -- have the

government masterfully socialite those risks. we had a different message than that. it was enormously successful. we wanted to recapitalize the financial system as quickly as possible with a framewo that maximized the chance that private capital wld do that work for us. the things we put in motion in the stress tests were designed to make that much more likely. alongside that, we try to take the catastrophic risk of the broader financial markets by making a lot of commitments to make sure there was more liquidity left in the dollar funding. those were untested strategies, but they were enormously effective very quickly. i think we were lky that we moved so quickly to adopt them. it allowed us to bring about a very substantial restructuring of our financial system and to

get out of the investments much more quickly at a much higher return financially than otherwise would be the case. i will give you an exale. the s&l crisis several decades ago was a crisis much more modest in scale, a much tamer financial challenge. that cost the united states about 3% of gdp. the similarly measured cost for the united states -- tar, the broader investments we made -- are going to be under 1% of gdp. that is an exceptional outcome relative to expectations. it was possible because you had such powerful support for

monetary and fiscal policy early on. >> clearly we had an economic recovery on wall street and the corporate sector. clearly in terms of unemployment, we do not have an economic recovery. tell me what you think will be done over the next two years. some people, the cbo among them, believe that unemployment may drop by the end of 2012 to 8%. do you believe those figures? >> the private forecasters say that all the expectation that the u.s. economy grows by 3% to 4%, the unemployment rate will be at the low end of 2012. these things are inherently uncertain. unemployment only starts to fall when you see economy starts to grow again. growth has to come first. we are now about 1.5 years into positive growth.

as this econo continues to process the recovery, you will see more people put back to work. gdp in the united states is now above the pre crisis levels. unemployment is still roughly in the range of 10%. >> why is that? >> it is partly because of the way the u.s. economy works as a whole. you solve a crisis because people were panicked. use all american companies cut deeply into the payrolls with brutal force. they have been more tentative because of the scale and because of the aftershocks of that trauma. you see our start to increase early. they are tentative about hiring

back full-time people. i think it is fundamentally the trauma caused by the shot two basic confidence. we are dealing now. pat will start to improve. a recovery that follows a crisis like this, a result and part of too much borrowing by households and by the nation as a whole -- those recoveries arden -- will be more moderate. there is no way to avoid that. that consigns us to a much more moderate path. some suggest it ll be 2016 until we get bac to 5% or 6% unemployment, which is considered full employment.

the believe that? >> i do not think the record is good. i am not an economist. all we can do is make sure that people who are responsible in congress and washington are doing things that are going to make it more likely that we grow and we bring the unemployment rate down as qukly as we responsibly can. that is our obligation. again, what is happening is encouraging, but we have a lot of challenges ahead, not just with unemployment or the trauma you see in the housing markets. >> what are you going to do about freddie mac and fannie mae? >> in a very short time, a few weeks -- and i am glad you raised that. i think the core of the u.s. financial system is much stronger. i think the basic framework of

reforms we legislated last year with barney frank and chris dodd leading the charge is a very strong framework of reform. it addresses the court challenges in our system. but we still have a mass in the housing and financial markets. it is almost completely dependent on the market -- on the government. we need to put private capital back into the housing finance business. that will lead us with a system that will not be vulnerable to a tragic, colossal failure such as fannie and freddie. more consumer protection. >> absolutely. >> are you worried about one of the 50 states or more may go into bankruptcy? >> i would say that it is tough

to understate the difficulty you have as a government of the states -- as a governor of the states. it will be hard for a period of time those pressures are diminishing, but there is long set of reforms they have to get through. congress did a lot in their first two years of recovery of trying to ease that burden. but the force of theressure is diminishing, not intensifying. >> china. hu jintao has said this is not a zero-sum game. you had been a long time follower of china. i believe you speak mandarin.

>> i would never claim to sak mandarin. [laughter] >> you have also been part of the security and economic dialogue that has taken place in china and the united states. where are we after the state visit? what came out of it? the the chinese reasonably at the right to say, "we have shown that we are as strong as the united states on the world stage and there is no bigger player than we are?" >> i do not believe the leadership of china would say that. it is remarkable, the most impressive transformation that we have seen. theyad this remarkable capacity to set those long-term goals and basically execute them. the chinese will be the first to

tell you that they are -- >> many people do not think they will be one-third. one by one, they are replacing whoever was ahead of them. >> they have they remarkably difficult situation, not just demographically. the labor force will start growinsen. they are at the early stage of building the basic architecture of a market economy. the economy is overwhelmingly dominated by the state where resources are allocated by the state, not the market. they are committed to that path of reform. what you saw was both preside obama and president jintao acknowledged that the world depends on how effectively we

together figure a way for us to be growing together to be pursuing policieshat are not just in the interest of what we have to do domestically, but are in the grong address of the -- but are in the interests of the gring economy. what we want to do is try to strengthen the incentives china faces to continue on this path of reform to rebalance the economy, to move towards a more market-oriented system and to join us in try to shape a system that will work for both of us going forward. china was not there when the united states and parts of europe built the post-war economic system. they were not prent at the table then. they have taken advantage of the system for the last 30 years or so, but that system has to adapt

and change. we are going to have our interests we are going to pursue and they will have their interest they are going to pursue. both countries have to recognize that those interests are closely tied. they are not fundamentally in conflict. they are largely complementary. they have to be comfortable that we are working on a system to benefit our interest as well as theirs. >> will be competing model for other countries around the world? >> if there is no risk of that. >> the as we look at this, you expect to be secretary of chert the treasury -- the secretary of the treasury for the four years of this administration? >> i am tentative say, "i hope not." [laughter] i will serve as long as the president wants me. >> at the president wins reelection and once you to be

part of the government -- it will be hard to turn in dallas? >> the president will win reelection. they will have a chance to make sure he as good people working with him to shape our future. it is a great -- >> the most important lesson you have learned? [laughter] >> there are so many. there is no -- when you talk to people at a university or people just coming out of college, what i say to them is that you have to work for your country. sometimes there is no greater experience, and no greater privilege, that the more interesting or challenging than economic and economic -- that

economic and fiscal policy today in the united states. >> thank you very much. secretary 10 doctor. wait a second. any questions you have before we close off? does anybody want to ask anything? yes. right there. do y have a microphone? thank you, tim. that was great. >> i am very proud of what has been accomplished. in many places in this forum we have been asked whether we should have more or less government. the question of effective government -- can you address help the u.s. government is making itself more effective? >> i think you phrased it right. it is true in many parts of the world that commitments are unsustainable. when people say those commitments have to be brought

back down to earth, they are completely right. what matters is t effectiveneswith which governments do things that only government can do. there are basic things -- again, education, the restraints keep it on your financial system, what you do for basic science and research -- those are things that governments have to do. they have to do them better than they have been done in the past, not just in the united states, of course. it is about competent and creativity and care and the capacity to act. it trivializes the challenges to say it is just about the math. >> thank you very much. our special thanks to cretary of the treasury timothy geithner. [applause]

booktv alert. host: there is a policy debate raging across the country and in this town as lawmakers and white house turned to the u.s. budget and the deficit, about the right approach, whether or not but the precarious economy weather got -- more investment is necessary or is it better to work on the deficit. matthew mitchell is at george mason university's mercatus

center. guest: we are a research institute that focuses on the intersection of public policy through the economic plans and try to bridge the gap. host: politically on the spectrum? guest: i would say we are a market-oriented think tank. we do have a view that and a lot of ways market solutions tend to be superior solutions. host: and isabelle sawhill, economic studies senior fellow at the brookings institution. i would start with you -- and interesting photograph of why obama loves reagan. you see a picture of the president and a former president together. i would like to ask you, how does this debate differ from the supply side debate versus the keynesian debate of the 1980's?

guest: i think, by the way, one of the things obama shares with president reagan is they are both very upbeat, very optimistic. i thought the state of the union address was a very upbeat talk about how we can win the future if we did the right things. on economics, i think there really is a difference because supply side economics says all you need to do is make sure the economy has low tax rates and very little regulation and let the market work and it will grow very rapidly. and there was a specific believe that if you cut taxes, it would actually bring in more revenue. i don't think any mainstream economists believes that is true, although tax cuts can have some impact on growth and have some revenue and facts --

effects. the other side, more keynesian side, says it is really important when you are in a downturn such that we have right now and unemployment is over 9%, to use government -- you use government to bring back jobs. you may need fiscal stimulus, you may need monetary policy. right now monetary policy is about as stimulative as it could be and fiscal policy in is in this bind because we have these very large deficits, which makes it difficult to say we should do more. it is also political and possible -- politically impossible. host: you espouse what theory? guest: i would argue, as most conventional economists would

these days, we should pay attention as we are in a downturn and not a good time to be cutting spending and raising taxes. you don't want to do that in the middle of a recession. on the other hand, you do want to have a fiscal plan going forward that shows that you can get your fiscal house in order. that will reassure financial markets and our creditors abroad that we know what we are doing and prevent an increase in interest rates for a fall in the dollar from disrupting any recovery that may be incipient. host: matt mitchell, you were not around for the reagan administration, but let me ask you about how you viewed the problems the country has as different or the same as earlier periods in our recent history. guest: i think one thing i think is different is spending.

if you look at what happened during the reagan and the station and really what happened with republicans in the decades that followed, it was a significant, only laser-like focus on taxes and taxes on the. while they did cut taxes, they never addressed spending and the share of the economy actually increased. bill clinton is one of the only presidents in the world war ii period as salt spending as a portion of the economy decrease. -- that saul spending as a portion decrease. the people who are opposing the administration, i think for the first time in quite a while, are not focused as much on taxes as they are on the spending problem. to me, i think that is heartening a little bit because this obsession with cutting taxes and let spending continue at its previous paced i don't think makes a lot of economic sense. host: but the recession we are in, why do you call spending a

problem? guest: for a number of reasons. the main reason is it that it drives two things we know that harms economic growth. if it is paid for with taxes, that can harm economic growth. there was a study by president obama's former economic adviser and her husband on that. if it is paid for with debt, when not excessive debt and deficit also harms economic growth -- we know excess of debt and deficits also harms economic growth. it is in my view, unsustainable. not so much what is happening today -- as a share of the economy it is 25%. in the next five years it will grow another 10 percentage points, 50% in a number of decades. host: you see the same trajectory and are you concerned? guest: i do see the same church rectory and i am extremely concerned, but we should be clear about what it is due to.

the aging of the population and the fact that health care costs per person in the u.s. are accelerating at a very rapid rate. that is basically what is in increasing spending as a proportion of the economy. right now, there is a temporary increase in spending because of the recession and the need to have unemployment insurance at some other programs that were part of the stimulus package. but that is a very short-term thing. i think basically what i am concerned with -- and it sounds like what matt is concerned about -- is not what is going on right now. what we should really be worth about is what the fiscal situation looks like a decade from now, two decades from now, three decades from now. by about 24, just three programs -- social security, medicare, and medicaid -- by 2040, just

reprogram skull will consume all the resources we have unless we -- just host: there are three ways to get in touch with us. you can tweet or send us an e- mail or give us a call. the phone lines are on your screen. we are talking about the economy and the prescription for it and concerns for the future. all that on the table. r two guests have different prescriptions for how to address it. let's talk about the concern about the demographics, the programs and interest on debt which will consume so much of the gdp.

>> i think it's a bell is right. in a lot of ways people in washington are eager to put a white hat on someone and a black hat on someone else and say it's the other side causing the problem. this may have a lot to do demographics and rising health- care costs. that is nothing that anybody has a firm grasp on how you can address rising health care costs. despite the demographics, there is something you can do, which is take steps now while people have enough time to prepare and to accommodate by increasing their retirement age and indexing the cost of living adjustment, to change into cpi, which is the change in prices. take those steps to shore up the system now. i would add to the list of things that are causing this increase in spending.

which is sort of the a exception that everybody in washington takes. most people in washington, most politicians admit there's a spending problem, but they make exceptions for one project or another. when you add up 535 exceptions, nobody wants to cut those particular projects, then you have a spending problem. >> what percentage of combined expenditures from home and security, defense, cia, includes securing the nation are in that? >> isabel may have a better gas. i would say 20% or 30%. >> all defense + homeland's areurity would be around 17%. host: do you support the kind of reforms that mitchell suggested? guest: yes, but i would

emphasize when we talk about raising the retirement or slowing the growth of benefits, we are not talking about affecting anyone who is retired right now, or is about to retire. we are talking about putting in place now and plan for the longer-term future that says to younger people today, you are going to get as least -- at least as much in benefits as the car degeneration. you are just not going to get as big an increase as you might have expected. and we are going to encourage you to do some saving to make sure that you have enough resources when you retire. social security was never meant to be the only source of income for retirement. it was intended to be part of a three-legged stool. it was one leg and then another leg was attention from your employer. the third was your own personal savings. host: it was called

supplemental security income at one time? guest: know, that targeted mostly the disadvantaged, a separate program. host: the social security suggests a wider net. guest: well, i think that is a problem. i think the american public b --need to understand it's not going to be the sole source of income for retirement. for low-wage worker working his or her entire life and has a difficult time saving, i dig a case can be made that we can actually boost what they get in retirement a little bit from where it is now. the president's bipartisan fiscal commission recommended that although we slow the growth of benefits for the more affluent beneficiaries, we should absolutely increase benefits for those at the low end of the scale and we should

also have an exception for those jobs where later retirement would be better difficult. manual jobs, for example. host: do you support the health care law and adjusting costs? think theon't health care law get the problem. it is interesting. there are claims the health care law brings down the deficit over the long run. the truth in that is what the health care law does is it raises taxes, but it does nothing to decrease spending and does nothing as far as i can tell to lower the cost curve. i am not a health care expert, so i don't want to talk beyond my knowledge. there is not a lot that government can do other than remove the perverse incentives that intervention in the health- care market party has.

host: the you believe the health care law will address spending concerns on health care? guest: i think it will do so modestly. there's a lot of uncertainty. the potentially -- it could potentially have a positive effect, but we don't really know. according to the congressional budget office, which is neutral, its will actually reduce costs somewhat and it will reduce the deficit. it is a very difficult challenge to reduce health-care costs without affecting access. but we should be able to do it. this country as much higher health care cost per person than any other advanced nation by a wide margin. we don't get better health care as a result. so there is something fundamentally inefficient about the way we deliver health care. we don't get good value for the dollar. i think the bill is a good

thing, but not perfect. host: say the doctor has been a guest at c-span many years, so its collaps -- so we are glad to have isabel sawhill at the table. she has spent her life at the brookings institute and pryor was a senior fellow at the urban institute. she's co-director for families. and focused on domestic policy, federal fiscal policy and co- director of the center for children and families at the brookings institute and president of the national campaign to prevent teen pregnancy. matthew mitchell, this is your first time on c-span. >> it is. >> research fellow with state and local policies at george mason university's mercatus center. he has his ph.d. in economics from that school. a ps from arizona state

university. thefirst-- a bs from arizona state. let's get to some calls for our two guests. beginning with norwalk, conn. tom, republican, on the line. caller: my question is obama keeps on pulling money out of the private sector through his policies and he keeps on adding to the regulations of the private sector, of the business sector. if you pull money out of the private sector and give it to the public sector, you shrink the money in the private sector. and it keeps the job growth down or exacerbates this long unemployment that we are seeing. do you see anything changing in the hearts of obama in his

policies since the election of the party candidates that will change his policy towards continuing raising taxes and regulation on the private sector? guest: i think in the state of the union address annual saw a very clear pivots of the president towards reaching out to the private sector. in his appointment, also, he has signaled that he will work more closely with business groups in the future. -- his appointments. that suggests that he is very aware that government does not create jobs, only the private sector creates jobs. the government's role is to make the environment such that businesses will want to hire, will want to invest, will want to use some of their record

profits. the private-sector is very flush with money right now. corporate profits are at record levels. the stock market is high. what is preventing businesses from investing and hiring is the fact that people are not buying what they have to sell. until we can get the unemployment rate down and get in comes of households but, you are not going to see a lot of hiring. for the longer-term, i do think the things that the president is talking about such as a drop in the corporate tax rate, closing some corporate subsidies or eliminating some corporate subsidies, and reviewing regulations can help. i do not totally agree with your assessment that obama has been especially bad on pulling money out of the private-sector and

regulating more than his predecessors. if you look at the data, in fact, the bush administration actually increased government spending more than any administration we have had since the second world war other than lbj, other than president host: johnson let's get a call from michigan, democrat. caller: good morning, c-span and susan. my question is as we investigate trade agreements that have been devastating to our job markets in the states. i think that would have an impact on the employment, either that or looking at these countries that flood our markets. host: what do you think of trade and its effect on the state of our economy? guest: there's a remarkable degree of agreement

among economists on this. my view is that of adam smith, that trade is beneficial for every party, really. artificial barriers to trade cause more harm than good. if the government says i cannot buy a product from somebody because they live in another country, that does mean harm because it raises the prices of my goods and services. the harm that it does for me outweighs whatever benefits of bestowed upon the producers in the u.s. i would argue that there's a dynamic effect where it harms the producer in the long run because it makes them less competitive. the auto industry in the u.s. benefited from intervention on trade policy for decades. over the long run it makes them less competitive and less appealing to consumers.

host: there's a great deal of popular sentiment that suggests otherwise. people often say it field trade agreements have decimated our manufacturing base. guest: manufacturing is going down in just about every country in the world. the reason is the economy is changing. the service sectors are improving. this is thinking turn. this is what happens in an economy, it's very painful for those going through it. i would argue that it becomes much more painful when government policy shelters people from the fundamental changes that are happening in the economy. host: when naphtha -- nafta was being sold to the public, we heard there would be displacement. they spoke about the need to retrain our work force. was there enough of that done in this country? guest: i am not sure there was

enough. i agree with what matt said in general, but what we need to remember is that there are groups of workers that are going to be very much hurt in the short run. if all of us benefit from trade, as he argues, but some group is harmed, then we ought to have in place retraining programs and other ways of helping those having to adjust to these very painful changes. i think that the training programs that we have in this country are not terribly good. look at germany. germany is doing extraordinarily well economically, despite all of the financial crisis and everything that we have seen around the world lately. one of the reasons germany does so well is because germany begins to train their workers at a young age. they train them very well. they have partnerships with

business to do that. they have apprenticeships. we could probably benefit from restructuring our training programs. and using community colleges more for this purpose. host: next call from tennessee, california, a republican. caller: thanks for taking my call. ronald reagan when he cut taxes at that time the rate was 70% so it really expert more economic growth. they got more money in their pockets. the president had a good speech. st. that there's gonna to be a freeze is not enough. we need a 20% across the board, including closing the department of allocation. and health benefits to the epa. and federal workers should get a

20% cut across the board. too much t regulation. i'm a businessman and it's almost impossible to do business anymore. caller: thanks for the call. some interesting points. one thing that is interesting is obama has this portion in his speech which is absolutely right on. he says that we cannot address our long-term problems without lowering spending and without the loring spending in areas that people do not want to address. these are the entitlement programs like medicare, medicaid, social security. it was about 1.9% of the entire speech. he never followed up with a realistic plan for addressing that. i still got him for saying this is a problem. what i would like to see is some leadership that says this is what we are going to do to get

spending under control. with regard to the short-term, 20% cuts, i am one of those that thinks if you give a politician a reason not to cut and make the tough decisions, they are going to run with it and choose not to make the cuts. on the other hand, the biggest problem is projected spending increases. we have to figure out how to get the projected spending increases under control. there's no better time to start than now because it gets more and more difficult mathematically to deal with it as time goes on. host: the caller gave us three points. guest: there's a lot to cover. we spoke about the reagan tax cuts earlier. the caller mentioned them as well. they were put forward with the supply side rationale, but they were really keynesian tax cuts because we were in a recession in 1980, a very deep

recession. those tax cuts helped us to get out of that recession. ronald reagan then raised taxes in 1982. then subsequently several other years in the 1980's raised taxes. so that was basically keynesian tax cuts designed to get us out of recession, not to help long- term growth. the president in his state of the union said that the freeze was not going to be enough and then went on to talk about some of the big entitlement programs and revenues. i just want to get on the table that if we were to allow the temporary tax cuts that are going to last two years now that were enacted in december, including income taxes that we all benefit from and that were extended for middle-class and wealthy, if we were to let those tax cuts expire, that would

solve a lot of the deficit problem that we face. that would not be the only solution, but it should be part of the solution. we have already set a lot about regulations. host: here's a clip from congressman paul ryan in his response to the state of the union address. let's listen. >> instead of restoring the fundamentals of economic growth, he engaged in a stimulus spending spree. not only failed to deliver on its promise to create jobs, but also plunged us even deeper into debt. the facts are clear. since taking office, president obama has signed into law spending increases of nearly 25% for domestic government agencies and 84% increases when you include the failed stimulus. all of this new government spending was billed as investment. after two years the and and plummets rate remains above 9%. government has had $3 trillion added to the debt. host: i want to start with our

guests. you said the stimulus program was important and necessary at the time and a job creation- focused. why is their unemployment rate still where it is with the stimulus package? guest: there are many good economic studies that suggest that if we had not done what we did, the unemployment rate instead of being a little over 9%, might be 12% now. so i believe those studies. second, i think that -- i misspoke a moment ago when i said that the largest increases in spending had occurred under bush. because i have to acknowledge that as a result of the recession and of the stimulus package that was enacted when the current president first took office, spending. has spending. but you cannot blame the president for a really bad

economy. the financial crisis began during the bush administration. the bailout was a bipartisan bailout of the financial sector. the stimulus package that was passed in 2009 was intended to help get the economy back on its feet again. i believe that without that, we would have had much more severe.. host: did the stimulus work? guest: i am more skeptical. the administration made estimates initially that without the passage of the stimulus, and employment would reach 9%. in reality, with the passage of the stimulus, it was at 10% and its state around that level for a very long time. what is interesting is that if you actually read the literature on this, the language

in the journal is nowhere near the language that comes out of washington. there's a ton of disagreement about the effectiveness of fiscal policy and stability of fiscal policy. when all of that is condensed in the process and put into the language of politicians, it comes out as stimulus works. i am skeptical. host: a twitter fall or would like to a lightning round and whether use a good or bad to the following things. -- twitter follower. free trade > guest: good. >> trade unions? guest: good. guest: good. minimum wage?

guest: good. host: legal immigration? guest: i cannot speak in favor of illegal immigration. host: high or low taxes? guest: low. host: houston, brian you are on the air on our independent line. caller: i have a question for one of your guests. the first is for isabel. you cut medicaid and medicare when it's already $125 billion in debt. and for matthew, we already had a stimulus package which was almost $1 trillion. he spoke of infrastructure

spending on that as well. now where did our money go? how much money is left of? of thank you. we start with you. guest: a lot has focused on how much bang you get for the buck. the estimates are all over the board. a number of studies found it is much lower than the administration thinks it is. another aspect of research is focused on what is the multiplier multiplying. there's a new study from stanford economist john taylor that looks like this -- looks at this. all the extra government spending in many ways did not lead to increased government purchases. it ended up financing and at the state level, it allowed state governments to cover their deficits. basically, what you see is people are not going out and

consuming and spending, which according to keynesian would lead to an increase in the economy and employment. instead they're using it to pay down long-term debt. guest: i am not sure i understood your question. i heard you say how can we cut medicare and medicaid when we already have a large debt? host: that's when i heard. guest: i don't know why we should not over time be reining in health-care costs, which includes medicare and medicaid, precisely because we do have a large debt. the whole point is that they are contributing -- the growth of those two programs are contributing a great deal to the accumulation of debt and deficits. therefore, we do need to get them under control for exactly that reason. host: now to the social security comments. she writes social security does not contribute to the current

deficit. guest: that is technically correct. if you believe in this notion that there is money in a trust fund that can be used to pay future benefits. but keep in mind that that so- called money that is in the trust fund is not really money. it is not real assets. it is just paper iou's. there is kind of an accounting mechanism between the social third security trust funds and the rest of government. social security is receiving less money than it is paying out in benefits. it needs to draw on other resources to pay those benefits. that is what concerns me. if we begin to do something about this now, we could give

people lots of advance warning. it would not have to be very painful. if we wait until 2036 -- 2037, rather. i think i have the date wrong. guest: i think it's 2038. guest: anyway, we will have an effect of falling off the cliff. host: on twitter, they want clarification. would you explain the term "cash negative? guest: the amount of money that is collected in payroll taxes and these are the taxes that just about everyone pays, the employers and the employees, it is less than the amount that we send out in social security

checks this year. host: now to annapolis, jim,., caller: nobody mentions the two wars and tax breaks for the rich and pop up budgets in the military. only taking 5% from the military and talking about security. didn't we over-pay for that under ronald reagan to fix this problem? host: when the president proposed his five-year freeze in spending, did it include military? guest:no, it did not, but secretary gates and president obama have talked about making some hefty cuts in the military budget. so i think you are going to see some scaling back of military expenditures. obviously, the two wars are

something that were started in the previous. previous they were not paid for. for the first time in history we have put the fighting of two wars on the national credit card. that is not a good thing. i agree with the crux of your question which is whether we ought to scrub the defense budget/ it is not half of what we need, but it is a significant chunk of what we spend and should be looked at. quite a lot of republicans in congress right now do not want to cut defense at all. they want to fence that off and are not willing to talk about the big entitlement programs that we have been discussing. that leaves this very small sliver of the budget that is maybe 15% of all the money we spent, to take all of the cuts.

and that creates a very difficult and not sensible situation. host: this question on twitter deals with state budgets. guest: she is right about the pension programs. pension obligations, according to the states, are under-funded by 1.5 trillion or maybe one trillion. when you actually use of proper discount and account for its in a way that's more economically sound, they are underfunded by about $3 trillion. it's a big pension problem. one of the things we have seen thing is they have increasingly relied on skipping their pension payments in order to balance the books. in virginia this last year they

skipped their pension payment as a way to balance the books. that undermines or exacerbates an already difficult problem. host: there's a comment from sasha in new jersey. guest: if you make an unsustainable promise to someone, you are not doing them any favors the long run. i would much rather tell my baby daughter that you are not likely to see as big a social security check as i saw, so you should get ready for it now. that's a much more compassionate approach than to say it's going to be there and you don't need to save, you will be fine. host: let me ask about the fiscal woes of the state. there are discussions about whether it's possible to change alonso the states can declare bankruptcy. thus cutting some of their pension obligations and other iou's that they have. i want to ask about your

concerns on state fiscal woes and their cascading effect on the economy, a larger u.s. economy. guest: it is a very serious issue. states, almost all of them, are required to balance their budgets. their revenues plummet, which they have done as a result of the procession, and their deficits go up, so they have to take these hard steps that we have been talking about. the federal government has been unwilling to take them. they will have to lay people off and cut spending. that will exacerbate the economic problems we face. so right now the economy is growing at a modest pace. most of the forecasts are for growth rate of maybe 3%. but we have to grow at about 2.5% just to keep steady with the growth of the labor force. we have to grow a lot faster if we want to dip into this pool of

unemployed people. the fact that states are cutting back on their spending and laying people off is just going to make it much harder to get out of the hole that we are in economically. host: we are having a discussion about the economy with two economists from different perspectives. matthew mitchell is based at george mason university's mercatus center. isabel sawhill is at brookings institute. the next call is from connecticut. this is charles, a caller: republican good morning. this is perhaps not germane, but it is something that has aggravated me for ages. i would like to have the government refer not to a budget, because as i understand it, when most families figure a budget, at the top of the page they put down what their income is, then they list all things they will have to spend money on such as food and rent and mortgage and transportation and

so forth. if that number comes out bigger than the number of the top of the page, they go back and cut down on other things. the government does not seem to work that way. i would like to know if from now on, can we refer to it as the government's expense account? guest: i will start and say i like your idea in general and i think the government does need to learn to live within its means, which is really what you are talking about. we had a lot of problems back in 2008 leading up to where we are now because a lot of people were living beyond their means. we had access indebtedness in the household sector. people passing out their credit cards, people refinancing their mortgages. and then we had the credit bubble and it created a lot of

the problems that led to the current recession. when the government does the same thing, think about it this way, there's not a coin to be anyone to bail out the government if it cannot pay its bills. so, this is one reason why many of us, including me, are very concerned about the fiscal situation that we face and why we hope the president will take leadership and the congress will follow and there will be a bipartisan willingness to tackle this problem so that we can get our expenditures in line with revenues. whether you do that by cutting spending or raising taxes, the point is we should live within our means. host: let me put two pieces of informational on the screen. this is from a conservative policy group in the house of representatives, their proposal to cut federal spending over 10

years includes freezing non dispens -- non-defense funding. let's listen to the president by contrast the day after the state of the union when he traveled to wisconsin to talk about investing in infrastructure. >> we have to be more productive, more capable, more skilled than any workers on earth. it means making sure our infrastructure can meet the demands of the 21st century. rebuilding our crumbling roads and bridges, connecting americans and american people with high-speed rail and internet. it means doing what we try to do

in our own lives, like taking responsibility for our deficit, by cutting wasteful and excessive spending wherever we find it. and it means reforming the way our government does business so that it is responsive to the needs of americans. instead of being responsive to the needs of lobbyists. host: matthew mitchell, is the president, although acknowledging the need a voice all spending and reforming government, talks about investment. whereas the republicans suggested cutting. guest: this is emblematic of the problem. on one hand you see even the most aggressive republican proposal starts out with cutting spending in non-defense, non- homeland's security, non- veterans, then they go on to talk about spending. paul ryan is the exception, but most republicans have not come

forward with a very realistic way to address long-term entitlement. that is the republican side. on the democrat side, the president says many of the right things, we need to address the spending problem, spending is a significant issue, but then he makes his exceptions. for him the exception is infrastructure spending and investment in innovation and things like that. what serious spending reform involves is everybody being willing to take sacrifices. my favorite program is going to get cut, but that's ok. guest: i would pretty much endorse what matt just said. the problem is lack of specifics. everybody can talk the talk. we need people to walk the walk. furthermore, if we need them to walk together. we need a bipartisan agreement that we are going to do the

tough things. right now politically nobody wants to go first. nobody wants to jump off the ship into the cold water and pay the political price for having done so. and so, each side is waiting for the other to move first. host: we had bipartisan deficit commission whose job was. to do was guest: i think they did their job extremely well and i am very impressed with the bipartisan commission report. they put lots of good ideas on the table. the president in his state of the union said that he commanded the group. he said he did not agree with all of it, but he thought it was a start. so that's good. the bad news is that so far he has not come forward with a very specific proposal. we will see what he does in his budget, which will be submitted in mid february. host: i read that one senator

suggested that the report of the commission should be put to a legislative vote up or down. guest: yes, that kind of proposal is exactly what would be very helpful. look at the 1986 tax reform, this was regarded as one of the better tax reforms. they eliminated a lot of tax exemptions, loopholes, deductions, credits if that were hidden spending. and they lowered rates. this is something that everybody's ox was gored. it was a shared sacrifice and it worked. guest: it is very important. i don't think most people realize that right now there's $1 trillion every year in backdoor spending through the tax code. if we want to get spending under control, we should not just look at programs. we should look at all the special benefits that flow through the tax system to corporations and individuals,

which make the economy less competitive, more inefficient, actually benefits people at the top of the income scale more than at the bottom. the president's commission focused heavily on the need to do tax reform as we did in 1986. that could be the higher priority in my view. we could also simplify the tax system, which the average household would like. host: we have a sweet -- tweet. guest: i am absolutely. guest: i cannot. host: paul on our independent line. caller: i have a two college degrees, one in engineering and another in business. i have been in manufacturing 30 years. i listened to mr. mitchell.

he said manufacturing jobs are decreasing all over the world. these people who talk about manufacturing jobs, they don't know what they are talking about. the first thing, there is no amount of training, there is no amount of equipment that we can buy and manufacture, the only difference is the labor cost. that's it. manufacturing jobs have moved overseas to china and vietnam and other countries. there's nothing we can do about it. manufacturing is where the money is. that is where you gave the money. that's the main reason our economy is down. until they cut down on these trade policies, we will be a declining country. that is the bottom line. if you look at where the

economy was 100 years ago and if you talk with the typical american, they would say the backbone of this economy is farming. nearly everyone was a farmer. if you were not, you'll farmer -- you knew a farmer. then people will go into manufacturing. now you see this shift again from manufacturing into service industries and other types of industries that for the most part people are looking past other types of skills rather than using their backs. this is a sort of necessary fact of life. there's not much we can do about that. what i would say is the best thing we can do is to make sure the transition is least painful as possible. policies that attempt to cushion

people from this change actually end up doing more harm than good. for the last several decades we have seen subsidies and tariffs and quotas and all sorts of policies that favor the automobile industry in detroit. as they did that, what it did was its sheltered detroit from the rigors of competition. it added costs to detroit vehicles. in the and what we found is that detroit cannot compete with that model, cannot compete with other countries. basically detroit was in a recession 10 years before the rest of us. i would argue a lot of that is due to the un-competitive special favors that were given to those industries. host: >> do you share that view? guest: to some extent. one of the reasons that cars and

other manufacturers are not competitive is we have a unique health care system in this country that is employer-based. one of the reasons that labor costs are high in the u.s. and relative to some of our competitors is because private employers are expected to cover health-care costs whereas in other countries they are covered by the government. host: houston, republican line, dick. caller: thank you, susan. i heard about germany. determining and japan. the first thing hitler did was he issued money with no interest and started on a german highway. president obama tried to get our infrastructure worked out. had that money been spent, we would have something to show for it. we have something to show for its with gm.

people used to work on farms and people used to make their own shirts and shoes and clocks and stuff like that. you can do it again, america. take your money and invest and sell to your neighbors. the president has spent $3 trillion up to a $5 trillion. what happens to the money that disappeared after 9/11, the $2 trillion and the $12 billion that disappeared in iraq and iran? guest: thanks for the call. one of the things i think you were saying that i would very much agree with is that we cannot look to the government to do everything. as individuals we have a history of being quite self-sufficient. right now when times are tough i

think it is quite amazing how americans have really not been complaining much and have been trying to help their neighbors and trying to make do with what they have. and i did the president actually talked about that a lot when he gave his speech in tucson and said that there had been a lot of individual heroes who have come to the rescue of a congresswoman who was shot, and in this time of economic difficulty 1 dingbat can help is if we are all part of this -- one thing that can help is if we all take part. if we improve our education system, that does not just mean the government doing stuff in the education world, it means,

as the president says, parents turning off the tv, parents encouraging their children to do well in school. it means state and local communities taking responsibility for this because education is overwhelmingly a local responsibility in this country. so those are my thoughts. host: i want to go to the point that he made about infrastructure spending earlier. he said president obama was laughed off when he suggested that we spend on infrastructure. how much of the stimulus package was directed to infrastructure spending? guest: i don't know the figures. i would guess about one-third of it. i guess a third was slated for that. what i would say is that there may be a role for government to provide some infrastructure particularly for types of goods that are public goods, goods that it's difficult for the private sector to find a profitable way to provide. some models for that are changing. things are far more reasonable

than they used to be. we should consider those options as well. if those kinds of decisions should be made based on the merits of whether it makes sense to do -- to invest in these products. will the product create more value than it costs? i don't see infrastructure spending as a means to have your cake and eat it. we are going to build the roads and create jobs and save the economy. host: here's a file clerk listening to your discussion about coeducation and asking what we should be educated to do. and related to that, this caller makes a suggestion that there are many unemployed college graduates on the street and we don't need more. guest: i would disagree that we don't need more. this is a temporary situation.

i hope it's a temporary situation that we have high unemployment. people coming out of college right now are having a hard time finding jobs, that's true. but it is not the case that we are going to be able to compete long-term if we don't have a skilled and educated work force. host: our final phone call is from pennsylvania, vince, democrat. what's on your mind? caller: good morning. in the early 1970's most insurance or rather health insurance companies were not for profit. i believe it was nixon that they changed the laws that encouraged the big companies to go for profit. as long as they have to pay out dividends and are on the stock exchange and also the high ceo costs and how much money they take out of the system, all of

that money is being taken out of the health care system, doesn't that raise the cost of health care? if we made them all not for profits, would that not be a savings? thank you. host: some of the blue cross are operated as not-for-profit, aren't today? guest: i don't know about the structure of the health industry. i am not a big fan of all the profits that the for-profit companies are having. i think that the new health care law is going to try to rein in how much money goes toward profits in overhead versus actual care of patients. but i am not sure that this is an area where we are going to reap a lot of savings.

one thing that would help, there's a big controversy about this and i'm not sure how i feel about it and it's not consistent with our history and political culture here, but in europe they have much greater efficiency where they have a single payer systems. host: having shown the two differences in opinion, how will the next six months play out? we're getting close to a presidential election. guest: it could play out the way it typically does which is politicians will kick the can down the road and we will see nobody wants to take a lead on this. the other way is it could work out a way that it has in other countries. in canada in the mid-1990s's they got serious about the gdp ratio, chronic government

spending and high deficits. they cut $6 in spending for every $1 of revenue raised and they solved their problem. if you are able to tackle deficits with spending reductions as opposed to tax increases, it's much more likely to solve your problem. politicians that do that are more likely -- are just as likely to keep their jobs than the typical politician. so it would be good politics for the president. is it easier to get

[speaking spanish] >> most people that run the private independent schools are formal public teachers who took over the schools and are now running them. [speaking spanish] the exchange schools belong mostly to a network foundations, religious foundations, and some other nonprofit foundations. [speaking spanish]

there are other non-profit exchange networks but they are only about 50% of the total. [speaking spanish] the main difference between the

private independent schools and the its changed schools are that the people who run the private independent schools are former professors who usually have four runs -- far less resources than the other chain schools. they come from a lower social strata. they do not have the management skills that the other schools have. that is why the results showed that independent private schools do not perform that much more different than public schools. >> did you have any other questions he wanted to ask? >> there was one thing i did not respond to. when we converse, i get to the u.k. personalized education is very much discussed in sweden.

we go to a greater extreme to have our headmaster run one of our schools which we are allowed to do. in some countries you must have an examination. we are living in a global world. that is an excellent way of bringing teachers over. we have taken our curriculum and then we have taken over two schools, one in a very rich area in london. they are among the 10% worse schools in the united kingdom. we are step-by-step introducing our model. it is much easier to start from scratch than to take over a school and take 2000 students. step-by-step we are getting

them into the new model in close cooperation. in the states we have probably 15 teachers of various kinds of helping to transform what we have done into the curriculum in new york. to me, it said -- if i look at the global world, it is exciting that all our students are in stockholm or london, or do york and can be in the same kind of network. that is a revolution i believe will happen in education over the next 25 years. >> this is a question for both of you. are there any incentives or procedures in place in either of your countries to support successful models and help them

expand faster? >> no. if we are successful, we get more students. it is very much market oriented. >> [speaking spanish] there is no public policy whatsoever in chile to subdivide -- subdivide the schools. [speaking spanish] there are several proposals to make it easier for schools to open ought and have the backing

of the chains. that will make it easier to have the development of chains eventually. [speaking spanish] we do not have enough information to find out white schools form chains. it is difficult to see how you can set devised them to do so. -- how you can send devictivizeo do so. >> we had the voucher system that is giving someone money to go to whatever school they want

and that can be to for-profit commercial or a nonprofit -- what it seems like some of the chains are run by religious or other foundations -- or we had recharger side -- the charter side which is still publicly run, but none not -- but not under the auspices of the school district. i was interested, when he came over to the united states you chose a charter rather than starting a private school. why did you decide to do that? for both of you, how close do you think your voucher system i in your home countries are versus charter schools?

>> the main reason for me coming from sweden -- it started in the u.k. we agree to start private schools. we thought we could compete in a very efficient way only sell the overpayment to the school system. when the minister of the cabinet came and asked if we could go in the academy program, which is in the mainframe factor and is financed by the government, we saw that as more interesting. from a philosophical view, you -- i am keen to bring education to the bottom 95% and not the top 5% of the rich or the noble.

you have not realized what would happen in the state's -- that is where we are now. our aim is to build a flagship school and show our educational model. we hope that will help to change the system and make more realize that it is in good to have competitors and it is ok that you can make a profit off of this if you provide a good education. >> as a follow up, because there is so much interest in scaling up good schools -- it is all across the u.s.. for the past 10 years it has been charter schools that have been the approach people look to

for scaling up excellence. there are some great charter schools networks that a lot of researchers have found do a good job. it has grown substantially over time. is this a model in an of itself for replicating excellence? some of them get philanthropic contributions. is that a model where people just give money and hope that the schools and expand, but have no expectation of a return on investment? they can produce the same effect we have seen in other fields where those who were given money to expand and enterprise are doing it with the expectation that they would get their money back. what i am doing right now is a study in which i have looked at the performance of all 70 or so

charter school networks operating in california. i have data on their performance from a huge range of california state tests. i have also collected data on the grant funding those charter school networks have received so we can give a correlation between grant funding and performance. if it's a high positive number, then that provides a model. if it is not, then it is not -- then it is not. this is still preliminary, the paper will not come out for a couple of months, but what i find so far is the correlation is 0.07 which is about as close to zero as you'll ever see because they are usually random correlations. there is almost no correlation between the grant funded charter schools and how well they perform.

this was my wife's idea, i did a correlation between the number of letters in the charter network's name and their performance. that is -0.29. it is four times stronger than the relationship between grant funding and performance. this makes a little skeptical about models, but this is pretty preliminary work. we will have to see. did you have any other questions? >> i would like to hear what they say. >> let's open it up to the audience. do we have a microphone circulating? right on the right at the top. >> hello. it is great that cato is doing this. it is important to have these discussions. i would hope it would be more

balanced. i have some questions about these two systems. i want to go to performance. first of all, sweden has gone down since 2000. i read in one place three times as fast as any other country. they have gone down in half between 2006 -- science between 2006 and 2009. it would seem to indicate that there might be something wrong with this particular forum. in the chilly case, the school by school comparisons that i have read do not show much of a difference, but if you get to the individual students you will find that the private voucher students are doing considerably better than the public. this may be due to saucier- economic choices. my hypothesis is that we are talking about neighborhood

schools here and you are getting intensify stratification. you are not getting a true measure of what the schools are doing. i would like to know what you think about some of that and hopefully cato will have some other views on this panel next time. >> i think it is correct that the piece as gone down in sweden. that has been very much discussed. at the same time, the independent schools are performing much better than the rest of the schools. the fact that peace has gone down -- peace is very high in finland. i would also question peace as the correct measurement of everything. there are many factors when you develop young people. when we get through this concise

-- discussion, there is a consensus that the competition and the fact that you have the large independent sector are hoping to become better. when we -- we are not allowed to measure its students in a way that braise them. we talk about the black and the blue and the red. we are still -- that is now being changed in the new mall. that is the agreement that came last year. it means that we can give concrete things back to the students. the larger evolution is one part of the matter -- why not change the whole swedish system where you require more than you get from the other system.

>> there really is a wide acceptance that pisa is different from the other well- know test. while finland has finished first, second, and third, the last time fenland dictate tests -- finland took the test, it finished between 10 and 14 depending on the subject. finland it no longer takes that test. they only take the pisa, the one they do the best on. maybe that is coincidence. you're so not -- i am not entirely sure. >> [speaking spanish]

like what happens in sweden, in chile there are two systems for the vouchers. [speaking spanish] firstly, the families can charge an additional charge -- the schools can charge an additional fee to parents for schools. [speaking spanish] even though the selection of students has been bad recently, private schools still managed to do that through their different ways. [speaking spanish]

research has shown that actually has an impact. schools can charge an additional fee to parents. they can select from the highest strata students. that definitely has an impact. [speaking spanish]

there is actually some contrary results because when you look at catholic schools, because of their religion you suppose they have people from lower incomes. the results showed that they actually have people from higher income strata, even for for- profit schools. >> this is something we discussed in the green room before coming out. it is also partly the result of the way the voucher system is designed in chile. in addition to the voucher, the public schools can receive additional funding. it is not large, is concentrated

on low income schools and students. from the parent's it perspective, if you are in a low income area and are a low income family, you can choose the private -- the public school with the voucher amount plus up to 30% of additional funding. it is a pretty big incentive for parents to choose public schools. it also makes the public schools offer a better education. you have a question? >> hello. i would like to ask both participants help free or your independent schools in sweden and your francesca's or private schools you have in july -- or your franchise -- and your franchise or private schools you

have in julchile? you mentioned that there are unions that you deal with. is that a constraint? if the independent schools in sweden are doing so well as you pointed out, why then are barely one in 10 of the seven to 16 year olds enrolled and nine of 10 still in public schools? >> let's take the second first. it is up to 50% already now. over the past 10 or 12 years it has taken off and is expanding rapidly. the key constraint for opening more schools is finding

locations. it will continue to grow rapidly. yes, we have made a collective agreement with the trade union. of course they will accept that we can increase as we like. we get the same amount of money as the other schools get. it is not very easy to increase. we have fewer teachers. we have expanded salaries for another -- expanded salaries for most of them. when i talk to teachers unions here and in the u.k., they are very surprised that the teacher's unions in sweden are as they are. the reason for that is before the voucher revolution, they only had one employer. now they have opened up -- it is

also good for teachers to have competing possibilities. that has changed the climate. he will in the next 10 years see an increase of compensation for good teachers. [unintelligible] there is an enormous difference between those who are really good and those who should do something else. we have a good system for making sure the good ones get the opportunity. >> it is very standardized in sweden. extremely standardize. i have to the of trade member -- trade union members on the board of the company. that is also a lot in sweden. the trade unions are represented on the board of the company.

>> [speaking spanish] like what happens in sweden and other countries with large public sectors, it is a stark difference between what happens with teachers in the public sector and teachers in the private sector. [speaking spanish] in the public sector, it is similar to what happens in sweden. there are teachers who are collected with the government. [speaking spanish]

in the private sector come -- private sector, there are few restrictions on teachers. there are minimal regulations on minimum wage and so on. but everything else, there is a lot of flexibility at the private schools when it comes to hiring, salaries, and so on. [speaking spanish]

the difference has created a big debate in chile because the current government has to pass a law that allows the directors of each school to hire up to 5% of the worst performing teachers. [speaking spanish] the chains have created a lot of anger from the public sector teachers' unions. the whole purpose of the vouchers is to instill

competition. if you handicap public schools and directors and cannot fire bad performing teachers, they are in a bad position to compete. this reform is quite appropriate to xl the system. >> do we have other questions? >> [speaking spanish] what kind of benefits? [speaking benefspanish] private school teachers are like any other private sector employee. the same regulations that apply

to any other company -- private company applies to private teachers, including health benefits, social security, and so on. >> we have a question on the aisle here. >> thank you. the public education here in the united states has a tremendous amount of resistance to vouchers. how do you deal with hal as you move in in new york, you have to deal with the teachers' unions, education unions, administrative staff? there is a tremendous amount of money being used in administration costs and overruns. i have work in two different

school systems here in the united states. had you address those issues when it comes to vouchers or charter schools, the fact that you cannot get rid of bad teachers, the union will come in and say no? the resistance here to change is a really big issue. thank you. >> we have been very much welcomed. we have gotten a lot of support from the city of new york. we are starting one school with

200 students to start with. it is sort of an example. it is seen as an experiment. we are not turning the system upside down. that may be one reason. at the same time, i have received enormous support from people who say, "this is interesting. maybe we can use this year, to." basically, i am it very much more positive when i hear friends talk about how difficult it is. yes, it will work. >> i had one question about the way it worked in sweden. is it the case that there was tremendous resistance to the idea of 8 voucher program nationwide and it was only because a party was elected that was more free-market oriented ander after people saw it --

>> it came because people were fed up with the schools. they were no good. i started for schools. i got 900 students in year one at a brand new school with their track record whatsoever. they did not come to me because they thought they would get the best education. they came to me because there was no alternative. when you go deep down enough in the system and say we have to change this, i think there are some places in the states where people realize we need to try something new. >> does that answer your question? >> [speaking spanish] to reply about the difficulties the private sectors have in chile -- >> [speaking spanish]

the interesting thing about the production of the voucher system in july is that it happened at a moment in the country's history where debate pretty much was not allowed. [laughter] [speaking spanish] there was no political debate. it just happened. [speaking spanish] the debate in the 1980's in july about education was not about quality, but about the courage of education to get the country.

[speaking spanish] it was not until the '90s when courage reached the level of developed countries over the quality of education. the it is the debate taking place in chile right now. [speaking spanish]

the debate right now is between public and private schools. public schools they feel they are at a disadvantage because the regulations we discussed. the private schools are proposing to -- they are proposing to curtail the spread of private schools. they think the lowest performing private school goes down altogether. >> you are leaving out a very important part at this picture. payment of taxpayer dollars that go to vouchers along with any private doctors. public-private partnerships are fine, but what about the funding for these voucher or charter schools?

the resistance here is a public schools do not want to have to put out any money to charter schools and certainly do not want to put out anything to get a voucher. stop -- the money has to come from someone. there has to be taxpayer dollars. the money has to come from somewhere. the public pays and the private part reaps the benefits. that is an important issue. thank you. >> a substantial amount of all taxpayer money is being used to buy services for corporations that are being run for profit. i suppose also the state's whatever used and when you build a road, houses, where whatever you do is being done by a private company that is run for profit. how do we get as much as possible for the taxpayers?

we get more education for each dollar we put in. we see more and more very clear signs that the same model is used for the running of a corporation that must make a profit. >> we have time for one more question. >> this is a brief follow-up. the place where you have larger market share is not in what we think of as k12. it is what would be equivalent to our community colleges in the 16-18. could you talk a -- >> we start with the children or -- are 11-years old or 12-years old.

it is a completely different separation. parents normally [unintelligible] at 11 or 12, they can travel a bit. that is why we have focused their. looking at them, we will probably take a step to develop our education to lower ages. it is a tremendous system that you have all of the curriculum. you do not have to have books. i do more now on the kindle that with real books. we are going to a revolution now. we are trying to develop and

use the creativity and the fact that we know that my grandchildren are much better at this than i am. i know people change dramatically and open up possibilities. >> we have to wrap it up now. i will thank you all again for coming out today. it was a very wonderful. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> next, former u.n. ambassador john bolton on president

obama's farm policy. then, egyptian president hosni mubarak on the riots in his country and then the response from president obama. >> this weekend on "book tv," cnn's national security analyst looks at "the longest war." also this weekend, david eisenhower on the continuing growth of the military industrial complex. edward mcclellan on barack obama's first campaign for the u.s. senate. sign up to get our schedules in mailed directly to your in box with our booktv alets. > a former ambassador to the united nations, john bolton, criticized the obama administration on dealing with

iran and north korea. this was at a luncheon on capitol hill. his speech on national security challenge is sharply criticized. that obama's policies on everything from the new start treaty with russia, chinese president hu jintao's visit to washington, relations with north korea, and sanctions against iran. he is considering a run for the presidency in 2012. this is just over one hour. >> i am the president of the defense forum foundation. the ambassador will be joining

us shortly. thank you for being here. i know this is a tedious day to get to work this morning. i want to welcome you all, especially those of you come into our forum for the first time. i hope he will become regular participants. the defense forum foundation was started in the 1980's as a bipartisan program where congressional staff could get together and hear from experts speakers on national-security issues and the promotion of democracy and human rights. i hope you guys that are new to the forum today will become regular participants. i want to acknowledge a few of our special guest. first of all, i am pleased that we have a member from korea.

[applause] we also have someone from the embassy of kuwait. we also have the ambassador of the western sahara. [applause] our special guest is here with us this morning. [applause] we also have ambassador frank ready. [applause] jeb carney from our board of directors. [applause] also from our board of directors, chad gore. [applause] i would like to welcome our staff. [applause] she was an intern last year, but she came to help us today. [applause]

our speaker, john bolton, has expertise in united states foreign policy and national security policy. he served as a united states representative to the united nations. he also served for four years as the undersecretary of state for arms control and international security. he has spent many years of his career in public service. previous positions he has held s secretary for organizational affairs at the department of state, assistant attorney general at the department of justice, an assistant director at the center for development. he is known for his outspokenness on behalf of democracy and human rights.

if you ask any north korean defector, chinese human rights activist, or someone from the western sahara, they would respond, "we love that american guy with the bushy mustache." [laughter] is a great honor to have the ambassador with us today. ambassador bolton. [applause] >> thank you very much. i think the defense forum foundation for inviting me back to speak. i want to thank all of you for coming today. i hope while we are here at lunch, it does not snowing as hard as it will be. predictions are notoriously unreliable. it is going to be a lot more

than they say. i want to take the opportunity here of being halfway through the obama presidency, at least i hope we are -- to review what has happened internationally in the first two years in trying to assess what the prospects may be in the succeeding two years. while the media and the president himself have tried to focus on domestic affairs, the rest of the world is not waiting for us to get our economic house in order. it is a challenge at a threat to american interests. most of our allies around the world are building day-by-day and the question of how we respond to them or whether we respond to them will be increasingly important as we go

forward. let me see first if i can identify some of the characteristics of president obama and his administration and how he approaches for policy. i think that does have an impact on the substance of policy. then we will talk about a number of important areas where i think some of our most important challenges will come. at the end, i will be happy to try and answer your questions on those subjects or anything else that i do not cover. i think the most significant aspect of the president's approach to foreign and national security policy is that he basically does not care about it. i think this marks him as a different from a long line of american presidents since franklin roosevelt to beginning on december 7, 1941, all of them got up every morning

worrying about threats to national security policy. it motivated them. it was at the top of their agenda. i do not think it is a priority that president obama has. it is not he does not deal with foreign domestic policy, he does. but he only does it when he has to end it cannot be avoided. you get the sense it was an interference, a new sense in the way of his domestic agenda. related to the first point is that i do not think that he sees the rest of the world as terribly challenging or threatening to american national interest. i think he demonstrated this during the 2008 campaign and many of his actions since taking office. he has desperately tried to

avoid the phrase "global war on terrorism" perhaps thinking if you done and not speak about it, there was not a war on terrorism. he said during the campaign that iran was a tiny country and that if it had nuclear weapons it would be a tiny threat. it is certainly true that we do not face the civilization- ending prospect or the exchange of nuclear salvos with the likes of the soviet union what we did during the cold war, but even a small nuclear weapon can pose a challenge. you can see why even though the threat is asymmetrical, it gives the holder of the nuclear weapon enormous leverage of the united states. even a tiny country with a small number of nuclear weapons

can obliterate other tiny countries nearby. ask the israelis. it does not take 1000 nuclear weapons to turn israel into an ash heap and create a second nuclear holocaust. what is tiny to us is not a tiny to other countries. the whole idea that iran is small and insignificant and does not worry us under the current regime gives way to the president's real view that threats and challenges to america had been exaggerated. typically if you combine two attitudes like that in american history, you would end up with a policy of isolationism. that, of course, is not the direction the president is taking. he is a very strong believer in multi-lateralism. alliances, international

organizations are a part of any american president's tool kit, but the difference is in this case, the tool kit becomes more important in the leadership. i think that is why when you put all this together that is s to understand president obama as our first post-american president. that is a very carefully chosen phrase. i did not say on american. i did not say anti-american. i said post-american. in the same sense as many european residents do not consider themselves as merely french or merely german. now they are european. they are part of something larger. i think the president sees

himself as something larger as well. this conglomeration of attitudes is not the first time that a leader of the democratic party has had these views. it is obviously the first time that a leader with those views as become president. it reminds me very much of what george h. w. bush said that in 1988 when he accepted the republican nomination for president and talk about his opponent, governor michael dukakis. bush said back then, "he sees america as another pleasant country on the united nation's roll call somewhere between albanians and zimbabwe." i think what bush said about dukakis you can say about obama. we are nothing particularly special. that is really what motivates

him. those of you who watched the state of the union earlier this week will say, "that analysis is obviously false. but what the president said about america. he gave a very patriotic speech." indeed he did, marking the onset of the 2012 presidential campaign. i think the fact that so many people comment on those aspects of the speech reflects the awareness that it does represent a substantial departure at least at the rhetorical level from the way the president has performed before. i do not think it is a departure that goes beyond rhetorical. we will see in the next two years. based on the evidence today, i think these foundations of the president's attitude towards foreign policy are going to continue.

i think that other leaders around the world have come basically to the same assessment. i think they understand the president takes a very different view of america's place in the world than most of his predecessors. they have calibrated their policies accordingly. they see weakness and unassertiveness. they are going to try to take advantage of it. i think the scope and pace in the next two years are likely to pick up over what they were in the first two. people around the world have been adjusting their policies to take the administration's view of the world into account. let me give a few examples, i think, of how the president has played these policies alps.

let's start with china. having hosted president hu jintao for a summit meeting, i thought it was a remarkable meeting. it was probably the most substance-free summit we have seen in a long time. i think that is a reflection of the lack of brand-strategy that we see in this administration. i think their basic motivator is one shared by many american business leaders and academics and others. that is the idea that china is engaged in a peaceful rise and that it will become a responsible stakeholder in international affairs. that is certainly one possibility. that is a very desirable possibility. it may turn out to be true, but there are other scenarios as well of a much more disruptive china, much more troublesome,

much more challenging to the united states. i think the peaceful rise and responsible stakeholders scenario is based on a straight-line projection of chinese policies since about 1990 -- economic growth accompanied by a larger presence in the world. i do not think that is necessarily the way you project policy into the future for a country as enormous and with the history that china has. it takes a slightly longer to plan far. let's look at the last hundred years of china where you had the first establishment of the republic of china, the breakup of china into warring warlords, the war against the japanese, the civil war between the chinese nationalists and the chinese communists, the defeat of japan in 1945, the second establishment of the republic of china, the second fall of the republic of china, the

establishment of the people's republic of china, then in the 1950's, the great leap forward of the most tragic economic policy in the history of the world -- more people were killed during the great leap forward than any other in history. the great cultural revolution destroyed the untold wealth of chinese culture and history. that was followed by the political repression in tian an men square and there was followed by economic growth. you can predict a century coming of uncertainty. when you look at some of what is happening in china today, the inevitable demographic effects of the one-child per family policy, the questions business leaders have raised about the authenticity of chinese economic growth, the

disparities in income that have arisen, the political shape of the chinese government -- you still have to have a lot of questions about what is the most likely scenario for china going forward. we can see unequivocal of evidence that the people's liberation army remains the strongest and most cohesive force within the chinese communist party, which remains the dominant force in political china. the government has dramatically increased spending to increase its nuclear weapons and delivery capability, enhancing their submarine fleet. they are moving towards a real blue water navy. they are increasing their investments in the area of anti-access weapons like cruise missiles.

there anti-satellite warfare experimentation. their success at developing a cyber-warfare capabilities. all of these are accompanied by a creasing political assertiveness as demonstrated by extraordinary claims to sovereignty in the east and south china seas and their disputes over american military access to the yellow sea in connection with the recent problems with north korea. all of this presents an enormously complex series of challenges to any american administration, but i think our administration has responded basically by turning away and worrying about chinese currency policy. i would worry about our own