commentsn this as well, for becoming part of the caraker government. >> this goes to what haened in tunisia. there we saw the army playing a role of the -- an orderly process of transition could take place. will the military ay that role in egypt or will it basically back mubar and try maintai regime that has given them so many privileges? it is a stretch to imagine that they are going to -- to democrats but that is what we need them to be in order to get out of this crisis in a way that provides for orderly transition to a democratic government. >> what does it mean, jennifer, that they are staying on the sidelines at this point, as these protests unfold? >> well, it is absolutely critical. any past successful civic demonstration has ultimately been about splitting the security forces from the regime

and the security forces need to feel that they will not be punished, all of them in a post-transition period and i would stay in the case of egypt, it is very iortant to look at the security situation. it is not monolithic. what i thought about the thugs was this was the intelligence services, which are really the kibed kind of cutting edge, really brutal part of the services in egypt asserting themselves. vice president comes from the intelligence community. so there could be a struggle right now internally and the -- the ability of the civic movement to be able to continue to split the military, to continue to keep the army on its side, is going to be very critical and that means they need to stay disciplined. as disciplined as they can, given their size. clearly what was happening

yesterday was the ability that the thugs wanted to actually turn this into a chaotic, violent scene that then order would have to be restored. >> let me get to how president obama is handling this. everybody has a view. start off interpreting where they are and where they have been. >> well, they have been playing catch-up, not surprisingly. a very fast-moving situation. last tuesday this whole thing started. in the ninth day. they have moved from talking about egypt as a stable country and mubarak is not a dictator to saying he has got to go. he has got to go now. so this is a dramatic shift in policy that hasaken place, kind of watching it in realtime. and so now, having i think succeeded on two fronts so far, which is to press the military using the leverage of o military assistance and the

context we have with the -- and on the other hand, getting mubarak to say that he won't stand again but they fell short. what they needed him to say is i'm going now. i'm handing over to suleiman and suleiman would then be the one to oversee the transition. mubarak has no credibility for the transition. the administration gets high marks for avoiding bloodshed so far but only b-minus in interpret s of getting what had to be done, which is -- in terms of getting what had to be done, mubarak to leave now. >> when the president spoke to mubarak and said it is time, that he would get the message and leave? >> well knowing what we know about mubarak, i don't think that should have been that expectation. he is a survivor, if nothing else. it is hard to envision him

stepping down voluntarily. i think, though, if we look at the obama administration's statements, they are definitely hedging their bets and i think if we look over the course of the past week, they have been been behind the curve. yes, their tone has gotten a little bit more tough. with the mubarak regime, they always seem to be reacting to events, rather than shaping them. i think a lot of people misinterpreted the word order transition, the famous statement that there should be an orderly transition. that doesn't mean that mubarak has to step down immediately. a transition could mean a variety of things including laying down a procedure over the next six to sev months leading up to the presidential elections and again to emphasize what the protesters wanted was not mubarak to not run again, they wanted him to leave immediately. so in that sense there is a big gap between what the obama administration has been saying

and egyptian protesters want and i think there is widespread disappointment now in tahrir square about the obama administration's response. they are questioning where is the u.s.? where is t international community? >> is that realistic? does the united states have a responsibility to look at events and think about how that transformation actually occurs? >> well, let's start -- the united states misunderstood the whole region and the debate really what was going on. ken wrote a terrific book about this situation two years ago warning the navings we have really entered into a prerevolutionary mode. the storm is coming. it is only a matter of time. we only need a galvanizing event for everything to explode. so yes civil society, the public from what i hear in morocco and algeria, they are

waiting for the united states to rethink its strategy and waiting for the united states t show some leadership. obviously the obama administration i think must be from my view congratulated for this evolution we have seen talking from stability, orderly transition and then we want to transition now. i thk from an american standpoint, the nightmare scenario is where the standoff persists. we all know that there are forces lurging in the shadows waiting to take advantage of the situation. the fear is like in iran, the opposition might radicalize. so that is why i think the united states -- from what i hear, from the streets is that the united states should be more firm, for the simple rean that it has huge leverage er the military and the military finally are the decider in there. so that is what --

>> pick up on this point. you have been in a room in these kinds of situations. what is the calculation going on right now? >> first, let me start with -- very important needs to be reinforced, which is time -- just a lot of -- continues, very problematic, in particular could cause the disintegration to have military, which as martin pointed out would be disastrous for egypt. it would resulted in chaos. that is one thing administration has to worry about. >> what would cause the military to disintegrate? >> oralizeation. >> a sense that the egyptian people were moving in one direction and the military was movinging into a different direction. this is a draftee army. they come fra the people. having them feel like they are caught in between. for the u.s., there is another sets of situations. on the one hand, it is clear the

protesters want mubarak to leave immediately, as shadi said. on the other hand, these kinds of transitions are extraordinaryly difficult to make them turn out well. most revolutions don't turn out well. one of the most important things here is that you can't have everything all at once, which of course is exactly what the people wt. completely understandable. but think about it this way. if the administration calls for elections now, if they are elections now in jipts, it would be the absolute worst thing for egyptian democracy in the long-term. it is a lesson hopefully this administration is going to learn. look at what happened with hamas in 2006 in gaza and iraq in 2004-2005. premature elections before you have political parties that are truly representative, before you have established order, before you have a way of conducting this, before you have a constitution, you will get the worst elements in society. >> this is your area. do you disagree? >> i do.

i think that we always wishfully wait for elections to be held in places where everybody is tolerant all the political parties are formed. the rules are very clear. this is never the case. elections are going to happen whether we likette or not. in fact, they could be a galvanizing force if they are moved up. i think six months is too little time. i think y should talk about calling elections in three months. doesn't have to happen tomorrow. it is going to take a while. yes, there will be a scramble among political parties to figure outow to compete. there has to be tremendous pressure on the international count in make sure these elections are as free and fair as possible, which they have not been in many years. i think the obama administration needs to turn back the clock a little bit to look at the performance of the obama administration. there was a very, very stupid decision in the the obama administration made right off the bat to cut off sens civil

society groups, assistance that had been started turned bush administration and that was a -- it was basically so that they could get the relationship back on track. there was a decision made. that ail yentsated a lot of -- alienated a lot of civil society groups. they felt that the obama administration, even though they were brought in a democratic process, was actually turning their backs on the

>> you're basically handing the outcome to the muslim brotherhood. is that what you want? >> first of all, i think the role of civic and use movements and forcing should not be underestimated. that was the case in serbia and the ukraine. political parties would have dictated to the sec janata is. i think elbaradei is not a charismatic figure, but people might be willing to unify around him. he is not particularly frightening to the outside world. the muslim brotherhood is not dumb. they would want to be part of a coalition government. i have spoken to some who said that the fear of the muslim

brotherhood taken over might not take root in egypt like other countries, and similarly, going back to the iranian resolution -- revolution, we are in a distant place. what is your perspective? >> i did not think you can compare iran to egypt. the brotherhood renounced violence. i have committed themselves to this democratic process. the brotherhood of yesterday is not the brotherhood of today. yes, there would be things we would not be comfortable with, in terms of their position on women and minority rights, but we have to recognize their objectives are paid are -- there aren't going to try to win the election. they never run a full slate.

they never run on more than 50% of the total districts or the total seats. why? they are aware this would provoke the regime or the international community. they remember what happened in algeria. there remember 2006 with a loss. there is a certain degree of pragmatism about what they're willing to do. now istherhood's focus going to be rebuilding their organization. they have been repressed increasing the of the last several years. they want to be able to rebuild their membership, get their message out, and read gauging preachy social activities. if they're not interested in power just yet. i think they have a more specific focus in the short run.

>> israel, and describe what is happening there. we of the heard a lot from the prime minister. the -- tyro is burning, but they are having an argument about who was going to be in one chair. that is totally fixating them of the moment. they are deeply confused about what this means for the egypt- israel peace treaty, for the common strategic alliance that has been built up over 30 years. with, then the deep -- enemies, whether it is a al qaeda, or extremists, or palestinian groups, in the secure hamas, and, of course, will bark -- error on. if mubarak is leaving, they are

entering into a new world that could be highly problematic. from their point of view, they're very concerned this would be the unraveling of the peace process. the peace treaty, look at jordan, and wonder what will happen there. so, i think, they feel as if they cannot influence event. they are horrified that the obama administration has kind of given up on mubarak. they wonder what this means for how the obama administration will be paid toward king abdullah of jordan, or toward israel -- behavior toward king abdullah of jordan, or toward israel. >> to ask a question that my team and i are esteemed as we think about our program on sunday, which is west of the

scenarios we are looking at? we have a long-term said aerial -- we have a long-term scenario. what would cause mubarak to leave today? >> audi said, it is a revolution. they are -- again towelette is a revolution. they are not predictable. one possibility is a continued standoff. history suggests it will not be forever. other forces will come in and start to pull things in a negative direction. if the army could start to on arrival. moderate opposition could unravel. they could become chaotic like iran. it was not clear who was going to be in charge, and there was a fight among its and opposition groups. another scenario is one that a lot of folks in europe and the

that states would like to see witches mubarak be moved off center, and the party in stepping in and effectively played the role of the old turkish military, supervising and orderly transition into democracy. in many ways, that is a scenario by the people in washington would like to see happen. the other scenario is that the situation is getting out of hand and a be a two-step bid. -- and they need to step in. >> the u.s. needs to be worried about an oil shock. where do we stand? >> oil balers are $90, or -- oil barrels are $90, or $100, and if this is pro -- protracted, it could go up, which the consequences for this fragile recession, obviously.

just as to the scenarios, there is obviously the city should scenario, and nobody really knows where that is going because it is still unfolding. the military is playing at a important role. i think we should expect that probably that scenario to unfold in egypt as well. for israel, i do not think we should -- look, israel or the united states, i think they have to adjust to a u.n. environment, whether it is the muslim brotherhood who takes over, or the -- or elbaradei -- a elbaradei who takes over. i do not think anyone who takes charge would dismiss of the peace treaty. there is quite to be a new relationship. >> i want to get to some questions here.

i will ask everyone to be pointed and brief. we will try to do that so we can take this conversation going. as we get ready to do that, let me get a quick comment from you on the implications for oil prices. what is your take from there? >> oil prices have gone up significantly, along with a whole list of economic consequences. this is going to have a devastating effect of the regional economy. it already has. we are talking about stock market crash as we have not seen in decades. there really is a panic. terms of the economic situation. the real worry is if these protests continue indefinitely, and there is no worry -- there is not more reassurance about stability, we will seek more of a decline in the county, which

will have any effect of the u.s. economy. >> $100 a barrel oil for the iranians does a lot to take down the pain of the sages we are putting on that. they must be sitting there rubbing their heads. costs >> -- we need to recognize that the arrest is do not see this as we do. we see this as an oppressed people rising up against a corrupt government. the iranian leadership is looking at this as an anti- american movement. they think this is playing to their advantage. they also see hosni mubarak, the most anti-european of all of america's highlights going down. -- anti-iranian of all america's allies going down. we also have to worry about to

what extent they want to stoke the flames. i will come back to my 11 analogy of the kaiser government helping to move him to russia to stop the flames of the revolution. it is something we need to be very attuned to. there is the potential for both of these groups to see it in their interest to make the situation in egypt even worse. >> a comment on that, and jennifer? >> i would say that the ready and government is not impervious to public pressure, having just dealt with the great revolution. they stepped up their repression of picking up people, executing people. they are worried internally, too, that this might reignite an opposition movement which they have successfully for our repressed. >> let's get to our audience. we will start in the back. they will bring the microphone

to you. yes. >> hello. are we meant to state our names? >> sure. >> i am with the u.s.-libya business association. my question is what do we beds year and egypt it -- event in egypt and tunisia before reaching mean for libya? >> -- mean for libya. >> we heard what rhetoric has evolved, warning them of what mubarak is awarded his people of, chaos. definitely, he is worried. he has been in power for decades. he is really concerned. odyssey, a libyan society which

has different social conditions, major differences, but that does not give solace to him. he is as worried as everybody in that region, including, obviously, morocco. >> yes, sir, in the back. >> thank you. >> i am particularly appreciative this winter's comments. beyond the regent, -- beyond the reach and, obviously there are governments around the world watching the situation. particularly, beijing, which saw all region slot which it swapped with revolution in the 1980 code bill. i know they have been censoring

the news from egypt, except for when the violence started to emerge, they were broadcasting that. would you comment of that situation? >> quickly, you have captured the answer you and your question. one thing that i understand has happened is the chinese have told mubarak to haiti in there, we have your back, and the russian government has done the same thing. >> the autocrat stick together. [laughter] >> we have a question here from our audience. what does this change mean for the u.s. in terms of the future balance of power in the region? the u.s. has lost zero of the income of -- lost lebanon, to

the ship, and now egypt. -- to the ship, and now egypt. >> guy lebas mid-the decision came out of the gate and gave a wonderful speech at cairo, and did nothing about it. in fact, they turned their back on the efforts of economic, political, and social reform. 80 to recognize that mistake, it realized a that is the way the united states is going to have to define its role in the future. the data states has to be an engine of change to a naval reform, hopefully not as explosively as it does happen in egypt, and hopefully convince all of the other allies said they need to move down this path. >> there's a big conversation about this agenda. did president bush's second inaugural, he pushed for reform, and then stepped back. what is more important, talking

about the freedom coming, or the disappointment associated with not continuing to push? >> i think the fact that the middle east was put on the political reform agenda was revolutionary. no administration has ever thought of democracy and human rights in the middle east. it was off of the table. he did know there was great disappointment at what the bush said the restrictions eased back, after hamas, which we think is a completely important -- different situation, i thought that was a mistake, but i think that people were then reenergize in looking to the above administration to really read-commit themselves to reform. this decision, to cut off all assistance, was terrible. yes, we need to get back on the

track. designee to be with the second of doggerel? with that kind of language? nope. but it needs to be real. the words have to be followed with real actions. that is not what did the station has done. >> to you have more of a defense? >> balance of power i thought was important. we have to get with it. history is moving in made very clear direction. if we wring our hands and say the balance of power, we need to worry about stability -- now we have to get on the side of the people that are demanding freedom. then, the question is how, in

that context, do we protect our interests? that is a critical question. the king of jordan, another ally of the united states, has said he wants to embark on a rapid political reform. we have to go with him on that. we have to help him move on that front. we have to do the same thing with all of the autocratic leaders that have suddenly gotten religion, at least verbally. we need to get behind them. if this is going to create an opportunity for us to lead a dramatic change toward democracy in this part of the world. >> it is amazing that we can have a fundamental conversations about the middle east, and we almost take for granted jordan, of course. there are some reforms that are going to take place. it almost seems like we are going to ignore.

it is a kingdom. >> so is britain, a kingdom to. [laughter] >> and site. you wanted to make a point? >> i want to add to marts and's point. i think there is a danger that all of the's administration will be remembered for resisting change. -- obama's it administration will be remembered for resisting change. the last thing we wanted the future leaders of these countries to think we were not on their side when it counted. i think there is an opportunity here. it is still not too late. 50 obama administration gets ahead of this, because we know u.s. credibility is still very low, and favorability is very low, if this is a chance for us to regain influence, and to

understand how the region is changing, and reorient, fundamentally, our policy. a lot of people were talking about a reorientation after 9/11, but we did not do it. now was a time to make it a reality. >> back to a question here. >> i am not so sure how tightly he would look at being called the bolshevik. [laughter] >> considering mubarak has been a shepherd, what does it do to the future of this process, considering the lease in the least enthusiastic in their region has been the palestinian authority -- considering the least enthusiastic in their region has been the palestinian authority. >> they have relied on the region for political cover, and

for the effort to the goat -- to engage in negotiations to resolve the palestinian conflict in that way. therefore, they are feeling somewhat like israel. what is interesting is that the two elements that are fueling the revolved, a lack of political freedom, and a lack of political opportunity, at least on the economic opportunity front, west bank palestinians are doing quite well today. they do not have the same on happiness about their economic circumstances. actions have just been taken against a key figure, putting him under investigation, and signaling that he is going to take corrupted and anti- corruption measures seriously.

they do not have a problem, it seems, like many of the others. they have announced the visible elections. what does it mean for the of the -- israeli-palestinian negotiations? they were already dead in the water pan this is not going to revive them. nobody imagined that by solving the palestinian problem you have to be able to deal with what is happening in egypt. most people did not believe that. having said that, while the focus is everywhere else, he would be a hell of a good time for the israelis and palestinians to actually resolve their differences, take advantage of the fact that nobody is focused on them. there are things that could be done on the ground like withdrawing the israeli army, which would give palestinians the sense of something is happening positively.

>> his is a huge leadership opportunity for benjamin netanyahu to bust through the gates and put down your old print? >> i agree completely that this is the moment that the israelis should find a way to diffuse the palestinian issue before what is happening in the rest of the arab world comes around again, and it inevitably will. >> jennifer, i want to ask you a question, and we will take a few extra minutes, if everyone is willing, for additional questions. i wrote down here, what is the spark? how did we get to this moment? in my coverage of washington and the iraq war, let's put aside a huge debate about weapons of mass destruction, but what was said in some circles was after 9/11 the united states grabbed the region by the scruff of the back, decapitated one of their

leaders, and sent the message said we will change their --. as chaotic as iraq was in that transition, is there a connection between that and what we are seeing today? >> no. >> you do not buy it. >> i do not buy it. of course, everything is connected, but egypt has had its own story for all of tide. if i first went to egypt in 1985 when there were hopes that mubarak would start opening up dead. -- what open up the end. one cannot believe that there have not been more crisis he had ejected the spark was about to be shot -- crisis. the spike was about to be shot. the sense was if they could do

it in tunisia, which was considered to be in mobile, nobody talked about politics there because the chance of change was so distant. they talked about french politics there. for to be shipped to go down, was really -- for some of the jet to go down, was what really spiked something. that is what got people to go off into the streets. i would say one point on the internet. the fact the egyptian government cut off the internet, it was the worst possible thing they could have done. people had to get out of the from behind their computers and into the streets. for those that are looking at turning these communication devices off, they had better think twice. >> before the notion of speaking of egypt and quality of a revolution, before the concept

of nationalism, which talked about arab nationalism, pan- arab nationalism that went beyond the artificial borders. in this case, is there anything to that? if there is this notion of some kind of freedom movement that was the been steamed over time. >> there is no link between the issue in a rock, and what we are seeing, certainly not between president bush's freedom agenda, and now what we are seeing. the view of the people of the streets, that is a bit laughable. this is really a revolution about how frustrated expectations. if we care about the rise in prices, that is what triggered it. that is only part of the. we have seen riots before. you wrote about it in your book. for people who live in the

region, people who travel to the region, off a the last few years we have seen a gap that has become an intolerable -- a gap between what people can expect, and what the state can't deliver. autocratic states could not keep up with people's demands. that is what we have ceded the last three or four years. for tunisa, you are right, we did not expect a revolution. in 2008, riots broke out. people burn themselves. this did not transpire broadway. it started also on morocco. that is what i see happening all over the place. >> it has been mentioned several times.

the central thesis being what? >> they have reached a free revolutionary state because of the enormous frustration with the stagnation of the region. i went back to the old literature on revolutions and pointed out that everything this dollars have been writing about is all. the middle east. it was only a matter of time. it was going to be a gradual process, or a sudden, explosive process. it is also important to keep in mind is that the terrorism we faces board of the same problem. the terrorists, there are frustrated revolutionaries. they all tried to start a revolution is in there all countries, and like other groups, by the russians before the end, they turned to terrorism and what they found they could not start the social revolution. they went after us because they saw as as the power standing behind the government's they

were seeking to overthrow. >> there also nihilists who are evil. >> those people are always there. you always find the people who will see the frustration, anger of the people, and take it to a ridiculous extreme. >> let's get back to our question. >> thank you. i want to link to the dual spots. the first is the picture of martin and david gregory sitting before that twitter board and an arts and making the -- and martin say that we are seeing a new revolution. then, to the comment that was made even though hot off how this is going to force a

fundamental realignment on foreign policy to. --. -- foreign policy. are we talking solely about the middle east, and arguably south asia, where is this is a serious suggestion that this is going to force something fundamental realignment american foreign policy, is that irrespective of geography? is what is being proposed here and bore suggested here that america -- or been suggested here that america is going to have to narrow the gap with its balance of interests? >> i hope so. [laughter] >> yes. as a democracy a human-rights advocate, we would hope that would be the case.

each of the station has taken the side and grappled with it. in certain cases, they have stepped back. what'd you have seen with the obama administration is they have tried engagement. they have not gotten much in return. i know they tried to portray russia -- there have been some games, or china, but in iran, they started with the engagement, and in north korea -- they have tried a lot. they are finding engagement is not bringing results of the national security side, and is at a tremendous expense of our values. they are going to have to realign themselves. whether it will be that the gap between our values and our interests really does change, probably not across the board, but i think it might in some cases, and i hope it does. >> we are almost ready for another question. i want you to comment on

something. there is an expectation beyond egypt. i should not say expectation -- a fear that is raised that this is somehow the opening for an islamic political movement to take root. what is fact and fiction based on your expertise? >> none of these groups are talking about anything like that. come some of these fears are exaggerated. there are concerns about the brother have put the position of the peace treaty. -- brotherhood's position of the peace treaty. the way to address that is to engage with opposition groups before they become super power, rather than afterwards. you did not have leverage after they are in power.

that is why a dialogue has to start. quite frankly, we should've started years ago. we could have been prepared. we could've said we had that conversation with the brotherhood. we told them that this is the line, and there was an exchange of news. i did we are late in the gaming. it is time to start reaching out. >> abraham, the have a question? -- do you have a question? >> can you please comment on the silence of the arab leaders to? >> we are leaving this to go to today's white house briefing. a spokesman robert gibbs and two economic advisers. this is live coverage on c-span. >> let me quickly go through the week ahead. i will turn them over to these guys. we will take a few questions to them, then we will get back to

our regularly scheduled programming. on monday, the president scored a letter remarks to the of the status chamber of converse -- commerce here, in washington. on thursday, the president well travel to marquette, michigan. he will dress warmly. the expected high is 13. local businesses have been able to grow as a result of broadband and access. the state of the union address, the president called for a national wireless the initiative to help businesses extend while this coverage to 98% of the nation. marquette is any effective demonstration of how the president's proposal will spark new innovation, put people back to work, grow the economy, and help of merkel win the future. on friday, the president will attend meetings at the white house.

was that, let me first turn it over to gene sperling, a bed to austin girls -- austan goolsbee to talk about today's report. >> the report of the president said of asian strategy that we have put out today really just -- innovation strategy that we have put out today really provides a summary of a comprehensive and ambitious strategy, which is a critical part of his division to win the future, and will be laid out in more detail as we put up a budget out. since i had a chance to go over a certain amount of these things on the day of the state of the you did, and many of the details will be later, let me do a sketch of the overall approach. a key aspect will be a significant commitments to research and development. again, this needs to be done in

the context of a budget, which is cutting non-security spending to its lowest level in 2015 since the eisenhower administration. these are the priorities we are making room for because it is part of his vision for growth and competitiveness for our country going forward. he was in the budget a very strong increase in basic research across the board. that includes putting on the path to double in the funding of the national science is the -- foundation. the department of energy to adult size its -- office of science. you will see an increase in research and development on clean energy and technology, which includes the aa the of the new arbour addition to of and the innovation hubs. these are two iterations the president about put forward in

his budget ever see very strong reviews, which he will be doubling. what you will also see, by which you saw this week, is the administration how we want to see these things deployed. you saw that monday, as we rolled out the start of america, which is very much building off of the president's small business job initiative, had collected -- connected of the nation to job creation. ask you saw that in the vice president laid out the electric vehicle goal, of hitting 1 million and vehicles by 2015. you saw it yesterday when the president actually went to one of the regional innovation hubs. there are three. he went to one and announced an aggressive strategy for six

which included a tax credit that we believe will be 10 times more effective because it is a credit as opposed to a deduction. it goes to companies as they are making it incremental improvements. there raced to the green grant programs, where communities can apply -- i think it is a "field of dreams" approach. for example, elect to vehicles could become examples for the rest of the country. he also put forward a goal of reaching 20% greater efficiency in commercial buildings, it really a call to action. he asked jeffrey about, the head of this new jobs consul -- jeff immelt, the head of the new jobs council, and together with president bill clinton to lead the call to action.

on the education side, obviously you have heard us talk about the goal to have 100,000 new stem teachers. you also see in our report something that had not done out before -- take the same approach to education so that we are using the technology, developing the innovations that help kids and adults learned. -- learn. if we can use technology so well to occupy my 16-year-old with video games, there is no question we should have the capacity to help kids learn in no way that keeps us competitive. this week, you will see the more innovative aspects of the president's infrastructure and initiative, which beyond the roads, bridges, and railways, focuses on wireless and should have -- initiatives, and the

next generation for air traffic. those are the broad outlines. let me turn it over to austan goolsbee. we will be around for questions. >> thank you, james stirling. the innovation strategy we are releasing it in this report is released in two parts. gene outlined the fundamental building blocks. the second part of the report is that we must extend the invitation capacity into the private sector, so we are extending just beyond the public investments. there are three components in the end of asian strategy -- and emphasis on small business, start-ups and new firms, and investors and the patent system. for small businesses, and we now

see that of the next new jobs created over the last 70 years, more than two-thirds of them were created by small businesses. startup of america and new firms are and even greater importance to the job engine. we released a white board about startup of america. it is a four-point program see that public and private sectors to try to help start-ups. it gives them more access to capital, in business mentors. it streamlines and reduces regulations, it continues its tax relief to start-ups, which the president has cut 17 times. the third category is for inventors. the patent system has a 700,000 application backlog. it takes almost three years to

get your patent application reviewed. that is not acceptable. does not work for small and businesses and small inventors. the strategy will caught that permission time almost did half, and today, we are announcing a fast track patent which will allow investors to get approval in less than one year. so, the market-based foundation that is small business, start- ups, and inventors, and the basic idea of the innovation strategy is that america has been a great innovative engine of the entire world for many years. we have the majority of the nobel prize research. we have the greatest universities. if there is no country that has more successful start-ups that we have, and truly, every american deserves a chance to change the world.

questions? >> these initiatives, innovation, competitiveness -- they seem to have a long-term view for job creation. today, we saw very small job growth last month. more people drop of the job market. talking about winning the future, what do you have for winning the present? >> let's take one step back and talk about the jobs numbers. there are two surveys. the one as a people, and that is where the unemployment rate comes from. the other is from businesses pare that is where the payroll comes from. -- businesses. that is why the payroll component comes from. everyone recognizes whether was

a significant component. we will learn more about this report in the next to job reports. in the survey of people, the picture is substantially better. the labor force participation rate did not change substantially at all. it is not the case of the reason the of the blood rate fell sharply was because a reduction in labor force participation. in start-ups and small businesses, they will show up for some of the survey of people. obviously, they are not yet in the system to be interviewed about their payroll. we need the right now, start-ups and -- winning the right now, start of some small business is both about the future and the here and now. >> as austan goolsbee said, this

was an unusual jobs number. i think the important thing is to look at what we will see as the overall trend. a couple of points, one is that in terms of things we adjust on, obviously the passage of what the president passed in the december on the tax cut, will have a positive impact on growth and jobs, over what anyone could have expected in december. we see that through a hundred $12 billion payroll tax cut, of which this is the first month we are seeing. you see that in terms of the bottom of the% expensing, which means every country in that -- in terms of the 100% expensing. those are things that are having a strong effect right now on

accelerating and investment and job creation. secondly, there are important signaling in the policies you put forward when you have the commitment to enhance battery technology, when you have a strong commitment clean technology. that sends an accord in signal right now to people who have cash on the sidelines that is our national priorities, important areas of growth. when you get these things together, they could have a powerful effect in unleashing the investment now. i will give you an example that would be relevant to next week. we have had conversations with some telecom companies that indicates the fact that we have to hop on the% fixed -- 100% expensive, says that some of them are accelerating and investment. those things comes together, and can get more people started to

invest in the future, but started the investment now, in a way that could have a strong impact on jobs. even today's numbers, we have seen some real strengths in manufacturing. i understand this was an unusual report, but a hundred 52,000 of the less cheer. it does not been its with -- since -- bought 150 two thousand last year. it is not been since 1997-1998. the ism purchasing index was over 60 for the first time in a long time. if the employment index reached the highest level since 1973. we do see in the manufacturing area some good news, and i think with some significant relation to posses the president

has implemented and proposed. >> let me first rib gene for always mentioning when he was less in the white house. [laughter] >> i was just having fun. we touched on advanced battery manufacturing. this is something that fits in with a future-oriented, and a bit of agenda. if it goes very directly to our tent-educating, out-innovating, and out-building. five years ago, six years ago, it was not sought, as you heard me say before -- it was not sought, as you heard me say before, that american workers would build these the defense batteries. it was somewhat unlikely that we would drive these cars, and this we did, that technology would be

imported into this country rather than built by americans in america. we now know that is not the case anymore. i believe the last time the president was in michigan, where we will go next week, was sued break ground on yet another advanced battery manufacturing this -- facility to produce batteries for cars that are being built by our auto companies. some of those cars are being exported. they are being driven on our roads, and some of those exports are being -- some of those batteries are being exported. if we do not take some of the ideas that are yet this report, and think about what are the jobs of tomorrow, but insure that the jobs of tomorrow are in this country today, which advanced batteries is a good example of, we are going to have a hard time competing both

today and in the future. i think that is one example of something where we have to look ahead, because we can put people back to work right now. robert mentioned the president's speech monday to the chamber of commerce. wondering if you can throw things forward and talk about how you think the relationship with the business community is improving, if it is, and what steps may be these measures or others that you two are undertaking can do to help that? >> i think the last few months you have seen a strengthening of confidence across the board. there have been signs of greater confidence from the consumer index and i think there have been greater signs of increased confidence in the business community. i think what a lot of americans

want to see is as we are fighting our way out of the very deep hole this president inherited, that we are willing to work together. and i think in december, it really was a turning point because the failure to have worked together would have created a degree of uncertainty in the month that we are in now, or in january, that would have had a very negative impact. it is hard to imagine have been -- having gone into this year every american thinking -- think in taxes have been increased. many millions having to file an alternative minimum tax. you take that, this president working together to not only extend a tax cut, but doing the payroll tax cuts and new business incentive -- you know, people can talk about tone, but results matter. and i think what people have seen is the president really

needing to bring people together to get things done and i think a lot of the things we are doing now, whether start up america, etc., they have a lot of that sense. this private sector working with us, with the administration, with labor, with the business community. i think you take this commercial building retrofit, i think it will be a great example where you will see labor and business working together on national goals. i think the relationship feels stronger going forward but i think it is part of an overall feeling of increased confidence that people see it the president's willing and able to work together to help get some things done that matter on the economy and jobs. >> i was going to ask a question on innovation. if they're concerned with this 112th congress, then they will

cut funding for the green jobs program? to promote innovation of the green jobs, particulate and minority sectors. >> i think that is part of the discussion we will have as a country going forward. the president put forward in the state of the union and his budget and economic strategy. an economic strategy for accelerating jobs and investment now, an economic strategy for winning the future and strengthening competitiveness and a critical component is getting our fiscal house in order, reducing spending and getting the deficit on a significant downward path. we worked very hard to achieve that critical components of an proving our fiscal path in a way that ensures we still could be making the investments that we think are critical for our country, competing for the high

wage jobs of the future. this is a very tough budget. it will get tougher each year. when you are freezing, it is a real cut and it is a bigger cut each year. we felt it was a degree of fiscal constraints that we could do, that would be difficult, but still be consistent with a strategy for investing in innovation, education, and research. whether or not -- and people will be able to see the details of our budget on february 14 and they will be able to debate and judge whether we drew the balance the right way. i think we did. i think people have to look at other budgets that go out, that share the same goal we do -- have to look at the details to see whether those budgets match of the same commitment that we are doing things that are pro-

growth and pro-jobs for the future. >> i wasn't gonna comment on the budget. i think the president made clear, though, that the green jobs area and the energy sector is a critical priority of investment. that that is part of the white section of the -- strategy. if you are going to chew up the seed corn and spit it out before it is planted, which is cutting the investments for the future that we need to grow, that is making a big mistake. all sides agree we need to cut and a fiscally irresponsible. the question is where we do that and a priority cannot -- >> i actually meant to say to of the seed corn and spit it out before it was planted. [laughter] >> let me ask this -- what do you think about what people are saying with the budget coming

right now, at a time of recession, it does not make sense. you should be doing that when there should be recovery. >> remember, when you look at our entire budget -- yes, we are starting on the path of fiscal restraint and we are freezing non-security spending. and, yes, there is no question that that calls for a degree of fiscal restraint. but we think that the confidence that that provides, that we are on a path to cut in discretionary spending by $400 billion, getting down to a level as percentage of the economy lowest since eisenhower, is a reasonable step forward that would not be harmful to the economy when you look at it as coming in a combination with $112 billion payroll tax cut, in combination with 100% expensing,

which actually accelerates over $100 billion of tax relief in 2011 for business investment. it is an overall strategy. you have to look how it works together. it starts the process of restraint but not to such a deep degree that it would hurt job growth. and that have been in combination with the measures the president passed in december that had a very high bang for the buck in terms of investment and job growth in 2011. >> you talked quite a bit about discretionary spending and the need for fiscal restraint. of course, discretionary spending is a small part of the overall part of the budget. entitlements are a big part. the president has not picked up his own fiscal commission's recommendations on the

entitlements -- and state of the union, social sugared seems to go the other way. attenuate tell us what the thinking is at the white house right now -- can you tell us what the thinking is? >> the president, through the american care act, made a very significant dent in a lowering health-care spending, particularly in the second decade. as you saw, when people saw to repeal his health care reform act, that was going to increase the deficit by $250 billion. there were savings and what he has passed so far. you have to see our own budget. there will be additional steps to see. the president did make very clear when he was at the state of the union that as tough as his spending restraint is, he a

knowledge did was only one slice of the budget. and anything else we had to do it as a country would have to be both parties and houses working together. but i will say one thing that i think is important on social security. this is not about a short-term deficit. this is not about using this as the mechanism to lower deficit path. the reason why the president is open to bipartisan measures on social security solvent c because he believes social security is a sacred trust, that it has been a hallmark of increased dignity for people in retirement for past generations, and he wanted to be for future generations. when we look at social security, we will look at it through one measure, and that is to ensure that what has really been the crown jewel of policy in the

united states for providing dignified retirement for older americans continues to exist in a way that a strong, protect the vulnerable, those with disabilities, and is not subject to the women's of the market and is the one thing that people can count on in good times and bad times in a retirement. that is it. that is our sole goal for that. while that may be in other people's fiscal plans for us, it is very much about trying to reform and strengthen some things he sees something he thinks is very important to economic dignity of seniors. >> whether to actually tackled that -- them are thinking of the budget will be released on the >> thinking that the budget will be released on the 14th. >> ag reform?

>> very glad you asked the question. it is not just -- the strategy, if you want to go through it in some detail -- it cannot just be done purely by executive action. it will take some legislation. but the key is to, on two tracks, let the patent office make the investment it needs to get the backlog down and speed up the process. the second is the fast track patenting, which enables essentially a faster track that people can make higher payments of fees to get on a track of patents that allows them to get a decision very rapidly, if they believe that their invention is time sensitive. anything -- t cost

>> it requires legislation. >> the patent system, there are fees to the patent system. for example, fast-track patents, you would get faster because it would have because itfee. >> more money for the person running the patent. >> there are different approaches are obviously for the different parts. one is, you want the examiner and the system they have of examining the patents now, is perceived by almost everybody to be excessively bureaucratic. so, we've got to streamline that system. is this a hazing joke. >> making faces. >> i will bet you a thousand

dollars that -- you can contact deenesh chopra and me and i would love to talk to you about it. >> let me know if you get that on the news. i know we've got about a half an hour or so before. patentthere's more questions. you already exceeded once and one. take us away. >> what is your administration conveying today to president mubarak and the egyptian government of what is the president's reaction to what he is seen on the streets today? >> first and foremost, i think the message that has been

delivered again through our embassy and our in agent with the egyptian government, continued restraint and the ability of protesters to protest peacefully. i will say, and i talked to the president about this this morning. we continue to receive very disturbing reports about what you could only say it is very systematic targeting of journalist, particularly international journalists. i have dealt with our embassy on trying to get assistance for journalists to get out of the country. some of whom have been held -- many of whom have been beaten. i said this yesterday and i will reiterate again today -- that

type of activity is deplorable. if the journalists are being held, they must be released immediately. the world watches the actions of all of those in egypt, and they speak volumes. about the series with which the government looks at an orderly transition. we are hearened that i think what many thought might come to pass broadly today, at least when i walked out here, had not happened. our main message, besides restraint and non-violence is that as the president said a few days ago, the government of egypt must undertake, through negotiations with a broad base

of those not currently in the government, direct negotiations toward a orderly transition that gets us to free and fair elections. they have to be real. they have to be legitimate. they need to take some concrete steps for this process to happen. and i think it is clear that without those concrete steps and without those direct negotiations toward that transition, you are simply going to see continuously more uncertainty and more unrest. >> does a concrete steps include mubarak stepping aside and omar suleiman or some other do >> as we said from the very beginning, these are solutions that can and will only be determined by egyptian people in solving the problem that we see today in egypt.

that continues to be true. the message for president mubarak and vice president omar suleiman and others again, has to be the need to take a quick, concrete steps toward that transition. i think the world is waiting to see that. >> options -- >> this is ot for us to determine, jim. the addressing of individual rights and freedoms that so many in egypt feel they lack can only be addressed by the government of egypt. they will not be provided by our government. they need to be addressed and provided by their government. i think instability will continue until that is done. >> is the white house concern that there would be a power vacuum? >> as i said a minute ago, i think the likelihood of greater

instability and uncertainty without the government taking those concrete steps towards real change -- a one be clear here, if i was not answering your question. i think what we are likely to see any reason why we continue to watch television of protesters today and watching to see that in to the days of the future is not because the government is moving too quickly towards a transition. it is exactly the opposite. it is because the government has not done enough in a concrete way, with a broad enough base of a coalition of people that are outside of what constitutes -- that signal has not come. and unless and until that happens, the instability is actually going to increase. i think that is the answer but

>> how do you respond to the bar comment yesterday that he would like to step down but afraid if he does do >> i think there are concrete actions he could take and the vice-president could take towards moving in the path of real change that can lessen and stability and can ensure that we don't descend into the chaos that he describes. just as i outlined -- i think the government -- the vice- president and the president, need to sit down with a coalition that constitutes a broad cross -- cross-section of egyptian society, a civil society, opposition political groups, people that are in egypt and not represented in their government. there are a series of things that we are not to prescribe to

the egyptian that must take place along that pathway toward free and fair elections. and unless and until that happens, my guess is the people that you see on tv art -- aren't going anywhere. i think in order to see the transition happen in an orderly way, the people need to see some concrete steps. i think this is a discussion that is being assisted by allies around the world, both in the region and outside. yes, sir. >> saying it is not for us to sit -- decide, for the egyptian people to decide. we are not prescribing anything to the egyptians. what is going on behind the scenes? there are all these high-level

meetings back-and-forth if you were not offering suggestions and options. what are you doing? >> i just outlined is series of steps right here in public that i think the government can and should take to address that very instability and that area of uncertainty. i said i think, very first day of the crisis, my guess is this will be said at this podium for months to come -- this is not a solution that can be imposed on or that can be forced on anybody in egypt. as i said earlier -- i doubt there is anybody in cairo that is looking for my definition of their freedom of speech. going to benot determined here. it will be determined in cairo. that is why they are marching.

look, it is safe to assume that this country has, for the past several decades, had a very important relationship with the government and the people of egyptian. the camp david accords signed by egypt and didn't -- and adhered to by egypt provided a cornerstone of for regional security for more than three decades. we have a vested interest in the foreign-policy in the egypt and throughout the region as it relates to our national interest. so, as i said a few days ago, there are meetings here about a whole range of issues and a whole range of scenarios. and i was in one of those meetings at 8:30 this morning, and the meetings will continue with the president over the weekend. >> about this kind of unrest and potentially happening?

>> we have seen, and i think white housees and administrations here for many years have seen intelligence about the instability in countries in the middle east and throughout the region. i think the question you are alluding to, dan, is did we -- or did somebody foreshadowed the specific events enid tunisia -- in tunisia? a free vendor there had his fruit stolen and let himself on fire and that started in tunisia a series of events that have greatly impacted that country. i don't think anybody expects we would have gotten a report in december that would -- might have predicted a particular

fruit vendor doing something like that. obviously, as things transpired in tunisia -- as i said in this room before -- we saw -- i read intelligence that talk about what the result might be in countries throughout the region because as the president has said -- government must be response to the people they represent and if they are not, you have uncertainty and unrest. >> intelligence that predicted this kind of unrest -- not necessarily the trigger. >> let me be clear, i did not say that. a i said, was there specific intelligence about the specific incident that started indonesia? no. some reporting an intelligence failure -- rest assured, there

are volumes of reports that have been read by this administration and past administrations about the potential for instability and unrest in tunisia, egypt, and throughout the world. i think some of the passion that you see in cairo is not necessarily because people have felt as if their government has not fully represented their views were respected their individual rights in 2011. i think this is something that goes back quite some time, which is why administrations that predated ours have brought up with president mubarak of the steps they believed needed to take place, just as president obama brought up with president mubarak the steps we felt needed to take place to address the lack of freedoms that we knew they weren't adhering to. >> is the president satisfied with the level of intelligence

he received on tunisia and egypt? >> the president expects that in any case he will be provided with relevant, timely, and accurate intelligence assessments. and that is exactly what has been done throughout this crisis. >> on the orderly transition that the government called for -- on wednesday, you said now means yesterday. meeting tuesday, when president obama first called for that. three days have gone by. days the matter in this instance. are you satisfied with the change that is taken place on cairo's side? >> i don't think we are. and based on what we have seen on television, neither are the people in cairo wars throughout egypt. that is why we talk about whether or not we are going to see on rest or whether we are going to see instability, until

or unless a real change is made or some progress -- people can see and feel progress on that path towards a free and fair elections. >> how soon would you like to see that tangible change? >> tuesday. again, it wasn't -- i was andn't -- president mubarak said we needed that transition. president obama agreed that that transition needed to happen and the time for that was now. and i think it is readily apparent that those in cairo, those in egypt need to see this process happen, and they need to see this process began. and it needs to begin in a real and concrete and legitimate way. it cannot be for show. enhanced to include, as i

mentioned, it has to -- it has to conclude that broad cross section of people, many of whom we see protesting for their rights in egypt. >> back and forth going on over the orderly transition. do you believe a transitional government headed by the egyptian vice president would satisfy the demands of the protesters? >> i do not know if i am in any position to say what exact steps would satisfy those in cairo marching, because they did not feel they have been heard or respected in terms of their individual rights. i know -- as i said earlier, i think the instability continues without anybody in cairo seeing those concrete steps. >> you mentioned at the kinds of meetings, discussing various scenarios.

is this government still in contact with the government in cairo, the military in cairo, discussing those kinds of scenarios and possibilities? a i would say, i don't have call -- when i came out, i did not believe the president had spoken to anybody in the egyptian government today. >> continue to do so -- >> there was important contact first and foremost at the embassy but the ministry of foreign affairs -- i am not going to get into the specifics of each and every one of those calls. again, that is the embassy to mfa contact, pentagon to military contacts, and portents mil to mil relationships that i think helps in the show of restraint we have seen. safe to say that a whole host of conversations being had and the

main thrust of each and everyone of the conversations, as i said a minute ago, the government must take concrete steps. we are not going to provide each and every step that needs to take place. that is for the government of egypt to understand through dialogue and negotiations with that broad cross section. >> the people in the street marked -- are not going to talk to a new government before mubarak is gone. formal bark to form a new government has to take an active part according to the law. you are at an impasse. >> the most important and biggest role that we can play is encouraging the government of egypt to become involved in those negotiations -- >> you keep saying that yesterday, yesterday, tuesday. we got nothing.

>> bill, and what do we see every day? more and more people coming out. more and more reporters that are beaten. this is not going to be solved here. it is going to be solved by the egyptians, and if they don't begin to take those steps, we are not going to see a relieved and instability that we have watched. >> how hard is the u.s. pushing? we have a billion and a half dollars on the line. >> we have more than a billion and a half dollars on the line -- we have important relationships and a very important national interest in stability and order in the country and in the region. i can assure you that every call begins with two things -- a call for restraint and a call for concrete, direct negotiations so that the people can see the government is willing and able

and actively making changes that will lead to a free and fair relations -- elections. >> are we making specific proposals on how those negotiations or exchanges can take place? >> we have been broad, but we have -- and i don't think anybody expects that we are going to outline each and every thing that has to happen. i feel confident in saying that that biggest step that we can push for is for the government to begin that negotiation and began its with a representative of a broad cross-section of the people. >> what about the opposition, which apparently says it does not want to talk to the government to embark steps down?

pushing them to begin talks? >> absolutely. >> now? >> i think we have -- no, we are ot deede i have not heard that. i think -- again, i think the greatest impediment to making this progress is beginning the process. and beginning the process at a level wind it up -- where the government is taking seriously the involvement of some of the broad opposition groups to speak about. >> the onus is all on the government and not the opposition? >> i think it is important the government began to show concrete steps that it is willing to take. >> was there a failure of intelligence, failure to heed, or neither? >> i would i guess directly it -- direct you to what i said to dan. the president has felt that he has gotten timely and accurate

intelligence, and as i said, there are volumes of reports on instability throughout the region. >> there was a report in late 2010, according to stephanie o'sullivan that reportedly said -- is right for -- that was heard testimony. >> i guess there was a report that dates back each and every year about stability and everyone of these countries. need a reportyou from the intelligence community to let you know there is potential for instability in egypt with middle east. >> secretary of state clinton says we are in uncharted territory here. well relations ever be the same? >> we have an important relationship with the country and the people of egypt and we expect that whatever government comes next, we expect that we

will again have the type of relationship that has provided, as i said, through the actions of the egyptian government, the cornerstone for safety and security and regional stability in the middle east. it has been an important relationship and it will be in the future. >> it is important primarily because of egypt's peace treaty with israel. does the new relationship has to be based on a much more democratic egypt? can it be the same with and egypt that does not fundamentally implement -- implement democratic reforms? >> that is a solution that i think will come from the ground in egypt. i do not think we are looking at something that is less than what we have now -- unless we would not have the images we are seeing. i know you alluded to the camp

david accord. our expectation would be that whatever the next government of egypt is, they would adhere to a treaty signed by the government of egypt. >> just to follow up. by expectation, does not mean we would use our influence, the military aid, to make sure -- use whatever tools we have -- >> lets not presuppose what tools we would use. treaty -- there's a the treaty is not with a particular president, it is with the government, the country, and the people of egypt. we would expect that that treaty, just as if this government changed hands in an election that we would adhere to the treaty's that previous

presidents have signed and have been ratified in the past. >> let me ask you another variation of what bill asked -- have we asked or suggested to mubarak to transfer power to the vice-president? >> i will not get into conversations that were had in the situation room or between our president and other presidents. >> vice president omar suleiman can now to say no transfer would take place -- he announced this, implying that there was some suggestion that mubarak should transfer power. then i should not wing it. i would be happy to look at a particular quote on that. >> mohamed elbaradei said he spoke to the ambassador of the united states, the ambassador of britain, the ambassador of australia, prime minister of greece -- wondering what kind of

effort the united states is trying to do to get the international community involved and what does the president see the advantage of that being? >> well, i think you just mentioned in many ways the broad arc of -- whether it is the europeans, whether it is the greater middle eastern region, the importance of equities that countries have in relationships they have with egypt and the importance they see in the same sort of regional and countries stability that we hope for. i don't think there is any doubt that we are better served by a number of countries delivering the same message you have heard the president deliver. i think it is important, again, as the world watches these images, that the world is involved in reiterating the

message that we have sent and continue to send to the government of egypt about the steps they need to take. >> is the united states right now trying to play an informal intermediary role right now between the government of egypt and opposition? >> i think the ambassador spoke with mohamed elbaradei as she has and will with a host of other civil society and political opposition groups throughout egypt. that is a robust expectation that our government and i think any u.s. government would have of their mission in cairo. so, we are -- the embassy was, well before anything started in cairo, maintains a relationship with many of those groups and

many in civil society. >> in the weeks since the president spoke and over the days as well, do you feel any progress is being made bringing the two sides in the process or is it the same as when the president first came out? >> no, i think we have -- have we seen enough progress? i think the answer to that clearly is, no. as we sit here a week later, and as i stand here, we have watched events happen in a country we have not seen -- in a country with a very rich history that we have not seen over the course of many thousand years. what we are seeing is not something that happens every couple of years in egypt. these are remarkable times. so, in one sense, we have undoubtably seen from where we

sit right now, both president mubarak and president obama first spoke, both on the phone and publicly, making statements. we have seen change from friday to tuesday in acknowledgement of president mubarak not seeking reelection. ut i think it is clear that we still see those in the street looking for the type of concrete -- concrete tent -- transitions both spoke about. >> better now or worse? >> well, i think -- i was put the question into two. i think we in were heartened by two things -- one, we have brought the scene restraint. -- broadly seen restraint.

so, i think that is heartening, and as i said yesterday, we take what the prime minister said yesterday -- we take seriously and hope the government of egypt takes seriously the words of the prime minister in saying that those responsible for the violence on wednesday will and should be held accountable. >> who are the -- >> how do you put it back together? better or worse. >> i think it is better because we haven't seen it -- i think, again, many of us -- i think many of us thought that as night fell in cairo last friday that we would be unsure of what we would wake up on saturday.

so, from the perspective of the type of broad violence that you certainly hoped would not happen -- again, we are certainly glad about that. i think the same went for the events of today. obviously, today was digging there were a lot of people out and we were, as we had been, concerned about what that would mean. i think we have seen some hopeful signs as it relates to restraint. but again, i think that type of political change that many have talked about, we have not seen. >> do you know anything about an assassination attempt ocece- president omar suleiman a couple of days ago? >> i am not going to get into that question. >> can we change the subject?

does the administration have any further -- with the job numbers today in terms of going forward, given the problems with today's numbers. >> as you heard austan and gene -- and i should be careful because austan is a trained economist and i just play one in here. as he talked about, you have two different surveys. you have a survey that calls of the house and says, do you have a job. that is a survey that ultimately you derived from that survey the unemployment rate. then there is what is known as the establishment survey that called a business and says, who is at work, what has happened, are you hiring. and that goes into a bls payroll number. we hav3 talking about here and

have watched the commentary and listen to it and read more about -- you obviously have some very divergent survey data. you have undoubtedly some weather packed in the establishment survey, particularly in industries like construction and transportation where one might easily presume that the weather would have affected the numbers coming out of that survey. i think it is important to understand that we -- i don't think we would ever look at through a series of data that we see over a week or a month and hang any of our hats on one particular no. i the way. i think we are encouraged in a sense that we see continued progress in private sector hiring. that progress, and the

president's viewpoint, though, continues not at a pace that we would like to see it. as austan said, we will learn more about what this means in the coming months as we look through some of the numbers underneath -- what do the construction numbers mean, what did the transportation numbers mean, what do the overall work force numbers mean. again, the bottom line for us -- there is a lot more to be done to put 8 million people unemployed as a result of the financial calamity back to work. that work would have continued, though, regardless of what the numbers today show. >> a quick question. u.s. diplomats still held and pakistan and the pakistanis are very angry -- >> sorry, u.s. diplomat? >> i think i would direct you to

either the pakistani government or our embassy in islamabad on that question. >> is the president aware of it? >> the president is aware of a lot of things. >> the report today that the president expressed "disappointment" to dni clapper on intelligence and analysis on egypt. >> i think i answered broadly about the president's view on intelligence that he has gotten. i also think it is largely safe to assume that i am not going to get into conversations that may or may not have happened in the president's daily briefing. just in general, are we supporting these protesters in cairo? how do you characterize -- >> as i did the first day of this, we support the aspirations

of those in cairo, alexandria in countries throughout the world to see governments respect their basic rights. the right to assemble, the right to speak freely, the right to associate. in this instance, we have seen the right to freely communicate over the internet through social networking tools cut off. and our government, as it has in this instance and as it will in countries throughout the world, supports those aspirations. >> these very moving images in the square -- have you seen his reaction been how does he react when he sees a person in a wheelchair over there -- >> i think -- as the president

has said, i think you are watching -- i think you are watching what happens when people in a country do not believe their government fully appreciates the rights that they lack. -- again, note just in egypt, but as the president has had discussions with the leaders throughout the world. >> -- >> go ahead. i have only a couple of minutes. we will play rapid fire. ago. >> rahm emanuel, what is the president doing for him? >> i have nothing on that. >> in chicago saying he may personal calls on behalf of rahm. >> i have to check. i did not have any guidance.

>> you mentioned the u.s. supports the demonstrators -- >> let me be clear. >> the democratic aspirations -- [laughter] >> b-. >> you pointed to the comments of the president in cairo, democracy in egypt. but in 2009 this administration cut funding to democracy groups and civil society groups in egypt. how do you square the words with the actions? >> i think you are going to see in the budget that the president releases, we are not going to, on a whole host of things that are important to him, that are important to the other political parties, that are going to have to be reduced as a result of 10 or 12 years of spending well beyond our means.

but i think the notion that somehow the support of the aspirations of those that seek greater freedoms is only supported by a level of funding in your budget, i think don't necessarily match a particularly in a time when we are going to see a reduction and a whole host of programs. >> as cutting the funded hot -- and has cutting the funding had any affect? >> there have been an number of expenditures of the past 30 years to support groups with similar causes in egypt, and we are just now seeing the manifestation of the cares and concerns of those involved. yes, sir. >> today the supreme leader of iran made his first mention and

friday prayers for seven months saying this was an uprising in egypt against an ally of israel, the united states but lunker this goes on, does it expose that we have extremist allies and the power vacuum? >> it is remarkable that iran will make a statement given their actions when it came to their people exercising the same rights that people are exercising now in cairo. i think the world, stephen, would welcome the acknowledgment from the islamic republic of iran, if they are so inclined, to allow their people to exercise the same rights that you see in cairo, peacefully. i think that would represent some real progress across the middle east.

and i think the world would challenge them to have their words matched their actions, which, we recall based on the violence that we saw it in 2009, they are not good at giving up too. yes, sir. >> do you believe the united states did have leverage with mubarak that the government and why your assistance should not be used to get him to heed their call for immediate did >> let me do this quickly because you guys have to get to a press conference as well, i am told. >> look,, we continue to speak, as i said, at a full range of levels to the egyptian government. and i do think the conversation that many have had with the military have been helpful. again, i think the actions that we will see from the top of the

egyptian government have to be in response -- have to be solved by an have to be in response to what we are seeing on the ground in cairo. again, i don't think we can impose that. in terms of our assistance -- and then i am going to run -- as i said, i think about a week ago, we will continue to watch the actions of the egyptian government and evaluate what those actions might mean. again, we are heartened to see restraint. we deplore the images and the violence that we have seen, of human rights groups, that have impacted particularly national journalists and call again on the government of egypt to take concrete steps toward direct negotiations that would bring forth the kind of change that we need to see on a path towards an

orderly transition and free and fair elections. the president will make a statement shortly -- i will see you there. >> as you heard, president obama has been meeting today with canadian prime minister stephen harper and just after 3:00 the president will make remarks to the media. we will have to you live starting at about 3:10 p.m. eastern here on c-span. tonight, former alaska gov. sarah palin is the featured speaker at an event marking the 100th anniversary of ronald reagan's birth, hosted by the young america's foundation. live coverage from the reagan ranch in santa barbara starts tonight at 11:00 a.m. eastern -- 11:00 p.m. eastern. tomorrow night, former vice president dick cheney speech at the same event. 10:15 p.m. eastern here on c- span. this weekend on american history to be on c-span 3, we will visit the old naval observatory but

operated from 1844 through 1893 in washington, d.c. university of virginia professor on the fugitive slave law of 1850 and how it in directly resulted in the expansion of the underground railroad. and a look at political cartoons of the civil war, how they provide insight into political issues of the day. experience american history to be on c-span 3. all weekend, every weekend. for a complete schedule online go to c-span.org/history where you can also press the c-span alert button and have our schedules e-mailed to you. this weekend on book tv on c- span2, "afterwords" with michael reagan on his father's legacy. also this weekend, ron reagan and his account of his father's life. emily lambert on the history and purpose of futures markets. find the complete schedule on book.tv.org and it schedules e-

mail to you. sign up for the book tv alerts. >> listen to historic supreme court cases on c-span radio. saturday, from 2003, the court considers the fair housing act, racial discrimination, and liability in meyer.v. holley in >> the complaint says mr. hawley should be liable as an individual because the on the corporation and also said he should be liable because it was the officer broker. >> listened to the argument on c-span radio, washington, d.c., 90.1 fm, nationwide ad xm 132 an online at c-span.org. >> that joint news conference with president obama and canadian prime as stephen harper coming up at 3:10 p.m.. live coverage on c-span. until then, sec chairman mary schapiro discussing the worker for agency and plans to implement the the regulatory

law -- the continuing resolution has been a strain on her agency. this is about 25 minutes. [applause] >> good morning, thank you very much. that was really lovely. i have to say that it is an equal honor for me to work with people of rob and meredith's caliber at the sec at this time. we have so much on our plates. knowing there is a team that is indefatigable, talented and committed, it a really is a blessing. it is also a pleasure to be here. each year this program gives me a chance to take stock of the previous year and reflect on what is yet to come. and as i think you all know, last year was indeed a very busy one. so much so that i actually began to wonder whether we had ever been busier.

i started to think about what it must of been like in the 1930's when the sec was established. clearly it was a tumultuous time. the shadow of the great depression hubbard. and the staff were certainly still mastering the various provisions of the new federal securities act of recently we came across a letter from william o. douglas that was written 75 years ago to this very day. douglas, who had just become a commissioner, was filling out remainder of kennedy's term. he sounded somewhat daunted by the task ahead. he wrote, "i fear the issues are much too large to fill, but i will try at all times to live up to the high standard of performance that kennedy has set." in less than a year's time, he became chairman of the sec and

was dubbed the investors advocate. the standard of performance today is as high as it has ever been, and the need for an investor advocate is just as great. investors, especially now, want to know that someone has their back. they want to know that someone is making sure companies are disclosing accurate numbers, that someone is policing wall street and pursuing fraud, and that someone is making markets as fair as possible, even for those without supercomputers. that is what the sec and to do. that is what it has done for three-quarters of a century, and that is what will continue to do for years to come. the fact is that without a strong agency to carry out that mission, americans will not have the confidence to invest in our markets. when investors don't have confidence, when investor dollars don't flow freely,

companies don't get the capital they need, innovation slows down, and jobs disappear. at the sec, everyone comes to work each day and knows this all too well. that is why we are so committed to our work, whether reviewing a corporate filing, analyzing market data, examining a broker- dealer, or pursuing an enforcement action. this morning i know we are joined by many of the fine men and women who currently grace the halls of the sec, and i ask all of you who work at the commission to please stand and be acknowledged. [applause] thank you. these are the people who make the difference in the lives of investors. we are just as determined as william o. douglas to live up to the high standards of performance. i have seen it firsthand.

my first year as chairman, i saw this-embraced the call for reform, welcome new leadership across the agency, adopt a new culture of collaboration, and suggest innovative ways to improve our systems and streamline our procedures. of the past year, i saw a true public servants continue to perform under significant pressure and under an intense spotlight. i have seen them roll up their sleeves to figure out what caused the market destruction of a six. i have seen them bring some of those complicated enforcement action and reece -- reached record sediments. i've seen them work long hours to fulfill their new responsibilities for derivatives, hedge funds, and credit rating agencies. evolution of the sec has been rather rapid and the past two years, and continues today. in 2010, we start restructured

in forssmann divisions that did not shy away from difficult cases and we saw the way specialized units began to take hold. when i spoke last year as the the pipeline is full with cases growing out of the financial crisis. since then, many of those cases have emerged. over the past years, the commission brought actions against citigroup, goldman sachs, and others. we've got our first case against the state and bobbing invisible securities and we continue to unravel the strands of one of the largest insider- trading probes. we brought accounting cases, and most recently we brought a significant case in which a proprietary trading desk in a properly used confidential customer information to make trades for the firm's benefit. last year we also introduced new cooperation tools similar to those used by criminal

authorities. in december, we used one of these tools for the first time would charged a former corporate executive, but not the company, which cooperated extensively with our investigation. what we know that statistics alone are not accredited indicator of success, the fact is that court ordered disgorgement are up 20% and the amount of penalties tripled over the past year. while i can never promised a particular case will be brought, i know that our pipeline of significant cases remains full. in the past year, the staff also make good on a promise to create a centralized data base with a massive number of tips and complaints and referrals we receive. now, a tip received in our los angeles office can actually be viewed by an examiner in the philadelphia office. that was just the first phase, and in a couple of weeks, we will have update our system further so that investigators will be able to search the database and analyze the

information. resources permitting, they can then add analytics to the mix so we will be better able to link data and detect trends. 2010 also saw the reorganization of our examination program. under its new leadership, the program is no more sharply focused on identifying the high- risk firms that it targets for examination. and to bolster its ranks, it brought on board specialist in risk management, trading, and complex structure products. now rather than sending increased teams to examine a firm, the examining individual -- a symbols individual specialist with the right skill sets for the firm or examining the new leadership team set out to build a national exam program that provides greater consistency and efficiency across our region. this has not always been the case, yet all this is important in our efforts to buy you a

risk, inform policy, and identify potential wrongdoing. -- in our efforts to evaluate risk. last month, we brought three significant cases stemming directly from examinations. going forward, the national exam program will continue to conduct reviews in critical areas from trading practices to market manipulation to structured products. of course no discussion of 2010 would be complete without at least a mention of may 6, the day our markets dropped more than 500 points in a matter of seconds, only to bounce back minutes later. that event reinforced the importance of our ongoing review of the structure of our markets, a review we had actually launched months earlier with the january issuance of the concept release on market structure. clearly, today's market structure offers advantages over the market that existed when i first art as a commissioner in 1988.

-- when i first started as a commissioner in 1988. there are drawbacks as well. high-speed, algorithm driven electronic trading increases the risk of sudden liquidity lost and damaging volatility. the continuing growth of trading in pulls and other venues threat is to undermine the market's price discovery pontian. sumter dissidents may have information advantages, and the complexity of the of market structure sometimes makes it difficult for even sophisticated testers to pursue their own best interest. the challenge is to preserve the benefits of the current structure of minimizing the drawbacks. in the immediate aftermath of may 6, the sec worked with exchanges to develop rules that trigger circuit breakers for certain individual stocks, that clarify upfront how and when erroneous trades would be broken, that effectively

prohibit stubs quotes in the u.s. equity markets. we propose the creation of a large trader reporting system that would enhance our ability to identify large market participants, collect information on their trades, and analyze their trading activity. we proposed a new rule that would require the creation of a consolidated audit trail that would enable regulators to track information about trading orders received and executed across multiple venues. we adopt a rule that effectively prohibits broker-dealers from providing unfiltered access to changes. these are substantial rules and proposals that will diminish the risk of damaging events and do much to keep the playing field level for all investors. but as we analyze responses to our concept release, with the bands a -- the events of may 6 firmly in mind, there are further actions to be considered. we are looking beyond the current circuit breaker system

and considering progressing to limit up-limit down stock trading parameters. trade would have to be executed within arranged tied to recent prices for security. in order to accommodate final price moves, the market would pause if no trades naturally occur within those parameters for a preset period of time. we are examining trading or other obligations that might be required of today's de facto or market makers. the high frequency traders which account for over 50% of daily trading volume and supply much of the market's liquidity. we are asking if these firms should be subject to proper regulatory structure including with respect to cronies and trading activities. given the potential for trading algorithms -- we are considering whether they should be subject to approvals and controls. because of the complexity of

equity market, we are examining rules that would enhance transparency of trading practices and practices of broker-dealers acting as agents for investors. zero of these issues are complex and they are interrelated -- all of these issues are complex and interrelated. we will not shy away from doing whatever is needed to ensure that they operate as efficiently and effectively as possible. the calendar was quite packed even before the passage of dog- dodd-frank. because of our intense interest in the municipal securities market, we adopted rules that provide market participants with more meaningful and timely information regarding the help of municipal securities. in addition, we adopted rules to curtail pay to play practices

by investment adviser seeking to manage public pension funds. we revise rules so that additional material chris -- so that additional materials could be provided. because we believe that investors deserve clear and accurate information from their visors, we adopted rules requiring advisers to provide clients with brochures that plainly disclose their business practices, fees, conflicts of interest, and disciplinary reformation. as i pledged laughter, we also proposed rules to create a more equitable framework -- as i pledged last year. we proposed rules to help clarify the meaning of target

dates. additionally, just this week, because of our actions, investors for the first time were able to access detailed liberation that money-market funds by with the commission, including their shadow net asset value. of the commission uses this information in its real time oversight of money-market funds, we believe that public disclosure can provide investors and market analysts with useful insight for their evaluation of funds. going forward, we will be working with a regulatory colleagues to assess the various options for making sure money- market funds are as safe and structurally sound as investors are led to believe. but if you thought that the rulemaking agenda was busy before dodd-frank, since then we have been in overdrive.

we propose 24 rules, adopted six final and to interim rules and approved two proposals from self-regulatory organizations. that is not to mention the reports we have submitted to congress, a host of round tables we held, and that thousands of public comments we have reviewed. with the passage of dodd-frank, we took on greater responsibility in several areas. to establish an entirely new regulatory framework around the over-the-counter derivatives market. in the year ahead, we will continue working with the cftc, defining terms, developing requirements for new trading and clearing platforms, crafting reporting regulations, carving out in using exemptions an undertaking dozens of other tasks.

we are proposing skin in the game requirements for asset backed securities transactions. we will work to sink our rules with those adopted under dodd- frank. financial professionals to provide personalized investment us about securities must adhere to fiduciaries standard of con -- conduct. in the months ahead, we will also be finalizing rules that will allow us to leverage the resources of whistle-blowers. after all, these individuals are often closest to fraud and can be an invaluable source of information. this is particularly important because we cannot be everywhere

at all times, given our limited resources. it is important that our new program coexist with the important role in terms of complex programs play in ferreting out fraud. our rule should send a clear message to whistle-blowers that they, too, play a critical role in protecting investors. i believe that once the commission clarified contours' of the program, we will see an even greater influx of helpful whistle-blower tips that we have already witnessed. all these tasks, all of these confidence enhancing measures, require resources. unfortunately we have been operating under continuing resolutions that have hampered our ability to do what investors and capital markets deserve. it is a strain that is already having an impact on our coalition, apart from the new responsibilities congress gave us to regulate derivatives and credit rating agencies. it is a strain that will

intensify as long as the budget remains at in -- existing levels. one only needs to consider that during the past decade, trading volume has more than doubled, the number of investment advisor says grown by 50 present time, and the funds they manage have increased to $38 trillion. our workers -- our work force had already been cut in the years preceding the but into crisis and is only just getting back to pre-crisis levels. a number of financial firms react -- we regulate expands many times more on their technology budget than we spend on our total operating costs. we absolutely appreciate the need to find efficiencies and leverage resources, which we have been doing and will continue to do, we also know that last year alone we sent the u.s. treasury nearly $300 million more in collected transaction fees than we spent. we will continue to pay our own

way for the years to come. in the past year, we returned more than $2 billion to harmed investors, more than price or any budget. we need to ask ourselves if we want market analyst to continue to use decades old technology to reach g8 -- to recreate marketed dances. we need to ask for what archy securities regulator to have to pull the plug on data management systems and on digital forensic labs needed to recreate the data that sophisticated fraud starts leave on their hard drives and i phones. we need to ask ourselves if you want to turn away the influx of market exports willing to complement our existing talent and join our ranks. these are the questions we are confronting, even as we implement our new responsibilities for funds, derivatives, and credit rating agencies.

no single aspect of our economy is in itself sufficient to drive an economic recovery. i believe that a particularly component is are forcing equimark its which supply the capital companies need to innovate, grow, and create jobs. that only happens if the markets are fair and investors have confidence in those markets. while there is much to do, i am proud of the progress we have made at the agency, proud of the way we are evolving to meet the needs of investors, and proud of our accomplishments. we will continue to bring significant enforcement actions, continue to step up our exam program, continue to take steps to ensure a fair market structure and continue to embrace our new responsibilities. we will continue to strive to live up to the standards set by those pioneers 75 years ago to lay the groundwork for an agency whose primary role is to protect investors. we owe it to investors.

we owe it to our capital markets, and we owe it to our economy. thank you. [applause] >> coming up tonight, former alaska governor sarah palin is the featured speaker at an event marking the 100th anniversary of ronald reagan's birth. hosted by the american foundation, live coverage from the ronald reagan ranch center in santa barbara, california, starts tonight at 11 eastern. we will have coverage here on c- span. live pictures now from the white house as we are awaiting the arrival of president obama. he had a meeting today with canadian prime minister stephen harper. they have been talking about a number of issues including a possible gas pipeline from canada to texas.

the prime minister and president have been meeting for a couple of hours prior to coming out to talk to reporters. this is live coverage on c-span. we do expect them in mere moments. >> ladies and gentlemen, the president of the united states, accompanied by the prime minister of canada. >> good afternoon, everyone. please be seated. i am very pleased to be welcoming my great friend and partner, prime minister stephen harper, back to the white house to reaffirm our extraordinary

friendship and cooperation between the united states and canada. i would like to talk a bit about what we accomplished today and then address the situation is unfolding in egypt. the united states and canada are not simply allies, not simply neighbors. we are woven together like perhaps no other two countries in the world. we are bound together by our society's, all our economies, by our families. that reminds me, my brother-in- law's birthday is today. i need to call him. in our many meetings today, i have come to value stevens candor and his focus on getting results, both when it comes to our two countries and to meeting global challenges. i have not had the pleasure of band jam toand his fa the rolling stones, but i and japan have become a sensation on

youtube. we have had a very successful day. our focus has been on how we create jobs and economic growth on both sides of the border. canada is our largest trading partner and the top destination for american exports, supporting 1.7 million jobs here. today we have agreed to several important steps to increase trade, m -- improve our competitiveness and create jobs for both our people. first we agreed to a new vision for managing our share responsibilities, not just at the border but beyond the border. that means working more closely to improve border security with better screening, new technologies, and information sharing among law enforcement, as well as identifying opportunities. it means finding new ways to improve the free flow of goods and people. with over $1 billion in trade crossing the border every single day, smarter border management is key to our competitiveness, job creation, and my goal of

doubling u.s. exports. mr. prime minister, i thank you for your leadership and commitment to reaching this agreement. we have directed our teams to develop an action plan to move forward quickly. i am confident that we will get this done so that are shared border enhances our share prosperity. second, we are launching a new effort to get rid of outdated regulations that stifle trade in job creation. we need to obviously strike the right balance while protecting our public health and safety and making it easier and less expensive for americans and canadians to trade and do business, for example in the auto industry. a new council we are creating today will help make that happen. third, we discussed a wide range of ways to promote trade and investment, from clean energy partnerships to the steps canada can take to strengthen intellectual property rights. we discussed a range of common security challenges, including

afghanistan, where our forces service and sacrifice together. to that want to thank prime minister harbor for canada's decision to shift -- today i want to thank prime minister harbor. the transition to afghan lead for afghan security will begin this year and canada's contribution will be critical to achieving that mission in keeping open country safe. finally we discussed our shared commitment to progress with our partners in the americas, including greater security cooperation. i appreciated the prime minister's perspective on the region as i prepare for my trip to central and south america next month. let me close by saying a few words about the situation in egypt. this is obviously still a fluid situation and we are monitoring it closely. i will make just a few points. first, we continue to be crystal clear that we oppose violence as

a response to this crisis. in recent days we have seen violence and harassment erupt on the streets of egypt that violates human rights, personal values, and international norms. we are sending a strong and unequivocal message that attacks on reporters are unacceptable. attacks on human rights activists are unacceptable. attacks on peaceful protesters are unacceptable. the egyptian government has responsibility to protect rights of its people. those demonstrating also have a responsibility to do so peacefully. everybody should recognize the simple truth, the issues at stake in egypt will not be resolved through violence or suppression. we are encouraged by the restraint that was shown today. we hope that it continues. second, the future of egypt will be determined by its people.

it is also clear that there needs to be a transition process that begins now. the transition must initiate a process that respects the universal rights of the egyptian people and that leads to free and fair elections. the details of this transition will be worked out by egyptians. my understanding is that some discussions have begun. we are consulting widely within egypt and with the international critique to communicate our strong belief that a successful an orderly transition must be meaningful. negotiation should include a broad representation of the egyptian opposition, and this transition must address the legitimate grievances of those who seek a better future. third, we want to see this moment of turmoil turn into a moment of opportunity. the entire world is watching. what we hope for and why we will work for is a future where all of egyptian society seizes the opportunity. right now a great an ancient

civilization is going through a time of tumbled and transition. even as there are grave challenges and great uncertainty, i am confident that the egyptian people can shape the future that they deserve. as they do, they will continue to have a strong friend and partner in the united states of america mr. prime minister. >> first of all, thank you for your friendship, both personal and national, and thank you for all the work you have done an older people have done to bring us to our announcement today. [speaking french]

[speaking french]

[speaking french]

[speaking french] [speaking french]

[speaking french] >> i would just repeat that today, president obama and i are issuing a declaration on our borders, but it is much more

than that. it is a declaration on our relationship. over the past nearly 200 years, our two countries have progressively developed the closest, warmus, most integrated and most successful relationship in the world. we are partners, neighbors, allies, and most of all, we are true friends. in an age of expanding opportunities, but also great dangers, we share fundamental interest in values just as we face, and challenges and threats. at the core of this friendship is the largest bilateral trading relationship in history because since the signing of -- signing of the candid-u.s. free-trade agreement, that partnership has grown spectacularly. not only is the u.s. canada's major export market, canada is also america's largest export markets, larger than china, larger than mexico, larger than japan, larger than all the countries of the european union

combined. 8 million jobs in the united states are supported by your trade with canada. canada is the largest, the most secure, the most able, and the friendliest supplier of that most vital of all american purchases, energy. it is in both our interests to ensure that our common border remains open and efficient, but it is just as critical that remain secure and in the hands of the vigilant and the dedicated. just as we must continually work to ensure that inertia and bureaucratic sclerosis do not impair the legitimate flow of people, goods, and services across our border, we must of our game to counter those seeking new ways to harm us. i say us, because as i have said before, a threat to the united states is a threat to canada, to our trade, to our interests, to our values, to our common civilization.

canada has no friends among america's enemies, and america has no better friend than canada. the declaration of president obama and i are issuing today commits our governments to find new ways to exclude terrorists and criminals who pose a threat to our peoples. it also commits us to finding ways to eliminate regulatory barriers to cross border trade and travel, because sandra rules lead to lower costs for business -- simpler rules lead to lower costs and only two more jobs. shared information, compatible procedures and inspection technology will all be key tools. they make possible the effective risk-management that will allow us to accelerate legitimate flows of people and goods between our countries while strengthening our physical security and economic competitiveness. so we committed to expanding our management of the border, to the concept of a north american perimeter, not to replace or eliminate the border, but were

possible, to streamline and decongested. there is much work to do. the declaration marks the start of this endeavor, not the end. an ambitious agenda between two countries, sovereign and able to act independently when we so choose, according to our own laws and aspirations, but always understanding this, that while a border defines two peoples, it need not divide them. that is the fundamental truth to which canadians and americans have borne witness for almost two centuries, and through our mutual devotion to freedom, democracy, and justice, at home and abroad, is the example we seek to demonstrate for all others. >> we have time for a couple of questions. >> thank you very much, mr. president. is it conceivable to you that a genuine process of democratic reforms can begin in egypt walt president mubarak remains in power, or do you think his stepping aside is needed review

for reform to even begin? to prime minister harper, do discuss canada's role as a secure source of oil for the united states, and in particular, did you receive any assurances the u.s. and nutrition looks favorably on transcanada's proposed pipeline to the gulf coast? >> i have had two conversations with president mubarak since this crisis in egypt began. each time, i have emphasized the fact that the future of egypt is going to be in hands of egyptians. it is not us who will determine that future. i also said that in light of what happened in the last two weeks, going back to the old ways is not going to work. suppression is not going to

work, engaging in violence is not going to work, attempting to shut down information flows is not going to work. in order for egypt to have a bright future, which i believe it can have, the only thing that worked is moving an orderly transition process that begins right now, that engages all the parties, that leads to democratic practices, fair and free elections, representative government that is responsive to the grievances of the egyptian people. now, i believe that president mubarak cares about his country. he is proud, but he is also a patriot. what i suggested to him is that he needs to consult with those who are around him and his government. he needs to listen to what is being voiced by the egyptian people, and make a judgment

about a pathway forward that is orderly, but that is meaningful and serious. i believe that he has already said that he is not going to run for re-election. this is somebody who has been in power for very long time. having made that psychological break and decision that he will not be running again, i think the most important for him to ask himself and for the egyptian government to ask itself, as well as the opposition to ask itself is, how do we make that transition effective and lasting and legitimate? as i said before, that is not a decision ultimately the united states makes or any country outside of egypt makes. what we can do is a firm -- affirm the core principles that will be involved in that transition. if you end up having just gestures toward the opposition

but it leads to a continuing suppression of the opposition, that is not going to work. if you have the pretense of reform, but not real reform, that is not going to be effective. as i said before, once the president himself announced that he was not going to be run again when his term is up, relatively shortly, the key question he should be asking himself is, how do i leave a legacy behind in which egypt is able to get through this transformative period, and my hope is that he will in of making the right decision. >> you asked me about the question of energy. yes, we did discuss the matter is raised. let me just say this in that context. i think it is clear to anyone who understands this issue that the need of the united states

for fossil fuels, far in excess of its ability to produce such energy, will be the reality for some time to come. the choice that the united states faces in all these matters is whether to increase its capacity to accept such energy from the most secure, stable, and friendly as location it can possibly get that energy, which is canada, or from other places that are not as secure, stable, and freely to the interests and values of the united states. >> do we have a canadian reporter? >> prime minister, can you answer this in english and french? canadians will be asking, how much of our sovereignty in privacy rights will be given up to have more open borders, and i want ask you about egypt as well, what do you feel that mr.

mubarak should be stepping down sooner if it would help the transition. mr. president, on the sovereignty issue, you are welcome to answer. you don't have to speak in french, though. [laughter] >> thank you. i love friends, but i am does not very capable of speaking it. -- i love french. >> the declaration is not about sovereignty. we are sovereign countries that have the capacity to act as we choose to act. the question that faces us is to make sure that we act and a sovereign way that serves canada's interests. it is in canada's interest to work with our partners in the united states to ensure that our borders are secure and insure that we can trade and travel across them as safely and openly as possible, within the context of our different laws. that is what we are trying to achieve here.

we share security threats that are very similar on both sides of the border. we share an integrated economic space where it does not make sense to constantly check the same cargo over and over again. if we can do that at the perimeter and decongest the border, that is what we should be doing. if we cannot harmonize regulations in ways that avoid unnecessary duplication and red tape for business, these are things that we need to do. that is what this is all about, the safety of canadians and creating jobs and economic growth for the canadian economy. [speaking french]

let me just agree with what president obama said. i don't think there is any doubt

from anyone who is watching the situation that transition is occurring and will occur in egypt. the question is, what kind of transition this will be and how it will leave. it is up to the egyptian people to decide who will govern. what we want to be sure is that we lead toward a future that is not simply more democratic, but a future where that democracy is guided by such values as nonviolence, as the rule of law, as respect for human rights, including the rights of minorities and religious minorities. [speaking french]

[speaking french] >> with respect to this security and sovereignty issues, obviously canada and the united states are not going to match perfectly on every measure with respect to how we balance security issues, privacy issues, openness issues, but we match

probably more than any country on earth. we have this border that benefits when it is open the free flow goods and services, resulting in huge economic benefits for both sides, and so the goal here is to make sure that we are coordinating closely and that as we are taking steps and measures to ensure both openness and security, that we are doing so in ways that enhances the relationship as opposed to creating tensions in the relationship. we are confident that we are going to be able to achieve this. we have already made great progress just over the last several years on various specific issues. we are trying now to look at this in a more comprehensive fashion, so is not just border security issues but a broader set of issues.

i have great confidence that prime minister harper is going to be very protective of certain core values of canada, just as i would be very protective of the core values of the united states. those will not always match up perfectly. i agree even more with his answer in french. [laughter] thank you very much, everybody. >> remarks from the president and the canadian prime minister, stephen harper, following their meeting earlier today. we will reappear the commons tonight at 8 eastern here on c- span. also tonight, former alaska governor sarah palin is the featured speaker at an event marking the 100th anniversary of ronald reagan's birth. it is hosted by the young america's foundation. live coverage from the reagan ranch in santa barbara, california, starts tonight at 11:00 p.m. eastern here on c-

span. tomorrow night, former vice president dick cheney will be speaking at the same event. live coverage starts more night at 10:15 p.m. eastern, here on c-span. >> i will not make age an issue of this campaign. i am not going to exploit for political purposes my opponent's youth and inexperience. [laughter] look at the life and presidency of ronald reagan on the 100th anniversary of his birth. >> the whole environment of politics has come apart, and had become polluted and destroyed and violent. >> "q&a" sunday, hubert h. humphrey, the art of the possible. >> the reason for doing the documentary was to show another side of humphrey. he was not leaking lyndon johnson's boots all the time.

people did not understand the pressures he was under. >> "q&a", sunday night at 8:00 on c-span. next sunday, the founder of the american spectator magazine has written over a half dozen books. his latest, after the hang over, the conservatives road to recovery. join our three-shot conversation with your e-mail, phone calls, and tweets. >> earlier this week, the senate judiciary committee held a hearing on the constitutionality of the health care law. monday, u.s. district court judge roger vincent ruled the law was unconstitutional. he was the fourth battle district court judge to rule.

this hearing is 2 hours 40 minutes. minutes. >> this hearing of the senate judiciary committee will come to order. i want to thank chairman leahy for allowing me to convene this hearing. hes expecting to be sure. the title is "the constitutionality of the affordable health care act." this is the first hearing on whether the law complies with the constitution. i would like to thank the chairman and also my friend, the ranking member of the senate judiciary committee, senator chuck grassley. after our statements, we will turn to the witnesses in seven- minute rounds. when judge benson of the northern disict of florida made a ruling monday striking down the act, it must of caused

concern across america. many americans who are counting on the provisions of that law are in doubt about its future. senior citizens were hoping you close the doughnut hole of that gap in medicare prescription drug coverage. they will wonder what it means, whether they need to return checks that were sent to tm, or when the next check will be sent in the future. many americans will be in doubt, those who were 25 and eligible to be covered by their parents and family health care plan may have questions, cancer patients who joined the high-risk pools may have doubts, small businesses who thought tax credits were coming their way might be asking members of congress what it means. i want those millions of americans to know they should

not despair. they should reflect on the simple history of major legislation in america. this is not the first major law that has been challenged in the courts as to its constitutionality. let me mention twoor three others. the social security act, the civil rights act of 1964, and the federal minimum wage law, all of those successfully challenged in lower courts but unanimously upheld by the supreme court. i think the same thing will happen with the affordable care act. for those who are keeping score, as to the challenges in federal courts to this law, make certain that you know the numbers. 12 federal district court judges have dismissed challenges to this law. two have found it to be constitutional. two have reaed the opposite conclusion. how is it possible that these

federal judges, 16 different judges,who not only studied the constitution but swear to uphold it, can come to different conclusions? i think those on the judiciary committee understand that many people can read the constitution and come to different conclusions. it is not likely we will produce a national consensus in this crime, maybe not even agreement with those in attendance. if we serve the congress by laying out the case on both sides, i think this is a worthy undertaking. at the heart of the issue is article 1, section 8, enumerate in the powers delegated to ngress. one side argues that with the passage of the affordable care act, cgress would be on that authority. the other disagree. within those powers as one described by one constitutional scholar as the plainest in the constitution, the power to regulate commerce.

the threshold question is, the health care market in america, commerce? i think the answer is obvious. the supreme court will decide. over the course of history, the court has interpreted this plainest of powers through its application of the founder's vision to current times. whether it was roscoe still burn growing wheat to feed his chickens in 1941 or someone using homegrn marijuana to treat chronic illness in 2002, the justices from robert jackson to and in scalia -- anton scalia have made decisions on precedents for courts. sometimes, lower court judges, many might be characterized as activists by critics, try to make new law. this has happened in florida and

virginia. judges have ignored the precedents and created a new legal test distinguishing activity from inactivity, a distinction that cannot be found anywhere in the constitution or supreme court precedent. this is historic. i have had four opportunities to meet in this room and to interview prospective nominees to serve on the u.s. supreme court. they all standith photographers and the cameras are rolling. they hold up their hands and take the oath. then they sit and answer questions, many times for days. the questions that are asked is whether or not they're going to follow the constitution, or whether they are going to be judicial activists. that is the standard that should be applied as we consider the future of the affordable health care act. i believe if the justices of the supreme court applied the precedents, look of the clear meaning of the constitution,

they will find this constitutional. when the act comes before the supreme court, i am confident they will recognize that congress can regulate the market for health care that we all participate in, and that it can regulate insurance. the political question focuses primarily on one section. even if congress has the enumerated powers under section 82 tax and pass la affecting the health care market, and did it go too far in requiring that individuals who do not buy health insurance coverage face a tax penalty? returning to article 1, section 8, allowing congress to make all laws necessary and proper for carrying into execution the foregoing powers, the supreme court just last year said the necessary and proper clause makes clear that the constitution's grant of specific federal legislative

authority are accompanied by broad power to enact laws that are convenient or useful or conducive to that authority's exercise. the test is whether the means is related to the implementation of a constitutionally enumerated powers. is an individual mandate rationally related to congress's goals of making health care more affordable and prohibiting health insurance companies from denying coverage to thos with pre-existing conditions? it is clear to me. the private health insurance companies could not function if people only bought coverage when they faced a serious illness. it is worth noting that many who argue the affordable care act is unconstitutional are the same people who are critics of judicial activism. they are pushing the supreme court to strike down this law because th could not defeat it in congress and they' losing the argument in the court of public opinion, were four out of five americans oppose repeal. why is public sentiment not

lining up behind the repeal effort? because a strong majority of americans do not believe their children should be denied insurance because of pre- existing conditions. they want to cover their young adul children under family plans. they believe small businesses should be given tax credits to cover insurance for employees. they oppose caps on coverage and cancellation of coverage when people need the most. with many parts of the world in turmoil abridging turmoil today over questions of freedom, we should not forget that the strength of our constitution lies in our fellow citizens to put faith in its values and trust the president, congress, and the court to set aside the politics of the moment and fairly applied 18th-century rhetoric to 21st century reality. i want to recognize senator grassley. >> thank you. i appreciated it the discussion

of some of the policy issues within this legislation. whether you agree parts of this bill are very good, parts are very bad, things that ought to be thrown out, things that ought to be put into it that maybe are not into it, are all legitimate issues, but the real issue for us today is on the constitutionality of it. i think we're very fortunate in this country to be under the rule of law, under that constitution. we are fortunate to be probably the only country out of 190 on the globe that degree in the principle of limited government, and that is something we not only appreciate, it is something we should worship and something that ought to be considered. the american people are a very special people for that reason. i look forward to those issues. we agreed on the issue, we move forward. if it is not constitutional, we

start over. all of the policies that are in dispute that my colleague mentioned would be continued if this is constitutional. if it isn't, then we will debate those issues once again. the florida judge ruled on the constitutionality of thnew health loss this monday compared the government's argument to alice in wonderland. that reference applies equally to today's hearing. things are getting curiouser and curiouser. under r system of enumeration powers, the sensible process would have been to hold a hearing on the constitutionality before the bill passed, not after. instead, the congress is examining the constitutionality of the health care law after the ship had sailed. like alice in wonderland, sentence first, verdict after. what has gotten us to this

point? early in debate, republicans and democrats agreedhat the health care system had problems that needed to be fixed. i was part of the bipartisan group of senators on the finance committee who were trying to reach an agreement on comprehensive health reform. however, before we could address some of the key issues, some democtic senators in the administration ended these negotiations. the majority took discussions behind closed doors. what emerged was a bill that i feel has major problems beyond constitutionality. republicans argued that instead of forcing it through the senate, republicans and democrats should return to the negotiating table to find common sense solutions that both parties could support. the plea went unanswered. the majority passed the health care law without a single republican vote. when republicans identified specific concerns, such as the

constitutionality of the individual mandate, we were told our arguments were pure messaging and obstructionism. throughout t debate, the majority argued that the individual mandatewas essential for health reform to work. there are many constitutional questions about the individual mandate. is it valid to regulate interstate commerce? reality is that no one can say for certain. the nonpartisan congressional research noted it was on precedent for congress to require all americans to purchase a particular service for good. the commerce clause allows regulation of a host of economic activities that substantially affect interstate commerce. no dispute about those decisions. it has never been before allowed congress to regulate in activity by forcing people to act. what is clear is of this law is

constitutional, congress can make americans buy anything congress wants to force you to buy. the individual mandate is at the heart of the bill. my friend senator baucus said at at mark-up back in september, 2009, the absence of a requirement of a shared responsibility for individuals to buy health insurance guts the health care reform bill. the supreme court can strike down the individual mandate, it is not clear that the rest of the law can survive. the individual mandate is the reason the new law bars insurance companies from denying coverage based on pre-existing contions and the sponsors made the mandate the basis for nearly every provincial law. judge vincent's ruling that the

whole law must be stricken reflect the importance of the mandate to that overall outcome. then there is the medicare issue before us. does the new law amount to coercion of the state? some of my colleagues on the other side of the aisle may even make the case today that even though i don't think that there really promoting that asa viable option for the states, if a state drops out of medicaid, the new health law states clearly that none of that state's citizens would be eligible for tax credits, because people with incomes at medicaid eligibility levels c never be eligible for tax credits. the idea that the federal government could, through the

medicaid program, drive the single largest share of every state budget seems very inconsistent with the objectives of a federal system of government. at this point, mr. chairman, i asked that the statement be placed on the record. i'm interested in hearing from the witnesses today. ultimately, we all know the subject of this hearing is finally going to beetermined by the supreme court. thank you ver much. >> thank you, senator. that statement will be made part of the hearing. i want to invite my colleagues on t democratic side to come closer. i ask now if this panel of witnesses would please stand and take the oath. please raise your right hand. these where the testimony you're about to give will be the truth, the whole truth, and nothing but

the truth, so help you god? thank you. let the record reflect that all the witnesses have answered in the affirmative. there will be given five minutes for an opening statement. we have seven-minute rounds. our first witness is john kroeber of oregon. he was elected in 2008. he has a national distinction in the fact was nominated by both the democratic and republican parties. he is a bipartisan attorney general from the state of oregon. he and others recently filed a brief before the sixth circuit in support of the constitutionality of the act. he served as a u.s. marine, a law professor, a prosecutor, a member of the justice department's task force. he served in a multi agency emergency response team that investigated the 9/11 attacks. he received his bachelor's and master's -- pastors --

bachelor's and master's degrees. thank you for being here today. [inaudible] >> thank you. i am the attorney general of oregon. over the course of my career, i've taken a note to defend the constitution. i take that obligations seriously. i'm confident that the affordable care act is constitutional and will be judged constitutional. the region for that confidence is simple. there have been four priry arguments raised in litigation challenging the bill. i believe all four are without rit. want to review the arguments and explain why i think they have no merit. the first is that the commerce clause by its own terms only regulates commerce. the argument is that declining to get health insurance is not

commerce, but refusing to engage in commerce, and falls outside the power of congress to regulate. this is extraordinarily weak. it was explicitly rejected in a case where the courts held " congress can regulate purely intrastate activity at is not in itself commercial." that belief was dated and not just the majority opinion, one by justice kennedy, but in the concurrence from justice scalia as well. the argument is dangerous. the gonzales opinion provides the foundation for federal criminalization of our laws banning the home production and home use of child pornography and dangers of drugs like methamphetamine. the prosecutor overturning it would be a disaster. the second argument that has been raised is based on the activity-inactivity distinction.

in peru as verses united states, the supreme court spoke of the clause regulating activities. opponents have used this language to raise a novel argument that the constitution prohibits the regulation of an activity -- inactivity. it claims that declining to buy insurance is inactivity. there are three serious flaws with this argument. the distinction has absolutely no basis in the text of the constitution. second, the courtecognized in both the wicker and carter decisions the congress can regulate activities and conditions. i believe that would also apply to the condition of being without health care. third, people lack insurance because businesses don't offer

it to their employees, insurance companies declined to extend it for pre-existing conditions or individuals failed to select it and pay for it. some lot of choice, some because they cannot. all of these are action with real world and often very tragic consequences. the constitutional fate of a great nation cannot decided by semantics and word games that label real-world actions as in activity. the third argument, steadied by some litigants and by some courts, is that the supreme court has never interpreted the constitution to allow congress to force individuals to buy a product. this argument is inadequate -- inaccurate. this was raised and rejected by the court in the weaker ce. in that case, the. it argued that as the result of an act, he would be forced to buy a product, food, on the open

market. mr. justice jackson wrote, "the claim was that congress was "forcing some farmers into the markets to buy what they could provide for themselves." this claim is identical to those raised in litigation. they would rather self-insure and pay themselves. justice jackson rejected the claim, holding that these kind of questions are "wisely left under our system for the resolution by the congress." again, strongly supporting the constitutionality of the affordable care act. finay, critics claim the personal responsibility mandate interferes with constitutionally protected liberties. i find this argument odd because

the constition does not create or protect the freedom to freeload. right now, we have 40 million americans who don't have health care coverage. those 40 million people have the right to go to a hospital emerncy room. hospitals are legally required to provide that care. as a result of that, they racked up approximately $40 million -- $40 billion in health care fees every year the opponents of the bill claim that this cost-shifting is constitutionally protected. i suggest there is no constitutional right to force other people to pay for your own health care when you declined to take responsibility for yourself. thank you very much for your time. >> thank you, general kroger. our next witness is a professor who is a renowned scholar of

constitutional law. he served as solicitor general under ronald reagan from 1985 until 1989. he worked in the reagan administration as special assistant to the attorney general. from 1995 until 1999, he served as associate justice of the supreme judicial court of the state of massachusetts. he received his b.a. from princeton, a master's from oxford. professor, thanks for joining us today. please proceed. >> i should just add to that statement that i have two of my former students here, professor barnett, and attorney general kroger. i taught him constitutional law. i come here not as a partisan for this act. i think there are lots of problems with it. i'm not sure it is good policy.

i amnot sure it will make the country any better. i quite sure that the health care mandate is constitutional. i have my doubts about the part that senator grassley mentioned with the medicare -- medicaid compulsion on the states. that is something to worry about. the health care mandate, i think, really is -- i would have said a no-brainer. such indulge in brains go the other way. clearly, insurance is commerc that was upheld by the supreme court in 1944. there was a time when the supreme court did not think it was commerce. it has been ever since. if y ok at the mountain of legislation, most noticeably some legislation, you see that

the congress and the courts obviously think insurances commerce. health care, surely health care insurance surely as commerce, insuring something like 18% of the gross national product. if that is so, if health care insurance is commerce, then does congress have the right to regulate health care insurance? of course it does. my authorities are not recent. they go back to john marshall, who sat in the virginia legislature at the time they're ratified the constitution, and who come in 1824, said regarding congress's commerce power, "what is this power? it is the power to regulate. that is the prescribed rules by

which commerce is governed." to mymind, that is the end of the story. the constitutional basis for the mandate, the mandate is a rule, more accurately, part of a system of rules b which commerce is to be governed. if thateren't enough for you, though it is enough for me, you go back to marshall in 1819, where he said, "the powers given to the government imply the ordinary means of execution. the government which has a right to do enact, surely to regulate health insurance, and has imposed on it the duty of performing that act, must, according to the dictates of reason, be allowed to select the means."

that is the necessary and proper clause. the end -- he ends by saying that the regulation of health insurance, let it be within the scope of the constitution and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the constitution, r constitutional. that, to me, is the end of the story. think that one thing about judge vincent's opinion, if we strike on the mandate, everything else goes, shows as well as anything could that the mandate is necessary to the accomplishment of the regulation of health insurance. is it proper?

there is an intellectual confusion here. something is necessary. this is clearly necessary. it is improper only if it bumps up against some specific prohibition in the constitution the only prohibitions' i can think of that this bumps up against are the liberties causes of the fifth and 14th amendments. if that is so, not only as obamacare unconstitutional, but so is romneycare in massachusetts. that is an example of an argument that proves too much. thank you. >> thank you very much, professor pierre the next witness is a partner in the d.c. office in a law firm, where he specializes in constitution law.

he was the deputy assistant attorney general of the dust is rigid justice department's civil rights division. he was one of the lead lawyers in the florida supreme court on behalf of president george w. bush in the recount controversy. he received his b.a. from tulane university. thank you for being here today. please proceed. >> thank you for the opportunity, senator. the individual mandate compels citizens to engage in -- and contract with a wealthy corporation, even though often, and crabs usually, it is to the citizen's economic disadvantage to engage in that health insurance when he is healthy and does not need insurance. it is agreed this is unprecedented. congress has never before required a citizen to engage in contractual or commercial activity pursuant to the commerce clause. we have heard today this

difference is a material. there's no difference between regulating inactivity and regulating activity. regulating someone who has decided to contract and has entered the cmmercial markplace. under this reasoning, that means that because we can tell gm how to contract with its customers when they decide to buy a car, or how to contract with employees in terms of workplace conditions, since there is no difference, we could compel somebody to contract with general motors to buy a car or to enter into an employment contract. the gist of my remarks is this is not some semantic trick, something we came up with in response to the health care act. it is a core principle that goes to the most basic constitutional freedoms and limits on federally enumerated powers. in the first place, insurance is commerce. that is not the issue. the issue is rather if

inactivity is commerce. sitting at home and staying out of the marketplace is not, as. it becomes, as if you leave your house and decide to buy or sell services. then you have congress, which can regulate. the decision not to buy health insurance does not affect commerce, unlike e examples we have heard in terms of the plaintiffs in wicker. they were providing goods that would enter the commercial mainstream. they were providing goods that were the sort that congress was free to regulate under the interstate commerce. the decision to sit at home does not affect the insurance company's ability to contract with a citizen. the rationale for the individual mandate is not that you're eliminating a barrier to congress. the rationale for the individual mandate is you are ameliorate in

a congressional distortion of commerce. congress told insurance companies that they had to take people with pre-existing conditions. that is good for the patient. it is costly for the insurance companies. what we are constructing the american citizens to do is to ameliorate the economic harm that congress has visited on those insurance companies. this is not in any way within the traditional conference power. congress can tell someone not to grow wheat. what it cannot do is tell his neighbor that he has to buy some other crops to ameliorate the harm that congress has put on him by banning is weak. this is different in degree and kind. it is without limiting principle. in the florida case, the more congress can distort in the first place the commercial marketplace, it can bootstrap that original distortion into regulating all sorts of things,

all sorts of contracts, from credit cards, to cars, to mortgas that it could never get that in the first instance. it is also not proper. mr. fried suggests it is fine to compel people to contract. recently, the court said you could not force coal companies to provide health insurance contracts to former miners. it forces citizens to contract with a wealthy corporation to ameliorate the corporations loss of profit. that is proper, there's nothing that congress cannot do. what is the limiting principle that is being suggested here and elseere? i used to call it the due process clause. it suggests that will limit congress's power. that is a restriction on the state's. they concede that the only limitation on congress's

enumerated powers is the same as the limits on t state's plenary police power. the supreme court clear about anything, it is that you cannot to obliterate the distinction between the limited federal government and the state government. if you do that and advantage commerce clause alogy, which eliminates that distinction, that alone shows you it is an abuse of the commerce power. thank you. >> thank you very much, mr. carvin. the next witness is randy barnett from the highly regarded georgetown university law center. he teaches international law. he previously served as prosecute -- prosecutor in cook county. he h been a visiting professor at harvard law school. of particular relevance, he argued the commerce clause case of gonzales, which weave

heard reference to. thanks for coming today. please proceed. >> thank you, senator. in 2010, something happened in this country that has never happened before. congress required that every person enter into a contractual relationship with a private company. it is not as though the federal government never requires you to do anything. you must register for the military. you must submit a tax form, fill out a census form, and served on a jury. of the nature of these few duties illuminates the truly extraordinary and objectionable nature of the individual insurance mandate. each of these duties is inherent in being a citizen of the united states. each is necessary for the operation of the government itself. each has traditionally been recognized. in the u.s., sovereignty rests with the people. if congress can mandate that you do anything that is convenient to its regulation of the national economy, that relationship is now reversed.

congress would have all the discretionary power of a king and the people would be reduced to its subject. the defendants of the maate claim that because congress has the power to draft and the military, it has the wer to make you do anything less than that, including mandating that you send your money to a private company and do business with it for the rest of your life. this does not follow. the greater power does not include the lesser. no one claims that the individual mandate is justified by the original meaning of the commerce clause. the government and those law professors who support the mandate rest of their arguments exclusively on supreme court decisions. given the economic mandates have never before been imposed on people b congress, there cannot possibly be any supreme court case expressly upholding such a power. in my testimony in a forthcoming article, i explain my nothing in current supreme court doctri on the tax power or necessary

and proper clause justify the individual insurance mandate. rather than impose a tax on the people, congress decided to invoke its regulatory powers under the commerce clause. because the commerce power has never been construed to include the power to mandate a person must engage in economic activity in litigation, the government has been forced to rely on the necessary and proper clause. the individual mandate is neither necessary nor proper. it exceeds the limits currently placed on the exercise of a necessary and proper clause provided by the supreme court in the lopez and morrison decisions. the mandate is not necessary to "carry into execution" the regulations being imposed on insurance companies. it is being opposed to ameliorate the free ride effect created by the act itself. congress cannot bootstrapped powers this way. in testimony, i explained by the individual mandate is improper

because it commandeers the people in violation of the 10th amendment that reserves all powers not delegated to the constitution -- to congrs by the constitution "to the states respectively, or to the peoe." apart from what the supreme court has said about congress's power, each senator and representative takes his or her own nose to uphold the constitution. each must ship -- each must reach his or her own judgment. after the supreme court relied on e necessary and proper clause to uphold the constitutionality of the second national bank in case you will hear a lot about today, president andrew jackson vetoed the renewal of the bank because he viewed it as unnecessary and improper. therefore, he found it to be unconstitutional. he wrote, "in our power is so absolute that the supreme court will not call into question the

constitutionality of an act of congress, the subjt of which is not prohibited and is really calculated to affect any of the obstruction to government, it becomes us to proceed in our legislation with the utmost caution." therefore, regardless of how the supreme court may rule, each of you must decide for yourself whether the mandate is truly necessary to provide for the portabilitof insurance, if one changes jobs or moves. each of you must decide if commandeering that americans enter into contractual relations with the private company for the rest of their lives is a proper exercise. if you conclude that the mandate is either unnecessary or improper, let president jackson -- like president jackson, you're obligated to conclude it is unconstitutional and support its peal. even if you do not find that the mandate is unconstitutional, this week's ruling in florida

suggests there is a good chance that the supreme court will. you might want to consider a constitutional alternative to the individual mandate sooner rather than later. thank you. >> thank you very much, professor. our final witness is the douglas g. mags professor at duke university law school, a partner in chair of the appellate practice law firm here in waington, he served as acting solicitor under president clinton from 1996 until 1997, and was an assistant attorney general from 1993 until 1997. he is a graduate of the university of north carolina law school. we're glad you're here today. please proceed. >> thank you very much, senator. the coming together of the american colonies into a single nation was more difficult than we can imagine. come together as they did come

in the summer of 1787, they created the greatest common market the world had ever seen. john marshall characterized the power to regulate the commerce of that nation has the power to regulate that commerce which concerned more states than one. the notion put forward by those who have seen these losses as it is beyond the power of congress to regulate the markets and to make efficient the markets in health care and health insurance that comprise 1/6 of the national economy. it is an astonishing proposition. the arguments are essentially that it is novel and has not been done before, and that crazy things will be done if it is accepted. neither of those arguments pass muster. each of them are the same arguments that were made when

the challenge was brought with the social security act of 1935. first, this is a regulation not like those in the cases of morrison and lopez, of local, noneconomic matter. this is of economic matters, as professor fried has put it well. it is a regulation that is critical to the provion that prohibits insurance companies from denying coverage to americans because of pre- existing conditions because a child is born with a birth defect. a lawyer is said to be someone who can think about one thing that is inextricably related to another thing without thinking about the other thing. the excellent challengers to this legislation want to do that. there is no dispute over the proposition that congress can regulate insurance contracts and say you cannot turn them people

with pre-existing conditions. you cannot turn down people because children are born with birth defects. that being the case, and the fact that judge vincent agreed that it is necessary and essential for the act to operate and to provide a financial incentive for people to maintain coverage generally, those provisions are inextricably interlinked. mr. carvin says the provision that prohibits insurance companies from denying people with pre-existing conditions, he calls that a congressional distortion. i think most americans are now assured that when they change jobs, they will not lose insurance. if they have a child born with the defect, they will lose insurance. they think of that as the regulation of the market, which congress has ample authority to make effectively. the fact that something is

within the commerce power is does not mean it is permissible. is this so intrusive that it should be carved out of the commerce power? the answer is, it is rather on remarkable. -- unremarkable. only if you go to work and earn taxable income to the penalty provisions apply to you. if you go to work, one of the things you find out is the government takes a 7.5% from you and your employer for social security, 15% if you are self- employed. they take additional taxes for medicare. then, for coverage after you're 65, for coverage before you're 65, 2.5% financial penalty if you don't maintain coverage. it is extraordinary to think that something that gives you more choice, that allows you access to the market, is somehow so intrusive that it has to be

carved out from the commerce clause. of curse, it has not been done before. every new act of congress is something that has not been done before. that mode of reasoning is found to be indefense of. will it lead to an expanse of congressional power? it will not. congress -- the liberty clause as prevent anyone om forcing americans to eat certain vegetables or go to the gym. what about the fact that this is something that provides an incentive to buy products in the private market? i never thought i would hear conservatives say there is something intrusive about buying products in the private market and about having a single government provider. that is the sense of their government. is there a precedent for doing that for any product?

not at all. this product has characteristics that would limit the application. it is a market that no one can be assured they will not tender. you never know when you're going to be hit by a truck and have thousands of dollars of expenses and medical care, which you're guaranteed to be provided by the act. if my teammates the super bowl and i had not provided for a flat screen television, i cannot show up and expect them to provide it to me. with health care, no one can be sure they won'need it. 94% of the long term money injured have use medical care. at the end of the day, it does not remarkable that this market is when congress is using a market mechanism to encourage participation. the attacks against -- the attacks against it are

reminiscent of those made against social security. the supreme court rejected the idea that if you could set the aged 65, you could set it at 30. at the end of the day, i think what the challenges to judiciary review is one we've seen before. step back from that precipices and say, we will not stand in the way of social security. at the end of the day, i think the supreme court will not stand in the way of something that is less intrusive and respect the autonomy of america. thank you. >> thanks mary much, professor. we of been joined by senator patrick leahy. i would like to give him an opportunity.

>> thank you very much. i think senator durbin for holding this meeting. i thought this was an extremely important one and a very timely. i must say i have no doubt about the constitutional authority. professor barnett, the law school we attended. we should look at our oath of office. do. i can remember vividly taking that oath. i repeated to myself all the time. i think most of us do. we had arguments on the constitutional issue. during the senate debate, i talked about those arguments. i responded to them. the senate voted on the

constitutional issue. it formally rejected the constitutional point of order. it said the individual requirement was not constitutional. we voted on it. we voted the act was constitutional. two courts have ruled it is not. two have ruled it is. we all know ultimately it will go to the supreme court. professor fried -- we have all profited by the testimony saying that we're not going to question the policy, about the pot -- about the constitution. i appreciate that. it was not novel. it rested on a centuries work of

building on our safety net in this country. the opponents ctinue their political battle by challenging the law minutes after president obama signed it into law, within a few days. they wanted to achieve in courts, but they were unable to achieve in congress. this was debated for over a year -- most of the year, countless hearings, countless debates on and off the floor. millions of americans have access today because of the affordable care act. parents would have children in school and college they could keep on their policy until there 26 years old. if you have a child with

juvenile diabetes, they cannot be reduced because of a pre- existing condition. there are a whole lot of things that eliminate discriminatory practices. making sure a patient's gender was no longer contingent of pre- existing conditions. think about that. we're talking a gender being a pre-existing condition. we have added important tools. taxpayer dollars lost to fraud and abus in the health care system. senator grassleynd i may have disagreed about the health care bill itself. we agreed on going after fraud and abuse in the system. senior citizens would now pay less for their prescription drugs.

i realize there was it -- the realize they're looking for a victory they could not secure in the congress. that is happened many times over the course of this country. i would hope that the independent judiciary will act as an independent judiciary, and will be mindful as the justice was when he upheld the constitutionality of social security 75 years ago. " whether wisdom unwisdom resides is not for us to say. the answer to such inquiries must come from congress, not the courts." i agree with that. mr. chairman, i will have some questions for the record. compliments to you for doing this.

this is as important a hearing as being done at this time. >> thanks a lot. we appreciate that during much. i would not invite my former professors to ask me to judge my performance as a senator. i will not ask the chairman to issue another grade to professor barnett. he had that chance once before. i would ask you to comment about one of the statements made by professor barnett. it relates to the question of whether this is a unique situation where we are imposing a duty on citizens to either purchase something in the private sector, or face a tax penalty. i would like to ask you to comment generally. specifically, i'm trying to go back to the case involving roscoe fill burn. he objected to a federal law that imposed a penalty on him if he grew too much wheat.

he argued before a court that the wheat was being consumed by him and his chickens. as a result, the law went too far. i think the net result of a law is that he faced a penalty -- or complied with the requirement, and had to make purchase i the open market to feed his chickens. is there an analogy here? would you like to commen on this notion that it is unique and the law requires a purchase on the private market? >> charles? >> i told professor barnett -- i taughtim constitutional law. that case can be disnguished only if you say, after all, mr. filburn didn't have to eat, and

his chickens dn't have to eat. that is an absurd argument. i think mr. dellinger pointed that out. that is like saying, if you could make a commitment that you will never use health care, but you will never visit an emergency room, that you will never seek a doctor, then you should be free not to enter the system. that is silly. that is the first point of non- distinction. there is another point that is made. i get a little hot under the coar when ihear it. that is that this turns us into -- from citizens into subjects. judge vincent also said that those who threw the tea into

boston harbor would be horrified at this. let me remind you that the citizens of the early united states were well acquainted with many taxes. remember the whiskey rebellion. the reason they threw that tea in the harbor was taxation without representation, in parliament that ey had not elected did this to them. well, the people elected a congress. in 2010, the change to the congress. that is why we are not subjects, why we are citizens. >> professor barnett, you and mr. carvin have alluded to the activity-inactity distinction. tell me what case you look to for president or what part of the constitution you refer to

to come up with this approach. >> there's nothing in the constitution that says congress has the power to regulate economic matters. there's nothing that even says that congress has the power to regulate activity that has a substantial effect on interstate commerce. there is no former doctrine. as for the substantial tax, that is given by the supreme court. i have been operating reading my testimony is based on what the supreme court has said. the supreme court has referred to the congress's power and authorized congress to exercise its power to regulate the activity coming economic activity. that is what it says. justice scalia had a concurring opinion. he uses the word "activit or "activities" 42 times. that is a lot. that is what we're looking to. what we notice is the court has never said the congress has the

power to regulate economic matters coming economic decisions, -- economic matters, economic decisions, or inactivity. it has never said that congress can go farther. next time and here's a case like this one, it could go farther. we know that. it has not done so until now. >> for the recor the other four witnesses have acknowledged explicitly that the health care industry is part of commerce. do you accept that? >> yes, i do. >> general kroger, how do you respond to the inactivity of the citizen, not the overt act of the citizen? >> two things. most of the case law does speak repeatedly of activities. most bills are regulating activities. it has never limited the commerce clause to a formal category of activities and

prohibited congress from acting otherwise. the case specifically cites the language in carter vs. carter coal. it is not whether there is an activity, but whether there is a condition that can be regulated. .

>> i think judge vincent's decision sweeps far beyond where it was necessary to go and takes on some completely unrelated provisions. and i think that the fact that two other federal district courts have upheld the constitutionality of the law will indicate his opinion will not have a necessary affect at this moment. the department of justice i think is considering whether to seek an appeal even though he ised no order to nonetheless clarify that only the individual mandate of the ate. and of course everyone agrees what is also at stake is a provision that prohibits insurance companies from denying coverage for preexisting conditions. those two are linked. and i think that aspect of it is indisputable. >> thank you very much. senator? >> professor, you've made it

clear you're convinced there's no doubt the mandate and health law is constitutional, so would you see any need for congress to make any changes to the mandate in order to increase the chances that it would be found to be constitutional, make more certain it was constitutional? >> i see no need for it because it seems so clearly constitutional. you're wearing a belt. maybe you want to put on some suspenders as well, i don't know. but i think it's not necessary. i suppose it would be proper. >> ok, then, to any of the witnesses, some of you have discussed the supreme court's decisions that have given congress broad authority under the commerce clause. that's the whole point here. but congress has never before passed a law that requires people who are not already engaged in an activity, commercial or otherwise, to affirmatively purchase a product or service.

could the supreme court strike down such a novel provision as the individual mandate without overturning a single one of its precedents? >> yes, senator, that's clearly true. it is the defenders of the act who are seekng to extendhe court's commerce clause jurisprudence passed what it currently is. as professor barnett pointed out, they've only suggested that activities that affect interstate commerce can be regulated under the commerce clause. they've never suggested congress can compel people to engage in certain activities to offset the econoc effects of another part of the law. to get back to senator durbin's question, they never suggested they can compel from feldburn to grow weed. they've never suggested again, as i pointed in my testimony they can require mr. filburn's neighbors to buy his crops to

counteract the effects of limiting the wheat he can grow. i think those distinctions are loyally semantics and are relatively obvious to most people. >> unless you want to add. >> senator grassley, i think the very notion whats involved here is, quote, inactivity can be called into question. if you're sitting alone in the woods doing nothing, it doesn't apply to you. you have to go out and enter the national economy, earn $18,000 for a couple in order to be required to file an income tax return. onlyhen do you have to pay a -- 2.5% penalty if you don't maintain insurance coverage and since no concan be insured they'll need health care they'll be active participants in the health care market. this is in essence by no means a case of no activity. and i believe there's no case yet that's come close to

holding the congress can affirm obligatis when doing so carries out its regulatory authority over the national economy. >> the penalty may not apply to everyone but the mandate does apply to everyone. it's the penalty enforcing the mandate that might not apply to everyone. but the mandate that says every american has to have health insurance has to obtain or procure health insurance i believe applies to everyone. >> if i might just add one supreme court precedent which i always thought was very relevant is the 1905 decision in jacobson against commonwealth of massachusetts, massachusetts said every citizen had to obtain a smallpox vaccination. jacobson thought this was an attack on his liberty. he was fined $5 and the supreme court said pay the fine. >> that illustrates the distinction that i'm talking

about. maachusetts acted to stop the spread of an infectious disease pursuant to its power to protect the health and welfare of the state citizens. congress doesn't have that power. under mr. fried's analysis, congress could tomorrow require everyone to buy vitamins or vaccinations because in another part of the law they've required doctors through perfectly charitable reasons, to provide free vitamins and vaccinations to others and this would be offsetting the fact just like the individual mandate is an offsetting the fact. if congress can do that, then i think we all agree congress can do everything that state governments can do today subject to the restrictions of the liberty clause. and if that's true, then there is no distinction between the commerce power and police power. and again, i think we'd all agree the court has made clear that if there is no suc distinction that means the mmerce power has been exceeded. >> i want to go on to -- ask for a comment on a quote from

the senator, center for american progress critical of judge vincent and so, quote, if judge vincent were to have his way, insurance companies will yet again be able to deny your coverage because you have a preexisting condition, drop your coverage when you get sick, limit the amount of care you receive, take more of your premium dollars from their profits, end of quote. i think that this group shares the same thoughts that many of the supporters of this legislation have used as a basis for the law as well as the basis for this hearing. that there seems to be no differen between law and politics. and of course i think the supporters of that view think that the judge who rules on the law is unconstitutional must impose the policies as contained in the law. obviously i take a different view. i believe that a judge is obligated to make sure the laws

that congress passes comply with the constution. if congress passes a law that's beyond the constitutional power to enact no matter how popular, desirable the provisions of that law are for some people, the courts have an obligation to strike it down. number one -- and by the way, i wanted to direct this to the three people on the left. i'm sorry. not the three people -- jim cruege,, professor reid and dellinger. do you think it's personally attacking the judge saying the judge must prefer particular policy results that the critic opposes? >> no, it is not proper. >> ok. and anybody can add if they want to but let me go on to the next one, is it fair to say judge vincent's decision aims to take away benefits of

millions of americans are already seeing and putting insurance companies back in charge of your health re? >> it will have thatffect. quite possibly he greatly regrets it. >> and do you think that judges should decide cases based on their best understanding of the meaning of the constitution or on whether they thi their rulings would have good or bad policy consequences? >> the former. >> obviously it's good to have that understanding that we're a society based upon law a not upon what judges just happen to think it might be. >> you're right, it is. >> always have to watch out for these tough chairmen. actually, on that last qstion, mr. fried, do you

know anybody that disagrees with that, the left or the right? >> yes, i'm afraid i do. [laughter] >> and they don't admit it. >> do you know anybody that should disagree? >> not a soul. >> i thought you might go that way. mr. growinger -- mr. kroger, it's good to have you here. we always like having attorneys general here. we're fortunate to have two former attorneys general on this committee, senator blumenthal and senator wte house. you represent the state of oregon. you said that oregon is a sovereign state, i'm trying to summarize your testimony, in charge of promoting the health and welfare of its citizens. do you have any concern about the constitutionality of the requirement that individls purchase health insurance? >> none whatsoever. >> thank you.

now, as attorney general, were you asked or did you -- on your own review, the legal basis for the affordable care act? >> yes, i have, senator. >> you think it intrudes on oregon's responsibility to protect the health and welfare of its citizens? >> senator, i think it greatly assists the ability of the state of oregon to protect its citizens. >> thank you. and professor fried, having been here actually from the time of president ford, when you were solicitor general for president reagan, i almost feel like i should call you solicitor general, but do you believe the requirement in the affordable care act individuals purchase health insurance

represen unprecedented extension of congress' authority to regulate insurance under the commerce clause? >> it is a new requirement. i don't think it's unprecedented. i think the language which i quoted to you from chief justice marshall at the beginning of our nation amply covers it. >> well, tn, let me just explore that a little bit further. do you believe that there have been new limitations on the commerce clause by the current court or other courts that give you concern that the affordable care act is not a constitutional regulation? >> there have been -- excuse me. >> no, go ahead. >> there have been limitations. i sat at counsel table with the prevailing argument in mother us -- united states v. morrison because i believed the relevant

provisions of violence against women act were unconstitutional. and the court so held. but that was because the court found correctly that as despicable and criminal as it is for a man to beat up his girlfriend, it's not commerce. well, there's no doubt health insurance is commerce. >> and on the violence against women's act, did not the congress go back and redraft it based on the ruling in morrison? >> i believe they did but i -- >> or a version of it. >> i believe they did but i can't swear to that and i have sworn to my testimony. >> thank you. again, one of the reasons why i enjoyed your tenure as solicitor general with president reagan. anybody want to add to this?

here's your chance to disagree with mr. fried. >> i never pass up a chance to disyes with charles. it rarely happens. again, senator, i do think there's a fundamental difference in two respects. you are compelling people to engage in commerce. and what's the rationale? is it that by not contracting with insurance companies that somehow acts as impediment to congress? no. what it does -- to commerce, no. what it does do is prevent this free rider problem tt congress created by imposing the preexisting condition. i ca that a distortion of commerce. i didn't such that in an enormous sense. congress interferes in the private market all the time. what they've done is impose certain restrictions on insurance companies and they therefore are compelling people to ameliorate that problem, so the individual mandate does not carry into execution the regulation of commerce, it corrects a distorting effect of the regulation of commerce and it seems to me that distinction

is critical because otherwise, again, you could -- when y're talking -- if congress skis -- decides to limit what banks can do with mortgages or credit cards or car companies, then obviously they could conscript the citizenry to offset that. >> this is a repeating of earlient. i'm only cutting you off because my time is running out. >> i was about to finish. >> thus your time is running out. and professor dellinger,f you can very briefly -- >> all i wanted to say, senator, i wanted to talk about the two quotes professor fried mentioned, one which refers to congress' pow tore use any ordinary means of execution. a mandate is not an ordinary means execution, it is extraordinarily. in gibbons versus ogden, judge marshall said the congress may prescribe the rule by congress to be coverage governed. nobody up here thinks the ability to buy health insurance is itself commerce. that's not what anybody thinks.

that doesn't fall under this language either. neither one of those quotations directly apply to the situation we currently face. >> professor dellinger? >> yes, i would like to respond to what i think is one of michael carbon's best point, by disagreeing that this matter would stand for the proposition that where congress imposes costs on companies, it could then make up for that, fix that and going out and telling -- making people buy that company's prodt. that's not true because in this instance congress is dealing with a dysfunction in an imrtant national market caused by the fact that companies have an incentive to deny coverage to people with preexisting conditions as a result of that they're not covered, in order to make that market work efficiently, you need to encourage people to join the market so that they don't wait and order up their health insurance on the cell phone in an ambulance on the way to the hospital. that's a market problem congress can address and fix.

it is unprecedented, quote, unquote, but only in the sense that the health care -- the affordable care act uses a market-based system giving people more choices than has been our previous custom of providing a single governmental payor ase did under social security and largely did under medicare. so the idea this is unprecedented is only one that it is a new use of the market-bed approach, less intrusive, providing more choice. >> thank you. >> thank you, mr. chairman. >> thank you, senator durbin and thanks to all the witnees for being here. i feel like i'm back in law school. but we appreciate the fact that each of you are giving us the benefit of your expertise and your opinions on a very important issue, no doubt. i was attempted -- tempted to say, mr. chairman, i wish we had done this before the law was passed, which we did not, as opposed to now but professor

barnett you make an important point that congress' duty with a law like this does not end when it passes a law, indeed if in fact we are -- the opinion it does exceed eithe the prudential or constitutional bounds of congressional power under the commerce clause, we can repeal it. and i would just say to my friend, who's chairing the committee, senator durbin i know suggested earlier it's either this or nothing. i think they call that the fallacy of a false dichotomy. there's not just two choices. there's many other choices that are available to congress if this were to be repealed and replaced and i'm sure we'll talk about that a lot more. but let me just -- let me say, i was -- went back to look at the federalis papers where federalist 45, james madison talked about the powers of the federal government being enumerated in specific and the power of the state being broad

and indeed the heading for the federalist 45 is the alleged danger from the powers of the ion to the state's governments considered. it was exactly this sort of relationship between the state government and state power and individual citizens and the federal government that i think is causing the most concern here because my own view is that the iividual mandate is an unprecedented overreach of the federal government's limited and enumerated powers and i know lawyers can disagree and we do disagree and we usually do so in a civil and dignified way and that's great. the way, mr. chairman, i would ask unanimous consent to introduce letter from the attorney general of texas, greg abbott. he was one of the 26 attorney generals who were successful in the litigation andecently concluded in the district court in florida. >> without objection. >> i thank the chair.

so really i think what worries people more than anything else whether they articulate quite this way or not is i think a lot of people feel like the fundamentarelationship between the federal government and the american people has somehow been altered in a basic and sweeping way, and whether they can say, well, that's a violation of the 10th amendment or it's a violation of the commerce clause or the necessary and proper clause, whatever, i think it depends on the individual and their background and expertise. but i just want to ask whether you agree -- let me ask professor fried this question. jonathan turley, a law professor who testifies occasionally here before us said that if the supreme court upholds the individual mandate, it's hard to see what' left of federalism. you agree or disagree with that? >> i disree with that. i disagree with that.

i recall in the violence against women act, there must have been attorneys general from 52 states arguing that that act was constitutional. and it was thrown out anyway because it was not commerce and that was a correct decision. i supported it. helped procure it, indeed. but i think the scare here is quite inappropriate. as i recall, the great debate in the senate was between this device and something called the government option. and the government option was described as being something akin to socialism. and i think there's a bit of a point to that. but what is striking, senator, is that i don think anybody

in the world could argue the government option or indeed a single payor federal alternative would have been unconstitutional. it would have been deplorable. it would have been regrettable. it would have been western if not eastern european, but it would not have been unconstitutional. and it's odd this which is an attempt to keep it in the private market is now being attacked that way. >> you made a very good case that congress can pass some very bad laws that are still constitutional. >> yes, sir. >> because time is running short and i hope we'll have a chance for a second round because seven minutes doesn't give us enough time. but i did want toxplore professor fried, you did say while you're not troubled by the individual mandate, you are troubled by this huge unfunded

mandate imposed on the states by the medicaid expansion and indeed there's a whole body of law that you are nooubt expert in that talks about the federal government's coercing the states and commandeering the states to pursue a federal policy that is beyond the federagovernment's authority to do. and i will have to tell you that one of the consequences of this in my state is a $27 billion unfunded mandate over the next 10 years for the medicaid expansion which is crowding out spending at the state level for education and transportation and other important priorities. and i just want to ask you to expand briefly on your concerns in this area. >> the case that comes to mind is south dakota against dole which required the states, and that wasn't even aunding mandate, required the states to alter the drinking age p. and

threatened them with a withdrawal of 5% of highway funds if they didn't comply. and the supreme court said, well, 5% is so little that it's not that much of a teat. implicit in that is, would you believe 10%, how about 50%? and the unfunded mandate here is huge. and that's why i said to senator grassley that i think there really is a constitutional worry about that . >> that was one -- if i can just concluded by saying that was one of the basis for the texas challenge and i believe the other attorneys general in the florida case. i don't believe the judge got to that issue because -- >> he rejected it. >> i may stand corrected here. but i -- although we're

focusing on the individual mandate, i am intested in your testimony with regard to the coercion or commandeering of state authorities and state budgets. thank you. my time's up for now. i hope to come back. >> thanks, senator cornyn. senator franken. >> i feel like i'm back in law school. >> i gott. >> i didn't go to law school. >> thank you, professor. >> attorney general kroger, mr. carbon said and then repeated essentially this in his testimony, a decision not to buy health insurance doesn't affect commerce. is that inago -- is that an accurate quote? >> in the preexisting band, true. in other words, if you took the preexisting condition ban out of the law, the insurance

company would be able to contract with its patients in the fact that some stranger to that transaction sat at home wouldn't affect that contractual relationship. the argument i'm making is that the preexisting ban enables congress to reach out and bring that stranger of the transaction in. >> without the mandate you couldn't have the preexisting condition, it wouldn't work in the law. but this is a question for attorney general kroger. a decision not to buy health insurance doesn't affect commerce. mr. kroger, when the uninsured in your state go to emergency rooms and can't pay their bills, how much does that cost oregon hospitals every year? >> you know, senator, i've spoken to the c.e.o.'s of various hospits around the state. the amount of charitable care, care of persons who don't hav insurance varies from hospital

between 3% and in someases as high as 12% as the amount of care they're providing. the idea that being uninsured doesn't affect commerce is just factually incorrect. every american pays higher insurance premiums t cover that. >> i under the cost of $1.1 billion every year for oregon hospitals. how much does that -- do you know how much that costs uninsured -- costs insured oregonians terms of higher premiu? >> senator, the different studies show between $450 in higher individual premiums up to $1,500 for families who are required to help carry that cost of the uninsured. >> so this basically sounds to me like insured oregonians are subsidizing uninured oregonians. >> that is correct, senator. >> so would you agree with the decision not to buy health

insurance doesn't affect commerce? >> it clearly does affect commerce, senator. >> thank you. professor dellinger, my understanding is that when the supreme court decides cases they are interpreting the constitution, or if they are ruling based on precedent they are ruling based on previous supreme court interpretations of the constitution. is that correct? >> yes, sir. >> ok. i have to say that i'm confused and maybe it's because i didn't go to law school, by mr. barnett's testimony when he says no one claims that the individual mandate is justified by the original meaning of the commerce clause or necessary and proper clause. instead, the government and these law professors who support the mandate have rested their arguments exclusively on the supreme court. first of all, i' confused because i know of at least two scholars, jack ballen and akil amar who do think the original

intent of the commerce clause supports constitutionality. are akil amar and jack balken no one? >> they're pretty esteemed. and so is professor barnett. but i may proceed. >> well, yeah, i'm sure akil amar and jack balken have made ridiculous statements, too. i'm sorry. i didn't mean that. >> it's ok. >> i did. i did. ok. anyway, see -- but to me, on this -- and i didn't go to law school but it seems to me that there's a transive property, a equals b and b equals c and c equals d, a equals d. and since the courts are relying on precedence, they're

relying on a supreme court that wasnterpreting the constitution, right? so isn't it true that by relying on precedent you're rely interpreting the intent of the founders? >> that is true, senator franken, but i would also be perfectly willing to go back to the original understanding and find that this is fully consistent with it. in the following set, the framers did assume in 1787 that there would be substantial areas that were matters for local regution only. and the national government would be limited to regulating only that commerce which concerns more states than one. what happened over the ensuing two centuries is that the category of what affects more states than one has increased dramatically bause of

developments in telecommunications and markets, etc. we now have a single national market so that congress' authority to regulate that commerce which concerns more states than one is greatly vaster than the framers would have imagined, not because of any difference in constitutional principle that they adopted but because of the extraordinary developments in technology, communications, and other matters. >> like airplanes. >>hich have made it common. yes. >> senator cornyn made this 10th amendment point. as i understand it, the 10th -- the way the 10th amendment was written, and if you go to the federalist papers, it was written specifically to exclude the word "expressly." this is the 10th amendment. the powers not delegated to the united states or prohibited by it or reserved to the states

respectively or to the people. now, i remember that during -- when they were writing this, some south carolina representative wanted to put in "expressly" which had been in the articles of the confederation and madison says no and madison writes in the federalist papers that if you put "expressly" in then every possible power of the federal government would have to be written in an encyclopedic way into the constitution and then that would be absurd. is that your understanding? is that everybody's understanding of the 10th? is my history right? >> it is mine. yes. >> thank you. >> i'd like to welcome to the judiciary committee senator lee of utah and recognize him at this point. >> thank you, mr. chairman. i want to thank each of our witnesses for coming today,

it's an honor to be here and interact with each of you. i want to oak something that's been -- oako something that's been mentioned but requests it again. i think it's important we do this as senators because i believe among the founding generation, the foundi fathers, there was no understanding that was more ubiquitous than the idea what we were creating at the national level was not an all-purpose national government possessing general police powers, but a limited purpose federal government. and i think one of our jobs as senators is to make sure that regardless of what the courts say that we can get away with in court, regardless of how broadly we may exercise our power without judicial terference that we take a second look and say, separate and apart from what the court says we can do, should we be doing this? is this consistent with our role as legislators operating within a government with

decidedly limited powers. i also like the quote from justice jackson that was pulled out a few minutes ago. i think by mr. kroger, to the effect that certain decisions are wisely left for congress. the courts lack the authority to be a sort of roving commission on all things constitutional. we have to make a number of these decisions on our own regardless whether the courts are going to do them for us. i wanted to ask a few questions of mr. dellinger if that's ok, professor. do you agree, first of all, with james madison's assessment that mr. corn inquoted a few minutes ago, that while the powers of the federal government are few and defined, those that are left to the states are numerous and indefinite? >> i do agree. and i think senator cornyn correctly cites federal list 45 or that proposition. as i said, senator lee, within the area of congress' authority to regulate national cmerce, what has grown is t

interdependencey of national commerce, not our understanding of the constitution. >> sure, sure, it has grown but they had interstate commerce then. they were interconnected. in fact that was the whole reason why we needed to be a union in the first place, right? >> correct. >> we couldn't survive. so they understood this interconnectiveness. it's not new and been facilitated by jet airplanes and the internet. >> but if you got sick in north carolina in 1787, it had no affect in utah. >> or in mexico. it's still a lovely place. >> it had no affect in pennsylvania. >> ok. but they were interconnected so perhaps the changes we've had have been changes of degree, perhaps we're nor interdependent then than we are w but you would agree it's still accurate to say the powers of the federal government are few and define and those reserved to the state are numerous an indefinite. >> yes.

>> and yet if ts law is upheld, if this law is within congress' limited power to regulate commerce among the states, notice it didn't say commerce, it said commerce among the several states and before the nation. if this is within congress' power, wouldn't it also be within congress' power to tell every american, including you and me and everyone in this room that we must eat four servings of green leafy vegetables each day? >> no. >> why is that? what's the distinction? >> the distinction is that a regulation of commerce, to be constitutional, has to be a permissible regulation of commerce. and something which intrudes into the area of personal ataun my doesn't meet the standards. >> like deciding where to go to the doctor and how to pay for it? i'm trying to understand the between the personal autonomy issue there and that presented by this law. >> the case about broccoli is a case that's covered both by lopez and morrison, that is you're regulating a local, noneconomic matter, what you

eat and whether you exercise, and it is also governed as well, it is doubly unconstitutional because if government is well by the principle in cases like looksburg and vacco and cruzan to say an individual has a right to refuse unwanted medical treatment. you have a constitutional right to refuse -- and i think -- >> in that i'm talking about commerce clause. >> i understand that. >> let's keep our discussion limited tohe commerce clause. >> if you talk about whether congress could require people to buy other products, what would be congress' legitimate reason for doing so? i think there would be many constitutional objections. >> i can come up with one right now. look, if we are going to make sure everybody has health insurance and the government is going to pick up the slack behind, then congress could assemble a panel of experts, let's say your functional equivalent from the dietary council industry who would come

and tell us if you eat four servings of green leafy vegetables every day you're 50% less likely to suffer from heart disease, cancer, stroke or a host of other ailments, that will cost the government less money. so it's a pretty tight nexus there. >> yes, but as the court said in gonzalez versus rage, that's a morriso and lopez matter dealing with noneconomic matters and the court said in gonzalez where the act under review is a statute that directly regulates direct economic activity, it casts on morrison's unconstitutionality. it's a direct result of commerce activity, not something that affects a commercial activity. >> let's change the hypothetical slightly. instead of saying you must eat themit says you must take the first $200 out of each month's earnings and purchase the equivalent of four servings of green, leafy vegetables to eat per day. this all of a sudden is economic activity. this is not lopez.

where we're talking about noncommercial possession of firearm in a school zone or morrison, noner state act of violence. >> it seems there's two responses to the argument that would wholly stand for the proposition that congress can force anybody to buy anything. the first is that this is a requirement that you make a provision to buy something which you cannot ever be assured you will not use and cannot be assured you won't transfer the cost to others. i think it's distinguishable. secondly, the very form of that argument was used to attack the minimum wage and social security. >> social security was an ercise in spending power. >> the question is it the constitutionality of the minimum wage law of 1936 you would be asking me, is it a regulation of commerce for congress to have a minimum wage of $5,000 an hour? and that h never been a legitimate -- is it a regulation of commerce to say if you b one car you have to buy three cars?

that form of argument, i think, was used against social security and used against medicare and congress in fact never abused that. they never set the retirement age at 25 as the opponents of the social security act said would be possible if you upheld a requirement plan for people over 65. so the very form of the arment i think deflects attention from what is basically a completely unremarkab regulation of an important national market. >> mr. chairman, i see my time has expired and i have a brief follow-up question, can i ask that and b finished? i was pleased to see in your written testimony you've become such a huge fan of justi scalia's jurisprudence and he's also one of my favorite justices on the court. you quote him repeatedly as a source for the courts wickerby-filburn jurisprudence under the commerce law. is that the case it necessarily reflects his view as an original matter as a matter of firsprciples or are those

views made in recognition of the fact he's bound by stare decises. >> that's a good question and i don't know the answer. it could be he's reflecting stare decises. he cast the critical vote for the position that sustained my argument and not yours. >> he couldn't have been more wrong, could he? >> thank you. >> thank you very much, senator chairman. i'm taking a different tact than mr. lee in terms of the practicality of these decisions. if you look at people who i think mr. kroger is well aware of this who already small businesses taking advantage of the discounts that they're getting and the fact that you've got people who are -- kids who are getting to keep their insurance that are preexisting conditions and states who are now struggling to figure out what they're going to do in light of these decisions. so my question, i know senator durbin asked this of professor

dellinger but maybe a few of the witnesses want to chime in and that's what is the practical immediate outcome of the decision in florida monday? and i understand some state attorneys generals are telling people they don't need to do the work to comply with the law since judge vincent does not stay his ruling pending the government's appeal. othestates think it would be irresponsible not to continue making preparations for implementati of the act in case judge vincent's opini is overruled at higher levels. i guess i'd start quickly with you, mr. kroger, just from a practical level, what are you telling your state what they should do in light of the florida ruling? >> senator, i hate to sound as a lawyer, as a practical matter. >> aren't you a lawyer? >> yes. if i was giving advice to state government it would be covered by attney-client privilege and wouldn't be prepared to share it with you here. >> ok. >> i can say generally that i think it would be a huge mistake for a state to pretend that this is the final word.

obviously we have decisions on both sides that have come out. they're only district court opinions and so, you know, my sense is it would be an enormous mistake for a state not to continue on with implementation of the act. >> professor fried? >> i don't have a judgment on that. it seems to me odd that one judge in florida could govern the nation. so -- >> if they were in minnesota, that might be different? >> not to me it wouldn't. but i can't really speculate. i hadn't thought that one through. >> the next two, mr. carvin, professor barnett? >> i'll join professor fried's agnostic response, i'm not really sure. >> i've been asked this, too, senator and don't think i know the answer but can say without violating attorney-client privilege, i saw attorney

general abbott from texas on the news last night, and he said, himself, that he was counseling texas, that they -- the legislature, that they should continue to act pursuant to the law until it's ruled upon by above. i don't know if he's right but i do know that he is someone whose opinion i respect and that's the advice he's giving his own state legislature. >> along these same lines, judge vincent struck th entire affordable care act down because he found the individual mandate was unconstitutional. that is a step that an earlier decision which also found problems with the act of an eastern district of virginia did not take. do you think the constitutionality of the whole law is contingent on the individual mandate? and then i guess the secondary question was how important it is to you there wasn't a severability clause included in the bill. we'll start with you, professor dellinger? >> i think it strikes me as far too sweeping. and i will pass that question

on to my colleagues. >> professor fried, then? >> i don't believe that judge vincent said that the other parts of the statute were unconstitutional. what he said was because there was no severabity clause and because the rest of the act becomes unworkable without the mandate which is something, of course, that many of us have been arguing, therefore in striking the mandate, he's really in effect striking the rest of the statute because the rest of the statute becomes unworkable. but he's not saying that it's unconstitutional. if i read him correctly. >> ok. i st meant more broadly. so you think it matters there isn't a severability clause? >> severability clause, senator, would not be dress posstive and help the court --

despotitve and help the court. in the absence of the severability clause the judge must figure out what the intent of congress was and the government said in its brief the insurance regulations imposed on the insurance companies were not severable from the mandate. then the only question was for the judge, and that seemed pretty obvious, whether he could go in the 2,700-page bill and look at all the provisions that weren't regulations of the insurance companies, sort of like the 1099 requirement and say those could stand independently of these and said that's not something he thinks a judge should be able to do ango inside a bill and find the ones he thinks could work or not work and he said it's outside of my purview and i'll have to go with the whole thing. >> all right. professor dellinger stated the minimum coverage requirement in the affordable care act is no more intrusive than social security or medicaid. what do you think about that statement, professor fried? >> well, it' distinguishable because, after all, the

argument is being made, you don't have to buy insurance, you can pretend you'll ner get sick and so on and so forth. but with social security, you only get into that system if you earn money, if you have a job, if you make a living. well, for goodness sake. >> professor dellinger? >> altugh the mandate applies to everyone who's not exempt because they already have medicare, their income is too low, etc. like social security, the penalty provision only applies if you enter the market and earn money. and so what strikes me as so remarkae about the attack on this law is it seems to me to be in two ways everything conservative should abhor. first of all, it seems to establish the principle that congress can address a major

national economic problem only by providing a monolithic government solution and is precluded from using a more choice friendly marketplace. >> you're saying the argument would lead you to believe under their argument it woulde constitutional? >> i know professor barnett acknowledges that and mr. carvin does, too. so if the only way congress can address a market problem is by having the government step in and be an exclusive provider strikes me as an odd position which is why the idea of using the market and step in, it's been more a conservative idea and very akin to what the previous president bush wanted to do with parts of social security is give people a financial incentive to go in the private market. that private market approach was adopted here so it seems odd to attack thatnd say you can only use the government approach and also seems odd to say that five justices sitting

in washington should decide a matter of economic regulation for the whole country. both of those seem to me approaches that ought to be anathema to anyone who marches under the manner -- banner of conservatism. >> thank you very much. senator hatch? >> thank you mr. chairman. i wand to place a few items in the record. >> without objection. >> i have a statement of myself and one submitted by mr. schtliff. mr. bennett stated utah as being out of it as well. they stad for individual liberty and state sovereignty and i'm proud of utah's rule in this. i ask consent of judge vinent's opinion to be part of the record as well as the brief filed in that case by 32 senators, including several members of this committee. and finally, i ask consent a few of the articles i've published on this subject in

newspapers such as "the wall street journal" and "chicago tribune" and the recent journal of law and public policy, if i could have those in the record as well. >> that's already been said that the distinction between activity and inactivity is not in the text of the constitution. i think most all of you have said that. a text dsm uralist is born, and neither is broad regulatory scheme or anything else the supreme court came up with that the defender of obama care rely on and there's no quote intrusiveness, unquote, standard in the constitution either. would you agree with that, professor barnett? >> of course. that'sot a constitutional standard or doctrine i'm aware of. >> none of them are. mr. carvin? >> no. obviously things that substantially affect commerce

is something the court says are within the commerce clause but has been pointed out is a number of things that affect commerce, violence against women, possessing guns, which the court has said no, no, those don't come within the ambit and i would argue economic inactivity is far mor afield from the commerce power than things like buying and possessing guns. >> i'm very grateful to have professor fried here, a grand old friend and professor dellinger is an old friend, both of whom i admire greatly. i don't know you, mr. kroger, but i'm sure you're just fine. now, the congressional budget office in the past has said that requiring individuals to purchase a particular good or service was, quote, unprecedented, unquote. now, that's a congressional budget office. the cgressional research service recently concluded that, quote, it is a novel issue where the congress may

use the commerce clause to require an individual to purchase a good or service, unquote. i think it is a noel issue. i submit because congress has never done it before. now, i'll throw this question to each of our witnesses and hope i get straight answers. can you give me an actual example other than obamacare of congress requiring individuals to purchase a particular good or service? >> senator, if i may, my parents own a small business, they're constituents of senator cornyn and if you told them the government had never required them to buy a good or service, they would be astounded. i mean, the federal osha law and regulations require all kinds of sole appropriators and small business people to go out and buy equipment, whether it's orange cones or hardhats or a fire disposal system in a restaurant.

the environmental laws require a huge range of small business owners to buy air filters, up to, you know, sulfur oxide, scrubbers, the reason small business people tend not to like government regulation, particularly federal regulation is bause it does require them to extend money on goods and services. so i don't think -- i think those are -- >> only as a condition of being in business. >> you know, senator, the -- >> i mean, these people p are trying to get into business. >> it's true that my parents could close down their business p, all people could close down their business. >> they don't have to because they can go into business. but as a contion to going into it they have to meet certain laws, right? >> yes. >> in this particular case we have an inactivity of people, if y want to use that word, i don't find it the greatest word in the world, but we have an inactivity here that they don't want to do. and they would make their choice not to do it.

let me go to you, professor fried. >> i think the idea that one can make a choice not to seek health care throughout one's life is simply not realistic and cannot be the basis for an attack on the constitutionality. >> that isn't right. i have to coede that point. i -- it begs the question whether it should be mandated. >> i think once you've made the first step and you've made that first concession, the rest follows. >> ok. and i am -- brought to mind the various things that were considered in the senate and which the previous president, i think very wisely suggested as an actualityive -- alternative to social security, and a an

alternative, it was suggested that you could buy mutual funds from vanguard, from fidelity and you wouldn't have to buy it from the government. and maybe one would say that, well, you don't have to work. you can simply, you know, sit on a corner and say "spare change" and then you wouldn't have to y social security. but i think that's unrealistic as well. >> let me go to mr. carvin. >> no, they've never done it before and if you buy any of the analogies that have just been agreed to, then there is no limits on congress. the notion that health care is unique because you have to buy the goods is facially incorrect. you have to buy transportation, clothes, housing, shelter, food. and the notion that health insurance is somehow a core requiremt is kind of silly and of course if you started drawing these distinctions between transportation and health care, you get back into the sort of principled --

nonprincipled stinctions of debyilied commerce clause jurisprudence prior to the 1930's. >> mr. barnett? >> it has never been done before, senator. and the fact is even though everyone might be said to one day you need health care, the bill itself exempts people from buying -- health insurance is not the same thing as health care. everyone doesn't go in the insurance market and the bill exempts people for religious reasons from having to obtain health insurance. so clearly even congress recognized not everyone has to obtain health insurance just because they may or may not one day seek medical care. so the fact that medical care is inevitability which it isn't for everyone, but to the extent it's likely doesn't mean insurance, a completely different oduct, is an inevitability. >> nor, my understanding is athe very first congress required every adult free male to purchase and equip themselves with muskets, with

ammunition, with even certain forms of dress to carry the weapons with them. it is true that -- >> but you got to adm -- >> it's been a long, long time. >> provide some guidance for that. >> it's been a long time since then. yes, you can say when something sn't been done before it's novel or unprecedented but no matter how much one says those words it doesn't amount to a constitutional argument. this is novel in the sense the congress has decided to use a market approach and has used it with regard to the purchase of a commodity that truly is unlike others. there's nothing else in our economy where an individual who has made no preparation for the expense can go in and get a million dollars worth of goods and services provided to them, the cost of which is passed on to others. there's nothing like that. so in that truly unique market,

an incentive for people to make provisions through insurance seems unremarkable. >> the rean i raised it is for the purpose of showing that it has never bee done before and i think there are good reasons why it's never been done before. but i've asked the distinguished chairman, just let me make a couple more remarks. i have a lot of other things i'd like to ask but my time is up and if you'll indulge me, i'd appreciate that. you know, because no commerce clause cases involve congress regulating decisions rather than activities, rendering this -- that renders this case as a case of first impression, which is my point. the obamacare factor cites mandates that arise from different enumerated powers and argue, for example, as some of you have argued here. i've been very interested in these arguments, that congress has imposed mandates on

individuals before such -- as jury service and military draft or social security. professor fried has made this argument. and simply because one provision of the constitution allows congress someone would do something cannot mean the commerce clause allows the congress to impose an individual insurance mandate. jury duty, for example, that has been mentioned has multiple layers of exceptions and they make it far less compulsory for most people and is quote, necessary and propern order to exercise congress' power to establish lower courts and the sixth amendment of a right by an impartial jury. the congress may impose a military draft which again has layers of exceptions pursuant to enumerated powers to raise and support armies and they can close them and ask them to have guns as well and maintain the navy.

and the social security system, which has been raised here is unlike this insurance mandate. unequivocally an exercise in congress' pow tore t and spend for the general welfare. it's a completely different issue as far as i'm concerned. now, each of these examples stands clearly with an enumerated power. .

for the life of me, professor fried, i have a great regard for you, but i am really amazed that some of your arguments here today. great man that you are -- i expect them from dellinger. >> thank goodness i have general fried with me. >> it is wonderful not to lose one powers to surprise. >> you never lost that power. i agree with you much more than many other issues. i really enjoyed this. i really appreciate your taking the time here. this is a very important issue. professor dellinger, i want you to realize that it is about

protecting our rights, not necessarily broadening them in the sense of making people buy health insurance. >> you make a very good point that most legislation -- you made one that i thought -- [laughter] some legislation, state and federal, imposes obligations. that does not mean -- in that sense, it is not remarkable to impose obligations. >> you can find those in the constitution. >> it is though congress power that says people have to take a check from the government. there are lots of obligations. i think we should be very

attentive. affirmative obligation can be more intrusive. we have to take a careful look to make sure -- this seems does not. >> i have transcended mile limit. i appreciate it. i want to thank each one of you for coming. >> thank you. >> thanks. if any members of the panel would like us to take a break before we proceed -- should we just keep -- >> i need to get back to boston if i possibly can. that is a 2:00 train. >> i swear we will get to to the station on time. senator blumenthal, welcome. please proceed. >> thank you, mr. chairman. thank you to the panel. i have to make clear, i do not feel like i am back in moscow.

of law school had been this interesting, i would have gone to more classes. [laughter] i wanted to join senator hatch and others in thanking you for spending time with us today and giving us the benefit of some very important testimony. i want to say that i appreciate general kroger being here. i declined some challenges partly because this new act actually saved money for many states, including connect it -- conn. it saved millions of dollars through september of 2011. perhaps it does the same for oregon and the birth date. i also believe the lawsuit is

without merit. i think the two opinions we have, to the contrary, show clearly that it is without merit, and partly because of this distinction made out of non-constitutional clause between activity and inactivity -- i think they give very inadequate attention and weight to the doctrine that laws should be presumed constitutional. congress rejects the idea because of a footnote in the city of chicago vs. meredith -- vs. morales. judge vincent considered it almost not at all. he said, as i recall, "i can

consider -- i assume that i can consider the constitutionality," instead of "i presume it is constitutional." i want to direct this question to you, general kroger, and perhaps to the others. are you not troubled by the lack of weight given to this presumption, which is so fundamental to the work that you and other attorneys general -- and the attorney general of the united states does come a day in and out, defending staff chiefs against constitutional attacks? >> i would agree with you. constitutionality is extraordinarily important. the deference that is shown to the democratically elected officials to craft the right policy that will govern the country. i think probably both of those could use greater emphasis in

decisions that go forward. >> would you agree that one of the reasons that this presumption should have strong brand special weight in this case is that, in fact, the u.s. congress, as senator leahy pointed out, considers these constitutional issues in deliberating and debating this law? it is not as if the courts have discovered this issue, or the plaintiffs have discovered it. congress considered it. >> senator, i think ultimately chance tocourt's declare whether law is constitutional or unconstitutional. i would hate to imply that they don't have that responsibility. i do think closer attention to president -- precedent would

make a big difference in these cases going forward. >> let me ask mr. carvin and professor barnett. are you not troubled by the overreaching -- and i don't use that lightly -- the judicial overreaching that very plausibly could be seen in this disregard for the presumption of constitutionality? >> i think the presumption of constitutionality is important. i think congress has broad discretion in its congress clause read -- regulation. the thing to focus on is that congress has given broad discretion in terms of its means to a legitimate end. for reasons i won't repeat, i think congress is seeking to achieve this in this context. it is not fair to label activities which strike down laws as unfair judicial

activism. to me, that is striking down a law that is constitutional because you think it is bad policy. it would be equally wrong to strike down a law you believe this constitutional because you think it is a good policy. in both instances, the judge is not doing what we agree judges should do, look at the law and not be influenced by the desire ability of the law. >> i am confident you are not imputing judge vincent's integrity in ruling the way he did. i know you're not. some people outside this remark. i want to point out that the same judge vincent who held that the individual mandate was unconstitutional turned away the challenge to the medicaid requirements under their interpretation of another case. that is the same judge up holding an act of congress. it is being challenged by 26

attorney general's as well. he upholds the law while he finds another part of the law unsatisfactory. i think that should be added to the in the sense of his integrity. >> thank you, mr. chairman. >> i recognize sen. sessions as the last senator to ask in the first round. if we have questions, let's do this in a shorter period of time and accomodate the schedules of our panel. sen. sessions? >> i would like to offer for the ony -- of testim attorney general strange. they both believe the act is

unconstitutional. the u.s. government is a government of limited power. there are grants of power to the federal government and certain powers were not given. in recent years, there is a feeling in the country that the federal government can do anything it desires on any subject. ny subject. the rulings attacking this statute are refreshing because we enter a discussion about what it means to be a limited government -- a government of limited powers. i government of limited powers. i wish to suggest how far we

have gotten on these issues when they are explicit constitutional provisions, the right to keep and bear arms, whereas we at four members of the court to want to read that out of the constitution. it has a specific provision that provides individuals the right to not have their property tak except for public use, it has specific provisions that allow free and robust debates and the ability to speak out in public forums. those things are individual rights that our courts somehow gone to the. they are not very important anymore. in those cases, the staid almost one it would diminish individual rights. i just think this is a fundamental point that we ought

to note. we did not hearing -- have hearings in this committee on the health care bill, the constitutionality of it, and will people raised it on the floor of the senate, as quite a number did, they were ignored for the most part, and it was dismissed out of hand. we also had our congressmen -- i saw on television, saying what does the constitution have to do with this? it was a disrespectful approach to the constitution entirely. congress did not do a good job, frankly. we did not seriously engage in a debate about whether this power was and legitimately -- was legitimately granted to the federal government. the comet was about about states and the money. i would just note that mike governor, governor riley, has told me he is stunned by the economic impact that this health care will have on the state

budgets. senator corn and tells me that texas expects that $27 billion hit on medicaid requirements for the state. if the courts were to allow the individual mandate to stand, and thereby grant the feder government the authority to compel private citizens t purchase goods or services, to promote some broader government policy, can you identify in the limiting principle that would prevent the government from mandating the purchase of anything or everything? >> i cannot, and there have been a few efforts to try to identify them today. if congress can require you to subsidize a corporation because the burdens e federal government has imposed on a corporation, i do not see any limit in terms of requiring a purchase. certainly commercial goods,

credit card contracts, cars, things like that. mr. della certification, who i greatly respect, suggest there some restrictions in requiring you to purchase health care, because that involves personal autonomy. but most people would think that purchasing health insurance and deciding how you pay for and what dr. you go to would implement -- implicate personal autonomy it as wel there's a disagreement on this. professor fried they say it is per cent -- perfectly ok, citing the jacobson case. and professor dellinger would think that would implicate the liberty clause. at the end of the day, in terms of a limit in principle, congress cannot do anything under the commerce clause that is unconstitutional. will congress can do nothing unconstitutional. it makes the limitation to the commerce clause utterly irrelevant.

it would be -- the few gave congress absolute plenary power, they still cannot violate the bill of rights. it would be meaningless, particular the one that suggests that health insurance is something that you have to buy and it is different from every other product. i have to beg for food and ansportation and housi and clothing every day, and i think people feel much more compulsion to buy that product and health insurance, particularly a healthy 27-year-old who may well honestly quite rational think i am not going to go to the doctor except rarely for the next 20 years. i could make a much better deal for myself and be compelled into what everyone agrees is extraordinarily overpriced health insurance market. >> i believe that is a very important point. it basically says that it at some level, if we of disarrayed the logic of the commerce

clause, which is i understand was designed to regulate commerce between states, fundamentally, it has been broadened and brought in, but i do believe there is a limit to it. i heard you make a reference to the judicial activism question. i believe the president said or one of his post persons that this judicial ruling was judicial activism. i strongly believe and have stated repeatedly that a decision that invalidated an act of congress, if that act of congress is unconstitutional, is not activism. is that what would you agree? if everyone agrees that activism is striking down acts of congress because there is nothing in the constitution that prevents it. if there is something in the constitution that prevents it, and you need to strike it down. no one will tell you it would be

judicial activism the strike down all of that denies women the vote. that is blatantly unconstitutional. i think these lels are sometimes to run around in a pejorative manner that is unfair to judge is trying to grapple with -- at least everyone on the panel would agree it is a nuanced and difficult constitutional question. >> agree with that. >> thank you. good to see you again. and thank you, mr. chairman. >i am sorry ias late. i had budget committee and i have to return. >> i would like to, if i could come and enter into the record the congressional record for december 23, 2009, and in the section which i am entering, senor hutchison of texas raised a constitutional point of order, inserting the affordable health care act. in the state of the constitutional point of order, she stay -- she said it violated

the 10th amendment and she specifically referred to the mandate, that it would oppose on taxes, to buy health insurance for teachers and employees. it was then considered and voted on by the senate on december 23, 2009, and the vote was sustained by 60 votes against the int of order. there was a constitutional order race specifically on the floor during the course of debate. all of like to ask professor fried, the point raised by senator leahy, by your vegetables come and eat your vegetables -- i would ask you to comment on that. that is the one i'm hearing the most often by the people were saying, if the government in the army to buy health insurance, can that require me to have membership in a gym or eat vegetables? we've heard from professor dellinger on that. would you like to comment? >> we hear that quite a lot.

it was put by judge vinson, and i think it was put by professor barnett, in terms of eating your vegetables. for reasons i set out in my testimony, that would be a violation of the fit and the 14th amendment. to foe you to eat something. but to force you to pay for something, i do not see why not. it may not be a good idea, but i do not see why it is unconstitutional. i suppose that under the food stamp program, there are all kinds of regulations which distinguish between healthy and unhealthy foods. if there are not, perhaps there ought to be. in any case, if there were, it would not be unconstitutional. and that is the situation where

you're going to get your money only to buy your broccoli. that is all we're going to get the money for. you can say, well, you don't ed food stamps. a lot people do not, but some people do. those kinds of mandates, i think, are all over the law. the mandate that you eat your vegetables, that you go to the gym, i would be willing to -- i would love to argue that case, the and constitutionality of that, before any other country -- any other court of the country up to the supreme court, but on liberty crowns. >> my last question relates to a section of your testimony which may be taken out of context or misconstrued. will to give you an opportunity to cleared up. you've preface's a decision by

president jackson, that he viewed the bank of united states on proper and unconstitutional. you say in the concluding segment, in short, just because the supreme court defers to you does not mean that constitutionalists you do anything you like. i want to make sure i understand. if a lot of the land is a supreme court decision, whether i agree with it or not, whether i think it is constitutional or not, it is in fact lot of the land and i have to follow it. >> absolutely. can i expand? i am trying to make this point. much of supreme court doctrine -- getting back to senator blumenthal's question, the resumption of constitutionality, a state may defer to the congressman's judgment. president jackson is saying that if the court is one to defer to us, which is commenting on a

specific case, it is incumbent on us to protect -- to independently assess where we think something is an improper. he thought he was respecting the supreme court decision in mcauliffe v. maryland by holding the bank unconstitutional which the supreme court itself that found to be constitutional. >> but all of the land until the president acted was clear. that decision of the court was controlling. whether i agree with that as an individual citizen, that does not matter. >> you're absolutely right. i appreciate the opportunity to clarify that. >> may i add to that, senator? there is a great difference between the congress deliberately passing a statute which the court said by alex to constitution, and refusing to pass a statute which the congress thinks it is unconstitutional even though the

court has said it is not unconstitutional. i think there's a big difference between those two things. i think that is what president jackson was talking about. i think that the renowned citizen of illinois, abraham lincoln, made much the same point in his debates with respect to dread scott. so there is a difrence. i think professor barnett is dead right about that. you have an independent judgment. you have no leeway to violate what the court has said bile is the constitution. you're not bound to say that if they say it is constitutional, i guess it must be. i think he is right about that. >> and can i add, i also agree, is clearly right that members of

congress have an obligation to make the constitutional decisions. i like to clarify a point where i think that charles fried in nine may differ. we both agreed that one could easily dismiss hypothetical about laws requiring you to go to the gym or eat broccoli because they implicate liberty. with respect to incentives to buy commercial products, i think i disagree or may disagree. i think the court need not go anywhere near having to hold that it would be acceptable to require people to buy commercial products outside of the well- defined context that presents itself here, where virtually everyone has no choice but to for dissipate in the health-care market where $45 billion is transferred from people who are underinsured to others, or 94% of the long-term uninsured have access that health care market, and where congress is carrying a

dysfunction. those elements are unlikely ever to be presented again. therefore, i think this unremarkableinancial incentive to have insurance is not going to be apredicate for parade of horribless marching through washington. >> i had a chance to ask professor fried and professor dellinger about this but i would like to give this to the others a shot. i asked about the comment that if the supreme court upholds the individual mandate, it is hard to see what is left of federalism. let me ask you to consider this in your answers as ll. it sounds to me like professor fried is arguing there are no limits on congress's power to require individuals to buy insurance.

and the argument, it sounds like as a distinction and i may be missing something with regard to broccoli and other leafy vegetables, is, you cannot require them to eat its, but you might be able to require them to buy it under the commerce clause. so i would just like to ask professor barnett to consider this -- the cost -- the health care cost imposed by diabetes, really a ticking time bomb in terms o our health care costs, especially children who are obese, and because they get seriously ill and had premature ends of their lives, some as a result, i really do not understand how, if you can see that requiring the purchase of

health insurance, because of the costs on taxpayers of uncompensated care, how that is different. if you look at the cost of diabetes and what that imposes on taxpayers and why did you say the requirement to buy insurance, you cannot say, well, you are required to buy a gym membership, you are required to buy fruits and vegetables, and it sounds to me like you're saying you cannot make them eat them but you can require them to buy them. it sounds very strange to . would you care to respond? >> i think everyone agrees that the skyrocketing health-care costs are more attributable to the rising cost of health care than these distortions in the insurance market we talked about. if you want to reduce health care, not only would be -- it be appropriate if the court upholds a, it would attack another problem which more directly. diabetes is an excellent

example. walter would agree that they could require you to attend smoking cessation programs if you were a smoker. all the unhealthy habits, i cannot imagine why they could not go at it, and then to response to the larger point, this is some unique system, and the senator frank and's point, we'd so regularly subsidizes market, the people decide to live their own lives become these three writers, it means that you will always have an excuse to force people to engage in purchasing insurance, the more that the government is regulating the particular area. that was the point that judge vinson said yesterday. it has a bootstrapping affect. the more the federal government encroaches on markets and local areas, it gives them greater power under the commerce clause again all these people who are so-called free riders come off because of the subsidy issue. ititerally builds on itself

such that the distinction between local and national is quite literally obliterated. >> first, as to the point about the end of federalism. whether it would be the end of federalism, it would be the punctual end of the in numerous -- the enumerated powers scheme which is one of the central features of federalism. it's not only states having an affair rights and powers but congress having limited and enumerated powers. if after this there is no just -- no limit on congress's powers, then that part of the kind to small scheme is gone. and the supreme court has said that as an essential part. in the ruling will lead to that outcome cannot be the corct ruling. it is a reduction 0 at certain -- ad absurdum. professor fried has conceded the

basic point that if congress can make you buy this, they can make you buy anything. he is not exclude -- he has now conceded the point that they can make you t anything that you buy. but they can make you buy a gym membership but they cannot make you go to the gym. that may not be everything. they cannot make you go to the gym, but it is a heckuva lot. people would be surprised that congress -- that there is nothing improper under the commerce clause. let me get back to first principles here. the power of congress to regulate commerce among the several states, which takes place between one state and the other, it goes all the way down to make use the individual person by a gym membership had your gym. that includes that power. that is a stretch. that is a stretch that would and the doctrine of enumerated powers. >> if i may ask one more question, and that would be glad to have all of you respond

subject to the chairs time limits, i just want to ask one specific question. you have talked about the police power and the power of the state's relative to the federal the government. i think some are confused by the fact that states like my state requires an individual who drives to buy liability insurance, and why there is a different argument when it comes to the power of the federal government. would you care to respond to that. >> obviously the state can play a relatively paternalistic role in protecting against the health and welfare of others. i am not an expert but even there they are not requiring you to ensure yourself, they are requiring you to have insurance if you hit someone else. unlike the federal government, the states can require you to wear motorcycle helmets. i don't think anyone would think that is partf the commerce power. and the other is that it is a

condition of access to the highways as well. it does not get at someone sitting in their home. which distinguishes it from this. >> no state requires you to buy a car and operated carteret only if you choose in -- to, do you have to buy insurance. and there's some that do not require you to buy insurance if you operate a car on private property only. its -- if you're going to do something, here is how you have too it -- that is something that the government does. that is fundamentally different than telling a citizen they must do this thing. not if they're going to do it, here is how. but they must do the thing itself. that is the line that this bill crosses that congress and the commerce power has never crossed before. >> it is similar to automobile liability insurance.

if you're going to drive, the state say you have to have liability insurance. harris says, if you're going to use health care, you need to have health care iurance. this is a product which everyone will use or least no one can be assured that they will not wind up in the hospital, in that sense it seems quite similar. i'm i say i am never. use a flat screen tv and you hold it to me. you do not have to buy me one. i do not agree with michael's suggestion that in mind you of holding the suggestion -- this legislation would mean that. at is different about this is that it is a regulation. as charles fried noted, since 1944 the court has clearly held that there regulation itself is of the commercial transaction of purchasing health insurance. i think that distinguishes it from all other of the

hypothetical. >> professor dellinger, perhaps i did not make the point very well. the power of the state to legislate is quite broad on the the police powers because anything having to do with health, safety and welfare, but that is not to say just because they can legislate on an issue, that the federal government can. because of the doctrine of federalism that we talk about, the 10th amendment, and the power that the federal government is different than the power of the state. >> i wholly agree. the's nothing that calls into question decisions like unite states beat s -- v. morrison which held that when congress tries to regulate local crime because o a supposedly effects on commerce, that the court will draw a line there because it is a regulation about local and

noneconomic. here is a regulation that is part and parcel of a national economic regulation and therefore does not call into qution those limits. >>senate to limit all, you have the st question. >> i will try to ask this question very simply. it may be a follow-up to that excellent line of questioning. tax or penalty? a lot of discussion outside this room, almost none here that i can recall. is it a tax or penalty? does it make a difference? and maybe it makes no difference. >> if the congress had frankly enacted a tax on everybody, which they would then remit to those people who bought private health insurance, it is hd for me to imagine that we would be having this discussion.

but congress did not so enact. it d not do so for political reasons. it did not want to have this viewed as a tax. i think they are now paying the price in the fact that they have got to confront this discussion. but it was not, for better or worse, put as a tax, although the penalty is something that is collected by the internal revenue service, i believe. but it is not viewed, it was not enacted this attacks, because if they had been, as the senator pointed out, the power to tax for the general welfare is pretty plenary. but that is t how congress chose to enact.

it has left us with this debate that we're having. >> last word. >> i want to agree with everything that professor fried said about that. the only thing i would add is that if you actually try to justify what was done as it has, then essentially -- here is a sense in which senator it does not matter. again it would be an unprecedented proposition that congress can require american citizens to do what ever it chooses to require and then in act a monetary penalty under its tax power to penalize the for not doing that. that is really no different than the debate we just had two hours about whether this exceeds congress's power or not. it would still congress to give congress to command the citizens to do anything. that has never been done before. that tax power has never been used that way before. that is the only thing i would add to what professor bayh said. tooted it is relative and the

fallen since. there is the impression out there that under this law, federal agents are rife in black helicopters, dressed in fully equipped ninja cost in, kick them in yo bedroom door and drag you off at the point of data into an insurance agency. when all that happens is that ose who are not otherwise exempted, when they're filling up their federal income tax return, if you're not maintaining minimum coverage, if you messed up a and additional 2.5%, much less than social security. that is all that happens. it does not approach any slippery slope of any understood limits and are legal culture. >> thank you so much f the panel that has joined us. this is an excellent hearing. witnesses, it is a not assert that -- an honor that you have to one is for this important consideration of this major legislation. legislation.