how you're a concierge service for potential candidates. how is it working in new hampshire? >> it's pretty diverse here. they will call our offices and ask for some assistance and they often do, we'll set up appearances for them. but they have their own independent relationships here with a lot of people who do know them. actually individual, you have solid republicans who live here who may happen to know their staff or them, they can make phone cause and arrange to have them come to private sessions at their homes. they can set up meetings or dinners, have them -- a lot of them have been very generous in helping out the different counties and state with fundraising but it really is pretty wide open. if you know these candidates or if you know somebody that does and you can influence indemnify to come, whether it be to your home for a meeting or town hall, it happens that way as well. it's an interesting process. >> matt strawn, can i close the loop on the deadline for iowa to

set its date for the caucuses? is there a deadline and if so when? >> yes, we wait to see the puff of smoke from secretary of state gardner's office in new hampshire. [laughter] >> we will evaluate accordingly after our friends in new hampshire have acted. >> and, jack kimball, let me ask but the number of debates. there's cancer about too many debates within the republican candidates. do you think we will see these debates scaled back? >> well, you know, i have heard from the r.n.c. chairman about that and they were getting concerned about the large quantity of debates that seem to be forming so they're going to -- i think they're going to try to at least controlment in and i think that's smart. to try to control to a point, you can just oversaturate this and you've got to make sure that you do justice on behalf of any of the candidates that are out there campaigning.

but initially there's concern. let's be honest, we're at a critical time in our country. i think this is the most important presidential election certainly in my lifetime and i think that there's going to be a lot of interest moving forward this coming year in all of these candidates and i will tell you firsthand, every event that i have been to in the last several weeks since i have been in this position has been packed and the people are extraordinarily enthusiastic and i think it bodes very well. >> david catanese has the final question. >> circling back on the date of the primary caucus, how early could it be? could we see a christmas holiday iowa caucus or primary? >> i personally hope not. i hope not. >> i can tell you, speaking for myself and my wife certainly, that we don't want to be wrapping christmas gifts and taking knocks at the doors from candidates. [laughter] but i've been very clear with my colleagues on the r.n.c., with

iowa republicans, that at the end of the day, the order isn't going to change. it will be iowa, new hampshire, south carolina, nevada. but the date may be. but there is still time for florida and those other states that are out of compliance to get into compliance with rules that were passed by 2/3 of the r.n.c. and i really do hold chairman prebus at his word that is working with those states and they understand the consequences. as the father of three young kids i'm constantly reminding them there are consequences to your actions and if florida doesn't get in line, that's something we need to continue to remind them as well. >> they're grounded. >> matt strawn, chairman of the iowa republican party, and jack kimball from new hampshire. thank you both for being with us on "newsmakers." >> thank you for having us. >> thank you. >> jonathan karl, let me begin with you with the comment about mike huckabee from a report this past week, he's releasing some of his staffers in south carolina. has it become evident that he will not be a candidate? >> it sure sounded that way.

you hear the chairman of the iowa party making a couple of points. he hasn't spoken to huckabee and when you come in, you're going to lay groundwork in iowa, you talk to the chairman. he helps you get set up. he hasn't had any conversations with him. and the other thing about key huckabee figures from the last campaign who have already locked up with other candidates and if huckabee runs it's all about iowa. >> david catanese, who did you take away from the two chairmen? >> i thought it was interesting that jack squawk was much more forceful about saying that mitt romney was the front runner in new hampshire. that's probably obvious, we tried to ask him who is the threat to romney. i thought it was also interesting that he did not mention john huntsman because john huntman's strategy is going to be based on new hampshire, too, to go after that mccain coalition and he's talking to a lot of the same advisors up there, assembling a lot of the same team. if he's going to go through with this. so i thought that was an interesting contrast and str a awn obviously wasn't going to

pick a frontrunner. >> not to mention bachmann, santorum, the rest of the list. he hasn't met huntsman no, interaction there. i thought that was striking. >> and huntsman has two commitment speeches this month in new hampshire and in south carolina. >> and south carolina will be the first one, this will be the coming out party for huntsman. he arrives, he was back from china now, free to finally engage. the fascinating thing about huntsman to watch is he's got this campaign that's been built for him, but he hasn't been a part of this. john weaver and fred davis effectively built the whole campaign without speaking to the ambassador. he's been in china, he has not been free to engage in political activity. and now he arrives and we'll see. it's got to catch fire pretty quickly. >> let me ask about the calendar. we talked about this in 2008 with the democrats going ahead. it didn't help hillary clinton. will florida move up, stay the same? >> i would bet that the calendar

says the same because it usually does but florida, if you watch these candidates, none of them are ignoring florida. these chairmen are scolding florida, they're grounding them saying, look, you better get in line. but all of them, if you ask tim and even when haily barb was running, they said, we're going to play in florida, we're going to meet the voteers there. they know the electoral importance of florida, not just because of the primary, because of the general election. >> and the fact that tampa has the convention, does that weigh into this? >> it's a factor but what is the r.n.c.? what can they do to florida? they can penalize florida by is aing its delegates don't get seated hour do you do that if your convention is in tampa or they can say their tell gats don't get the same weight as the other states. but if florida does go early, i mean, and if these candidates are playing in florida, the actual delegate count won't matter. it's the momentum cut p coming out of -- a win in florida will be -- it's not a decisive

factor, a major factor. >> mitt romney's entire strategy is based on florida. that's his bank shot after new hampshire. he's not going to play in iowa, so we're told. he's got to win new hampshire although the chairman wouldn't say it. he can win south carolina? florida is big for mitt romney's campaign. >> david catanese, jonathan karl, thank you for being with us. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> coming up, federal reserve chairman ben bernanke on the current federal budget debate between president obama and congress. our financial coverage continues with bob mcdonald on the fiscal situation of his state and later joint chiefs of staff mike mullen's remarks on military leadership and the middle east. >> what i try to do is tell a story with visuals instead of words.

i'm writing paragraphs, they just happen to be with images. >> carol guzy has won the award more than any other journalist. >> great thing about being a journalist is the variety we get to experience, so many parts of the human condition on so many different levels. >> she'll talk more about her craft tonight on c-span's q&a d. you can also download a podcast of the show. it's one of our many signature programs available online at c-span.org/podcast. >> federal reserve chairman ben bernanke held the first news conference in the federal reserve's 97-year history. after a meeting with the central bank's monetary policy committee. he addressed the issue of rising gas prices and the current federal budget debate between president obama and congress. this event took place at the federal reserve's william building in washington, d.c. it's about an hour.

arris -- national health care >> for the 21st century. this morning we're delighted to be hosting our latest in a series of conversations with some of america's most influential lawmakers in this instance, it's a conversation with virginia governor bob mcdonnell. mcdonnell. bob mcdonnell was sworn in as the 71st governor of the commonwealth of virginia on genuine 16th, 2010. in that campaign for office he received almost 60% of the come and the most votes than any candidate for governor in virginia's history. and since taking the oath of office, governor mcdonnell has reduced state spending to th

2006 levels. is cut $6 billion out of two budgets, and he has defeated attempt to raise taxes by $2 billion. as february of 2010, the state unemployment rate has fallen from 7.2%, 6.5%, at the ninth lowest unemployment rate in the nation. the latest poll in virginia has his approval rating at 66%, even and maybe because of cutting spending to the 2006 levels. he has fought for pension reforms and many other things that we'll get into. bob mcdonnell is one of the country's most successful and for minded governors. we wanted to hear from him in the venue w chose to have a conversation with one of america's finest political reportersbyron york, the chief political correspondent and a twice weekly columnist with the "washington examiner." we will be having a conversation for about 45 minutes. we will open it up to q&a from

all of you, so without further ado i will turn over to you, by the. >> thank you very much, and thank you, governor, for being here. the election of bob mcdonnell in november 2009 was really the first ray of hope for republicans after the electoral disasters of 2006 and 2010, along with the election of governor chris christie in new jersey. your election in a state that barack obama had won in 2008 sent a signal that republicans might be recovering more quickly than thought, and that the for your democratic rain predicted i changed carver might not last that long. it was followed by the election of senator scott brown in massachusetts and then really smhing republican victory in the 2010 elections. now we ae in a fight about the

budget in washington where we have a situation where last year the leaders of the house and the senate chose not to pass a budget at all. this year we had a government shutdown fight that was resolved literally at the 11th hour. and now we have to budget proposal that both almost come from different universes. you on the other hand in virginia close budgetshortfalls by 1.8 going to invent 4.2 billion. you did without raising taxes and not blowing up thestate. so what are the lessons of your experience for what we see now in the federal budget fight? >> that's a great place to start. first, pete, thanks for your work at e21 and happy to be here today at the manhattan institute, also sponsoring this.

i do appreciate it. i think not just what's happening in virginia but governors have been doing recently in many states, a pretty good example of how you can take the tough stance, govern like a campaign to govern on conservative principles, resist spending and actually have fiscal responsibility and prosperity in your state that the federal government can learn from. goveors have a balanced budget amendment. we can do what happens in washington. we got to make sure revenues and expenses are equal every year. we don't have a big debt limit. in virginia, 5% sel-imposed but we have on that for decades and decades. we can't pass continued resolution. the bottom line is we've got to make sure that balances are equal every year.

so to answer your question, what we did is said look, we've got to make the tough call. we cannot raise taxes. governor kaine left me th a 2 billion-dollar tax increase and expense cut to balance he $4.2 billion deficit we had in the 11 and 12 budget. the outgoing governor gets to introduce the budget and the new guy coming in in 2010 ges to inherited to see what we can do with it. we have a set that as a democrat majority in the house with republican majority whatever we did have to have a bipartisan agreement to get a budget. but i was very clear, we were not raising taxes so let's sit down and discuss where there is we can cut in a way that limits and sets priorities, and that's what we did. the lessons of the federal government, we made tough decisions. governor kaine accepted 4 billion before i got elected, so we cut dramatically in k-12

education. inealth care, many health ce programs are we're trying hundreds of of dollars on a $40 billion annual budget, and then we did some one time reallocation, like mos there was an federal stainless money. we're able to do that without raising taxes. we'll back to the 2006 levels with the budget, and t good news, tried to come as you start to point out, unemployment is down five much act we do this cuts we ended up fiscal year with a 00, and $309 surplus. but i guess i'm here today that those things work. yes, there were a lo of short-term pain. yes, we got letters from teachers and from health care providers saying this is a disaster, this is tough, we can do this. but the reason it worked his when you reduce spending and you ask your officials in your administration to set priorities

and use the money of allocated the best way they can, they will manage will. it will rise up to the call, it will make a smart decision, and the priorities will be funded and those are not that are not parties will not be. i think that's what happened in virginia and i think that's what we've been fortunate to turn the corner faster than most states. we'll be looking at our second surplus at the end of june for the fiscal year. we are running well ahead of forecast, nine to 60% revenue growth over the last few year as we cut spending we also invested in job creating measures, tax cuts to other things. and it's wrking. >> is the fundamental driver of balancing the budget simply the fact that you can't print money, you have to do in? >> absolutely. that's why i stongly support a balanced budget amendment, i introduced a resolution this session of the general assembly after talking to congressman goodlatte and senator cornyn, both would support that it's the only way i can see after

honestly decades of irresponsibility at the federal level with republicans and democrats overspending, overpromising and over borrowing. and the balanced budget amendment, 49 i think and 49 of the 52 governors, i'm counting the territories, is the only way i think put the lid on spending where federal officials will not continue what they have been doing. so it's clearly a motivation for both paties, to make sure that you don't do with the federal government did. >> even if obama's budget and it were to pass, the whole process takes you to happen. and we are facing i think our third year, trillion dollars deficit. no prospect of a real agreement on cuting that anytime soon. what do you see in the short run in the next four years in terms

of the federal budget and the deficit problem? >> i think what i see is, unfortunately, is the greatest country in the world about to pass on to the next generation, the children of the baby boomers, a country that's potentially less secure and more in debt an more financially unstable than at any time in american history. and that is tough mdicine. and it should be embarrassing really by all of us. i've got five children and they're going to be inheriting the decisions that all of us make. and i'm hearing some of these younpeople say that for the first time, great generation passed onto you baby boomers, a great country, and while yet made great aances in technology and energy and other things like that, but what you all collectively are doing at the federal level in particular usually unsustainable and really immoral.

7 trillion going to 14 trillion under the presidents introduced budget, even with looking more than $20 trillion, which is tens of thousands of dollars of debt for every american. it's just not, it's not responsible. so i think we need a real wakeup call that is debt is just not something out there thatome future government can deal with, but this is a clear and present danger to american security. internally and externally, and until we really are serious about this, we are on a very bad path. and it means cuts and virtually -- no area of the federal government ought to be off limits. into erasers discussion about entitlements, medicaid and medicare, we are really not serious about balancing the budget. this last discussion about 38 billion versus 61 billion, everyone knows you're talking

weeks on the interest. t talking about anything serious about balancing the dget. so of course as you well know, a big battle about the debt ceiling and now the ryan budget. >> you mentioned the ryan budget, and one of the key parts to the ryan budget, bringing in medicaid costs under control, is a block grant to states. doesn't that just throw the tough decisions on you at tht point, is that something you want? >> yes, because i think governors can manage it much better than the federal government without the bureaucracy and not have worried baking for worries and all the other things that are locked into the medicaid law. mr. jefferson, the second governor of virginia, said that government passion he's absolutely right. 535 people in washington probably are going to be over

all less than touched with their citizens than the governor and his cabinet or her cabinet at the state level fading out what the citizens me. i really think that most governors would prefer the. i was one of 21 republican governors who sent a letter to the congress about a month ago to ask for block granting of medicaid. here's will happen. a couple of things. one, first of all, i find any authority for some of the programs the federal government is doing in article 1, section 8 of the constitution, there in lies is the real problem with where we are toy. that's supposed to be the parameters or the fence around federal power. tenth amendment says everything is basically goes to the state and the people. well, we have dramatically undermined that compact of deralism that our framers thought were key to american prosperity. we really haven't done the.

i think part of the discussion about medicaid, how do we didn't get that deal back, the pwer back to the states in those areas where the founders thought that it should be but i think particularly these areas are exactly it. at least give you an idea of why i think it's important medicaid spending in virginia over the last 27 years has grown 1600%. if you get your hands around the, 1600% from about $220 million, 3.4 billion. far and away the fastest growing expense item of any government program in virginia. it's gone from 5% of our budget, to 21% of our budget. that's before obamacare. you lay on obamacare, we've estimate is going to be another $2 billion by 2022 which will drive us up to 27, 20% of the state budget. this is unsustainable. we don't have that kind of money in our general fund to continue to put that much over a quarter

of our entire budget into medicaid. many states are over that 21%. they are at 26, 27, 28% every governor in the country knows medicaid expenses are a huge challenge. and so what we all believe are what most governors, if you all will give us the ability and take off the shackles about so many of the rules and regulations, give us the ability to innovate on what kind of program or incentive for self health care, and responsible for their own care, a series of incentives and disincentives and co-pays and some other things like that that we can put in place for medicaid, managed care and some of the other things we would like to do, we can save money. the federal government can block grant it and just have made a small cost of living increase that they provide every year which will save them dramatically more than what they are paying now.

and it will be a win-win. so that's the gl. i know that was a long answer to this is a very important issue and it's oneof the government can start to get entitlement under control. >> is it a win-win to the recipients? doesn't mean diminished availability, quantity of care for the recipients? can you save all this money simply by cutting through bureaucracy or does it really mean less care for people who receive medicaid? >> i think that's up to how well each government does with that money that they get. there are innovative programs like indiana and louisiana, governors that agenda good job with that. states that have gotten a fair number of waivers am the token in the medicaiprogram have had the ability to do some creative things. there arcompanies like and their group that are doing managed care for some states that are dramatically dropping the cost of medicaid within

those states. so there are any number of ways, try to, to have a reasonable level of care. but again, medicaid is supposed to be a safety net. yes, it's an indictment now. people have to fight it but it is supposed to be a safety net thate as a compassionate society put in place so that thoswho don't have the ability, reportedly, to provide for the own health care that are either poor or aged or infirm in some way to get these things through the federal government. but that doesn mean that we have to have a system were essentially everything is free and there's no accountability for the recipient. you all know what that means for a government program. if you get it free and it's the best that can be and some else is paying for it, you know what human nature is, you want the best and you don't care who pays for it. that is a real disincentive that

goes against the very ingrained human behavior. putting together some type of incentives into the system that maintain a good leveof care but controls cost i think governors can do that. >> what doou think about medicare component of the ryan plan? >> i have had a chance honestly to look at that in a great deal of detail because that's only fedel. medicaid is a 50/50 state federal match and so that's where governors have looked at. i've called the ryan budget a good start, but even with the ryan budget we're talking about decade before you balance the budget. >> the late 2030s. >> again, for a governor, it's still a four way othinking. i've got to do that every year on time, no c.r., no excuses, no federal money. so even with that budget, it's really not come is a good start. it's better than the deficit we've been running up with the obama budgets.

but it a small start. i think medicare, doing everything from looking at reducing certn benefits, changing eligibility and agents -- ages and things like that, i understand are contained in components of the ryan budget, are a start but i really think, if this goes to the heart of your first question, i think americans at this point in time already for straight talk and d ask conversation about what we are doing. for two reasons. one is most americans the last couple of years are doing it with their families and their business. they realize they can't keep spending the way they have been spding, whether it is with her credit card debt or somebody has lost a job in the family, whether it's because of business contracts and such so they've had to make tough decisions

about business. people have been doing it so that expect the government to do it too. and then secondly, because i think, i've been in office now, this is my 20th year. i think this is about the first time i have seen a newer and enlightened understanding by the citizenry about what deficits and debt mean to them. not an abstract sense for some future government to deal with, but what it means for them and their family at the front door. in other words, what they're going to have to pay, what they are living on their kids and their grandkids. what increase barred by the federal govement means to them in terms of reduced access to capital and driving up inflation in the future. when voters understand what it means to them at the front door, they then start to react. i really do think now tt there's a much more educated citizenry about debt and deficit that is what people are talking up in washington which i think frankly is good for conservatives. we are not talking about health

care or some other thing. we're talking about what is the fiscal plight of america. and that's good. we are talking about issues on our turf and that gives me some hope that we will solve it. >> this idea that given the deficits in the last years that we are kind of a different public mindset, paul ryan and republicans i think that you are right on that, and president obama and the democrats are betting you are wrong. and there are a number of polls that show peop so they want to see the deficit come down. they would love to see the budget lanced, but they do not want cuts in medicare. they do not want cuts in social security. and those who receive medicaid not want cuts in that either. there are a majority opposing cuts in all of those things. so, why do you think you're right on the? >> because it's a math problem. it just doesn't add up. you can't have both. you n't say on the one hand you want to fiscal responsibility in america, at the same time not being willing to have reductions in

entitlement spending. i just go back to my own experience, when we say we're going to have to make major cuts in k-12 education, i don't know if you remember that the teachers union said if we make these cuts we will lay off 30,000 teachers. there will be little kids that are not going to be able to be learning in a good public school building. and we heard all the -- guess what, it didn't happen. a year later those things, i think there were less than 1000 teachers that actually got laid off. that we have reassessed that most of hem are back, and why? because we instructed people throughout the education system, our administrators, school board and others, make good decisions, set the priorities, teachers in the classroom. the priorities one. more bureaucracy and more overhead and more middle level

managers at the public administration building. they made the right decision with the limited resources. i've got some faith in people, that if you give them clear direction, and you give them more limited resources, they will rise to the highest and the welfare that's, i cannot say that's the virginia experience. say that with chris christie in which donald, scott walker and others that are doing a lot of the same thing. and yes, there some short-term pain, and yes, your poll numbers may go down a little bit. but do you know what? people i think willis, one, we've got to do it, so we are willing to see the government to do. i think tom coburn said it best to he said for us to get our country back on track we've got to have a generation of lawmakers that are not worried about getting reelected. i can say from what we're doing with redistricting now, and what i know from 14 years and the legislature, every lawmaker is

worried about getting reelected because they deeply their ideas important for the future and that's great about our system. but we are in a critical tipping point where after probably four years of overspending by republicans anddemocrats in coress that there is no more room to do that. president obama's own commissi commission, simpson-bowles commission, i think is alan simpson that said this as their issued their report, he said there's no more they can to bring home. the biggest day. i think is exactly right. -- the page is dead. when they see these numbers they see the stickers on fox and cnn about theinterest payments, and just rolling by thusands of dollars a second, type of thing. we got to make some change. >> you mentioned scott walker. what is the situation in wisconsin mean to you? wisconsin, virginia, very different states, but what does the experience we've been watching in wisconsin mean to you?

>> it means that there really are big battles in the country between the left and the rght. and for there to be significant results gained and restoring fiscal responsibility at both the state and federal level don't have to be some very tough battles. and there were two issues really in wisconsin. one was the walker budget to address the $3.7 billion deficit similar to what had in virginia, and i think largely the citizens were with him. they got it he was very clear. i'm reducing the budget without raising taxes. we'll find a way to get this done. the bigger battle obviously was the public sector collective bargaining. and all of you are well versed in what happened there. we did that 18 years ago in virginia before i got there.

actually governor wilder, democrat governor, signed that bill in virginia. so we have long had a prohibition against public sector collective bargaining in our state. we are one of the best managed state in the country. and in that i think is art of the. i think what you learn is that, number one, governors and leaders at every level are going to have to aggressively take on a fiscal plight of their state, address pension, unfunded pension liabilities you can't talk about it but i do $18 billion of unfunded liabilities in virginia. we did a little bit in virginia this year. not nearly enough to fix the problem. and number two, that governors starting with people like walker, are going to look for ways to be more compitive. and that means removing the obstacles to auburn osha and capitalism and free enterprise. it means whether its unions or

taxes or regulation or these other things that hurt the ability, the entrepreneur to start a business or grow a business. those things will have to be addressed because we are in a very tough global economic. i don't just worry about tennessee and west virginia and maryland and north carolina and florida and texas anymore. i'm concerned about china and india and singapore, taiwan and thailand and other countries that have really figured it out, either perfecting some of the things that have been good about western civilization, or flirting with capless and. i'm going to china next week. china, japan and korea and tell them the virginia store and try to get people to come and invest in virginia. ..

>> one criticism is that when you are going to do something very bad, and that is what he was trying to do, you make the case over, over, and over again. in this case, he made the proposal and it was kind of a brought. you have to prepare the public for this in some way. how do you do that? >> that is a good question. that is what went winter as well with cutting $6 million and realignments. i talked about that in the campaign, did not think anyone was surprised when we killed the tax increase and reduced spending. people were ready for us to be

able to do that. and, brian, you really said it in your question itsf. you've got to tell people what the problem is, tell 'em what the various courses of action are and then tell 'em why your preferred course of action in this case outlawing public sector bargaining, why that helps you to be more compitive and would create more jobs for wisconsin. i can only tell you that the flipside, though, is political capital is fleeting. as we probably, everybody that's been in and around elected office knows. and it, arguably, is as high as it's ever going to be when you first get elected. scott got elected by a pretty good margin. an so when you're taking on the budget, you migh as well take on some other things that were budget related. at the end of the day, not only was it about competitiveness with the collective bargaining issue, but also about the predtability of future

increases for the employees. that's a huge part of the budget. virginia we ve a huge part of our $40 billion budget. if i could predict better what mill benefit costs are going to be, it's a lot easier to budget in the future. so they really were wrapped in the budget. and he happens to be in a state that's the end -- epicenter of of the battle. you do have to explain the problem, tell 'em why your solution's best and then repeat it over and over and over. the old saying is, you know, when you get tired of saying it, that's when people are starting to listen. we're so close to it in public life that youdo have to make your case repeatedly. eventually i think people will at least understand why you're doing something even if they don't agree with it. >> let me ask you about obamacare or the affordable care act. >> yes. >> the state of virginia wanted a fast track supreme court

review of this to get this settled, and the supreme court has now said, no, they're not going to do it. 's going to have to go through the normal appeals process up to the supremcourt. what does that mean? >> very disappointed. that was a decision handed down yesterday by the supreme court, and it was done in part because the justice department objected to our petition for a fast track. it's extremely disappointing. and every american ought to be disappointed because whether you're for obamacare or against it, what you should want is certainty and finality. and that is knowing now in your business, in your personal life if you're a health care provider or an insurer, you should want to know is it constitutional or not? because then you can start putting the things in place at the state or local level or in your business to know what you're going to have to do with your benefit plan as opposed to now maybe waiting a year or a year and a half or two years or whenever the federal circuits finish their work. then they may wait in the

supreme court to have them combined, the florida case, virginia case, other cases. and then the u.s. supreme court on a regular track makes a decision. i'm very disappointed with it because the sooner we got the answer, the sooner we'd know what we need to do. most governors now are tasked with a number of things they have to do by january of 2014 under theffordable care act. you've got to build health care exchanges, change insurance law, you've got to do a number of other things. and in good faith as a governor i've set things in place to try to be ready for 2014 because i don't know if it's going to have to be enforced or not. i hope it doesn't. but i've got to be prepared because if i'm not, then i've got other sanctions that are going to be visited upon virginia like other governors do. if we knew in a year from now, let's say, or six months because of the fast track from the supremeourt, and they ruled it was unconstitutional. we would save the taxpayers in virginia a lot of moneyby not

having to do some of these things. so it's a disappointing result, and i think it is linked part to the obama justice department being opposed to it. now, i don't know if they just didn't want an answer from are the u.s. supreme court before the election. that's not what they said. what they said is we need the circuits to rule on it and develop a body of law for the supreme court. i think that's nonsense. the supreme court is going to decide this matter. everyone knows that. and they could have done it without any advice from the circuits. they do that on other cases they think are important. in fact, they've taken other cases over the last 25 years that were arguably less important to the public than the constitutionality of the health care bill. so it's disappointing. we just got the ruling yesterday, but it is what it is. they've made their decision, so now the good news is we'll have a hearing withinthe next couple months, i think, within the fourth circuit. the fourth circuit has agreed to an expedit hearing, so at least the virginia case will be

advanced, hopefully the florida case, and at least we'll get it to the u.s. supreme court a little faster and create the certainty americans want. >> but you mentioned things that you're doing now to prepare for a 2014 rollout of obamacare. specifically, what kind of stuff are you doing? what does it cost, what's being done right now in. >> well, we've had to gear up staff in various areas to do the things that the obamacare law requires. as you know, many of the, many of the parts of the law have already gone into effect dealing with pre-existing conditions, kids on your dad's or mom's policy until '24 and some of -- 26 and some of those other things. so we've already had to make changes in the law. we've had to change insurance regulations already as well dealing with pre-existing conditions, some other things which means some additional staff at the bureau of insurance to be able to deal with those laws. the big thing right now is

setting up the health care exanges. most of the experts believe it is about a three-ar process to adequately set up these health carexchanges. we got a bill passed this year in the general assembly that forms the framework for health care exchanges, and other governors are doing the same thing. my secretary of health has been meeting with some of these other experts to talk about what is a good plan for setting up these exchanges in a way, frankly, that's least bureaucratic and least expensive to virginia and to, and to the state. it costs some money to do at in planning and in staff and some other things like that. so that's what we're doing right now because we've got the way the law reads is we've got to be ready by january 2014 to have exchanges in place, and if we don't, then the federal government will take over the exchanges and, frankly, that's the last thing i'd want. i'd rather have a state-managed exchange that we can control and motor ask and run the best -- and run the best way possible.

so those are the major components. i think what they did is they front loaded the goodies, if you will, the popular parts of the obamacare plan like the issues with pre-existing conditions and having children on a plan extended from age 24 to 26, but the tougher stuff, the individual mandate's not effective until 2014 and, you know, we'll have to deal with that down the road. >> so you could see a situation in which you continue, a year from now you will be one year further into building this infrastructure. >> yes. >> at some point after that a supreme court decision comes down, you win -- >> right. >> -- and then it's stand down, you just don't do all that stuff, never mind? >> it depends on the ruling. now, the justice department in our suit has conceded that if individual mandate falls, then most of the insurance-related regulations also fallment -- fall. because they are so intertwined. pieces can't exist independently.

and, byron, if i might, the reason this whole case is so important is, yes, it's about health care, and it's about federalism. those are critically important. but it's also a fundamental decision about the united states constitution and the reach of federal power. because if federal government can make each of you buy a good or a service and if you don't to fine you, there are very few limits left on federal power, in my view. and this is a big deal. it's also a big deal in the jurisprudence on the tax and spend clause and the commerce clause as how far do those powers extend since virginians had a lot to do with those early documents, the constitution and the declaration. [laughter] we really take these issues very seriously. and, you know, i don't think that the founders would have condoned that extent of federal power to mandate that you engage

in commerce. and if you don't, we're going to take your property, your money. and so i think this is vitally important that the u.s. supreme court get thisight. i certainly hope that they will, and they will invalidate it. and it's not about the underlying policies per se. there is broad agreement, i think, in the body politic that people do want, have a decent safety net. we are a compassionate people. we do want to have expanded access to health care. we do want to see costs driven down. but we don't want to do it in such a punitive way that we violate the spirit of the constitution and do it in a way that i think, ultimately, is going to drive up the costs of health care and not down. >> so you are operating on two tracks now. one, which is trying to stop amacare inhe courts and, two, implementing obamacare in the government. >> yeah. >> let me ask you, it seems like spending fights are endless. you are on the cover of "the

washington examiner" today. >> very good picture. >> inside, inside. virginia governor says no to dulles tunnel. so this is another one of these massive public works projects that the details of it are the washington metro is going to be extended to dulles airport, and the question is, does it go in an underground tunnel, or does it come in an aboveground station. and here again you're trying to say no to spending. >> yeah. the difference is it's going to cost anywhere from 250-330 million dollars of additional money. for virtually no material increase in the benefit. >> the underground is more expensive than the aboveground. >> absolutely. by that amount. i mean, the cost of the project already is 2.5 billion. with, that's the entire proje. phase oneis about on budget, phase two is threatened to be vastly overbudget. perhaps the $2.5 billion project

cost may now rise to as much as $3.5 billion. and that's just unacceptable. the other problem with it is the expense, the increase in expense is gng to be borne by prince william county -- excuse me, louden county and fairfax county. and they have overwhelmingly just voted no to paying for that. the board that makes this decision is the metropolitan washington airports authority board made up of not just people from virginia, i've got five appointees. but also made up of people from district of columbia and maryland. they're onhe authority. they're the mayor and the governor of maryland also have appointments. but they have no fiscal stake in this game which is sort of a structural issue. and i've made my thoughts known to mayor gray and also governor o'malley to join me in this. this is not a responsible

decision to spend $330 million to save maybe a two and a half minute walk. and you can, there's already a moving sidewalk, you can take a cab, we can build a shelter to keep people out of the rain, but we're talking about a tremendous amount of money that'll be borne solely b the residents and a handful of counties in virginia for very limited additional benefit. so i've asked them to reconsider this decision and, frankly, to reverse this previous decision. it's just not a good use of taxpayer money. we don't have an endless supply of dollars, and in the age of cutting and fiscal responsibility it's not the right decision. >> now we're going to go to questions in a few minutes, but i'm going to change subjects a little bit, ask you about the 2012 republican field. as far as the governors' updates is concerned, we just saw haley barber say yesterday he's not going to run. the governor of indiana, mitch daniels, is still a question mark. a number of republicans would

love to see chris christie run although he has said flatly i am not ready. there's been talk of you as a possible vice presidential choice on a ticket. run down the 2012 field. what do you think about it? >> well, they're all my friends. and it's unusual. of course, we know who the democratic candidate's going to be, but we're nine, ten months out from the beginning of the primary season, and there's not only maybe not a clear front runner, but we don't know who the candidates are. this is not really a great decision. i think, to be in. i'll say a couple things, and i was surprised at the haley barbour decision. i really thoug haley would be in. i'm a little bit biased, but i dohink the best candidates for the republican will be a current or former governor because governors have to make tough decisions with no excuses. the buck stops at your desk. you've had to deal with balanced

budget amendments in your states, and you understand the need to have fiscal responsibility. the most critical thing we need for our country right now. so i think mitt romney, tim pawlenty, people like that are probably going to make the strongest candidates. now, obviously, there are others out there who are interesting and who are bright and, frankly, who are now focusing like a laser on jobs and the economy and taxes and spending. clearly, the republicans' playing field and clearly the issues we should talk about. clearly, what's on the very top of most voters' minds. what i talked about after my election, i think, clearly responsible for me winning. it's hard to handicap, i think, obviously, if you look at the polls, and it appears as though governor romney is the front runner, but he's the known quantity because he was there last time. i thought he acquitted himself well, especially on the issues ofobs and innovation. and he's very tall lent insi

that area. talented in that area. i think governor pawlenty is going to continue to gain traction. i spoke with him for few minutes yesterday. he's a very talent and capable guy, did very well in a blue state for eight years. but there are people, other people that could get in the race that will, certainly, you know, make it very, very interesting. i don't know whether newt's definitely in or michele bachmann who's clearly so got se support from the tea party. donald trump has been a very entertaining candidate, obviously, so far. and there may be othe. i do think at the end it's going to come down to a current or former governor who will gain the nomination. >> you called trump entertaining. do you think he's a serious factor in this race now? >> well, he's serious because he's doing something americans want, and that is he's straight talk. he is, whether you agree with what his solutions are, he's very direct about where we are and what the problems are

particularly on debts and deficit. now, he's had sort of an up and down business career, but he's certainly up now. plus he's a new virginia business owner. he jusbought a winery and a golf course in virginia over the last year, so we like to see virginia business people in the fray, but he's been very direct on some of these things. i think americans are ready for that. it is refreshing to have that kind of -- whether people would elect donald trump, it's hard to say at this point. but he is at least getting some initial appeal with people that like that direct style. what people like about chris christie and others of us o say here's the problem, i'm not going to sugar coat it. if we don't make these cuts, we're going to be in bad shape down the road. that's the kind of leadership people are looking for. >> but the other side of the trump phenomenal illustrates what people view as real traps which is talking about president

obama's birth certificate and talking about him personally. what about that? >> i think that's a nonissue really. as far as i'm concerned, he's president, he's an american, a citizen. the problem with president obama is not where he was born, it's what his policies are now which are devastating for american business and for our future recovery. and really an inendty tuesday in foreign -- inendty tuesday in foreign policy. that's what we ought to focus on. i think these other things are really distractions that just aren't going to get us anywhere, and there's so much for us conservatives to be going after with the obama record. we now know what hope and change means, and it ain't good, for american recovery. and that's what we ought to be able to focus on. and i just think these oer things just don't get us anywhere. they're not serious discussions about what ails the greatest country in the world, and if we're going to remain this shining city on the hill, we ought to say this is what's wrong about the president's

agenda, this is what a conservative solution is on taxes and foreign policy and spending and entrepreneurship, and if you vote for us, this is what we're going to do. we had that straight talk in '94 with the contract for america. look what happened. people trusted republicans to win, and we delivered. that's the next part. if you deliver, they'll reward you going forward. and i just think that's the formula for success. >> all right. i think we're going to go to some questions now. we have microphones, we have people with microphones around, so if you'll, please, wait until you get the microphone before you actually ask your question. and right here. >> charlie with d.c. international advisory. governor, thanks for your comments today. two quick questions. onhe dulles tunnel issue, do you think virginia should get additional appointments on the metro washington airport authority? should there be additional transparency on that board as decision making, things like that? second question on international

investment, fdi to virginia. yomentioned you're going to china, japan and korea. >> yes. >> if you could give an overview of, you know, what you see as the international role in virginia, other countries y're looking at behind china and korea, sectors in those countries. >> yes. >> kind of an overview, thanks. >> yeah. thank you, charlie. i'm going to look a little bit at that structure. my predecessor transfred the control of that whole dulles core door and this -- corps do have from our direct control that's got multijurisdiction control, so virginia actually is the primary funder but the minority shareholder, if you will. [laughter] i mean, that's not a great deal for us. so i've got to look at that structure. i have good relationships with mayor gray and governor o'malley. we've worked together on a number of things, for instance, metro funding and safety.

we're all joined at the hip on that. we've all endorsed a new governance structure for metro through that board, and wre working together. this one i've let my views be known to both of them, i sent a letter on this exact same issue yesterday as well asking them to support our position, and i certainly hope that they, they willecause this is a big project. $2.5 billion, analmost a billion of it's from the federal government, the rest from a variety of sources. to get rail to dulles from d.c. and really make significant more use of that airport and just getting people out to that area so they don't have to use 66 or the tollway and then they can go wherever from there,t's a very important transportation project. but i do feel like i don't -- i have a project sole ri in my state -- sole in my state, but i can't fully control it. we're going to look at what can we do to improve that.

on the foreign investment area, i think everybody's thinking more globally. it really is a much more interconnected world because of the internet, because of the emergence of the pacific rim countries, any number of reasons. and so one of the things that i asked for last year in our economic development package was we were cutting the equivalent of about $4 billion out of the budget. we actually asked the general assembly to invest in job creation and economic development because long term we're not going to tax our way to prosperity, we'reoing get people to invest and innovate and grow our way to prosperity. again, appreciate all your colleagues being here, but they give us about $16 million in new incentives to be able to use, tax cuts, credits, other things. i asked for the money to open up trade offices in england, china and india. we're doing china next week, and i'll go to india in november.

i mean, if i can get on the playing field, that's a third of the world's population right there. and looking these folks in the eye and saying you need to come to virginia. here's why. we're the most business-friendly state in america, we've got great tax policies, i want you in virginia. that's what we're going to do, and that'sbe the way ceos do deals around the country. i do think that foreign investment is very, is very helpful to us. ifeople are manufacturing goods, i'd just as soon having those chinese companies manufacturing in virginia. if they're going to sell to virginia customers anyway because we believe in free and fair trade, i'd rather have them make the products in this virginia with virginia jobs and virginia transportation companies shipping those goods. so that's why we're doing it. i think we've had a little bit of success in england, and hopefully we'll do the same in china and india. >> okay. another question here. right here. if youl just wait for the microphone for just a moment.

>> wayne abernathy, american bankers' association. >> hi, wayne. >> appreciate you being here. a lot of people discount the ability of solving the budget problem because you have a president of one party, congress divided between two parties, a population that tends to like budget -- [inaudible] in theory but not in practice. house leadership -- [inaudible] >> well, that really is the big question. and it really is back to byn's question that there is greater understanding of the debts and deficits, greater concern about where we're headed, but asking people to frondoor and how do you feel about medicaid, medicare, social security cuts, they don't warm up to. [laughter] so there's a gap in the american mindset, and the only way to solve that is leadership. telling people why this shared sacrifice is in the best interests of our country.

e great wartime presidents have done it and others in peacetime in getting people to move towards a goal have been able to do it. and, again, that's what we tried to do in virginia last year with the help of the general assembly, and we did it. you know, back to 2006 levels at a $400 million surplus, greater jobs and dropped the unemployment rate to 6.3%. now people feel better about the tough decisions we made now because they see the fruit of it, and people are getting back to work, and they feel better about it. i ha to say, there were some tough, tough times in the short run in education, health care gointhrough. so i think you just have to be persistent to answer your question about scott walker, you lay out the vision, lay out the alternatives and then repeatedly say why this is the best course of action and what it means fo you and your families in increased prosperity for the united states of america down the road. so it is going to take john boehner, eric cantor, paul ryan, governors who are doing these

things at the states because they have to with the balanced budget amendment to put pressure on the the congress, to pat the back of ryan and his colleagues to say we're behind ya in doing this because we know it's necessary for our country. and if you do it, you will create a better, a better and more safe and more secure america. look what we've done in the states. we made the tough calls. now we've got less unemployment and greater solven, and if you dot, we'll have yur back politically, and you'll get the good results too. i really do think that while people say they don't want to see these cuts, they kn in their heart you've got to make 'em. there's no free lunch. there's no way to get anywhere near a balanced budget unless you make these tough calls. and it's the first time people have really gotten that in their mind and understand what it means, what it means to them. so i think people are ready for

that kind of leadership, and i hope that they'll get it out of the congress. >> okay. we've got one more. we have one all the way in the back here. >> governor, scott thomas from the progressive policy institute. >> hey, scott. >> i had a question about creating jobs and encouraging investment at a time of fiscal responsibility. one thing in the transportation bill you just signed created a state infrastructure bank. >> yes. >> which is an idea that's being talked about here in washington a little bit including a bipartisan bill from senator warner and kay bailey hutchison from texas. wondered if you could talk about how that idea really helps stretch public dollars, create investment, jobs at a time of fiscal responsibility and how that helps virginia make the right -- [inaudible] and at the same time keep budgets under control. >> yeah, good question, scott. i can't say it was a original idea. we listened to other states who were doing that. my secretary of transportation -- [inaudible] came out and developed that

idea, and i think it is novel. we've set the framework for $4 billion of new investment in transportation, those of you that live in northern virginia, you'll be complaining about construction, not congestion. so that's the good news for you. and we did it through a combination of advancing debt whh is a great time to borrow. we've got aaa bond rating, great contracts, interest rates are tremendously low, so that was a big piece of it. but the infrastructure bank was the way to take, we took money from our surplus and from an audit that found about a billion four lying around we thought should be put to work building roads and put that in the infrastructure bank, initial capitalization of about 300 million, ultimately a billion, and it's a way to leverage the money better with loans, loan guarantees and grants. so with some of our money and maybe some matches from the local governments or because the loan guarantees we drive down the interest rates at which local governments can borrow.

that somimes is the deal maker in order to get some of these projects done. and so what we're targeting is the local and regional projects that are either currently unfunded or underfunded and make them, make them go. and the local governments know what those are better than we do in washington. we really do believe local governments, the government closest to people does work best, especially when it comes to these kind of congestion relief and transportation projects. and because it's a revolving an fund, it'll be the gift that keeps on giving. as they pay it back with interest, the corpus of the fund will get bigger, and we intend to put more surplus monies in the future, so it'll be a powerful engine if we can get it to that billion over the next three years. i've spoken with a couple members of congress about that, and i'meally gd to see that they're looking at that as a way to, as a way to create some creativity in funding. the other thing we're doing is a lot of public/private partnershipss well. it's a great way to leverage scarce public resources.

the normal dl is about 25% public money, 7 5% private money can get a deal done, and then you pay user fees, tolls. it's a lot more efficient to pay tolls over long rural stretches now than it used to be. with speedpass it's almost transparent, so we think we can leverage that money in a much better way now than we could a while back. so those two together, i think, are going to actually mean it's not just a $4 billion package in virginia, it's more like 9 billion because of the projects we're going to be able to get done. >> all right. i think we're actually about out of our time on c-spa governor, i want to thank you very much for coming and thanks to e21 for making this happen, and good luck to you in the futu. >> thank you, byron. i appreciate all of you coming and thank e21 and the manhattan institute for their work [captioning performed by national captioning institute] [captions copyright national

cable satellite corp. 2011] [applause] >> today, and the campaign 2012 with the campaign chairman from iowa and new hampshire. they discuss how the gop is offering for the new hampshire primary and iowa caucus. at 6:00 p.m. eastern on c-span. >> what i tried to do is tell a story with the visuals instead

of words. i am writing paragraphs with the images. >> with four college surprises, carroll has won the award more than any other journalist. >> the great thing is the variety that we get to experience so many different parts of the human condition. >> more about her craft tonight on c-span's q&a." you can download it podcast on one of our signature programs on c-span.org. monday, michael steele, former rnc chairman about the 2012 presidential field. then joseph boardman, the president of amtrak. later, louise story from "the new york times" on the financial

crisis. it 7:00 p.m. eastern here on c- span. >> you are watching c-span. politics and public affairs. every morning it is "washington journal," our call in the program connecting it policy makers, officials come and journalists. you can see coverage of the house and forums. also supreme court oral arguments. on the weekend, our signature into the programs. on saturday, "the communicators," and on sunday -- "newsmakers," "q&a," and "prime minister's question's." washington -- it your way. the public service and created by america's cable companies. >> federal reserve chairman ben bernanke held the first news conference in the federal reserve have seen 90 year

history. this was after a meeting with the fomc. they addressed rising gas prices and the current budget debate between president obama and congress. this took place at the federal reserve martin building in washington, d.c., and it is about one hour. foster maximum employment and price stability. then i would be glad to take your questions. my goal will be to reflect the consensus of the committee while taking note of the diversity of views as appropriate. my remarks and interpretations are my own responsibility. in its policy statement released earlier today, the committee announced that it is maintaining existing policy, reinvesting principal payments from securities holdings. second, that it will complete its planned purchases of $600

billion of longer-term treasury securities by the end of the current quarter. going forward, the committee will review the size and composition of its securities holdings in light of incoming information and is prepared to adjust them as needed to meet the federal reserve's mandate. the committee made no change today in the target range of the federal funds rate which remains 02 1/4%. the committee continues to anticipate that resource utilization, subdued inflation trends and stable inflation expectations are likely to warrant exceptionally low levels for the federal funds rate for an extended period. in conjunction with today's meetings, fomc but japan's submitted projections for economic growth, the unemployment rate for 2011 to 2013 and over the longer run. these projections are conditional on each participant

's individual assessment of the appropriate path of monetary policy needed to best promote the committee subject -- committee's objectives. a table showing the projections has been destroyed. i will focus on the central tendency projections, which exclude the three highest and lowest projections for each variable in each year. i call your attention first to the committee's longer run projections, which represent participant's assessments of the rate of economic growth, unemployment, and inflation will converge over time under appropriate monetary policy and assuming no further shocks to the economy. as the table shows, the longer run projections for outward growth have a central tendency of 2.5 to 2.8%, the same as in the january survey. the longer run projections for the unemployment rate have a central tendency of 5.2 to 5.6%, somewhat narrower than in january. these figures may be interpreted

as participants current estimates of the economy's normal or trend rate of growth, and it's normal unemployment rate over the longer run respectively. the economy's longer-term rate of growth and unemployment are determined largely by non- monetary factors such as the late did -- the late -- the rate of growth of the labor force in the speed of technological change. aestimates of these rates are uncertain and subject to change over time. the central tendencies as measured by the price index is 1.7% to 2%. in contrast, the longer run outlook for inflation is determined almost entirely by monetary policy. consequently, given that these projections are based on the assumption that monetary policy is appropriate, these longer projections can be interpreted as indicating the inflation rate that pparticipants judge to the

most consistent with the federal reserve mandate to foster maximum employment and stable prices. at 1.7% to 2%, the man the consistory of inflation is greater than zero for a number of reasons. most important is a hint -- making a rate of zero -- could lead employment to fall below its maximum sustainable level for a protracted period. hence the goal of the zero inflation is not consistent with the federal reserve mandate. most central banks around the world aimed to set inflation above zero, usually at about 2%. i turn to the committee passed economic outlook. as indicated in today's policy statement, the economic recovery is proceeding at a moderate pace. household spending and investment in equipment and

software continued to expand, supporting the recovery, but not residential investment, still weak, and the housing sector is depressed. in the labor market, overall conditions continue to improve gradually. for example, the unemployment rate will move down further and payroll employment increased in march. new claims for unemployment insurance to indicators of hiring plans are also consistent with continued improvement. looking ahead, committee participants expect a moderate recovery to continue through 2011 with some acceleration of growth projected for 2012 and 2013. specifically, as the table shows, participants' projections for output growth have a central tennessee of 3.1% to 3.3% for this year, -- have a central tendency of 3.1% to 2.3% for this year. these projections are a little below those made by the committee in january.

the markdown of growth in 2011 in particular reflects the somewhat slower than anticipated pace of growth in the first quarter. the outlook for above-trend growth is associated with the projected reduction in the unemployment rate, seen as edging down to 8.4% to 8.7% in the fourth quarter of this year, declining gradually to 6.8% to 6.2% in the fourth quarter of 2013, well above the central tendency of the long run projections of unemployment of 5.2% to 5.6%. the projected decline in the unemployment rate is relatively slow largely because economic growth is projected to be only modestly above the trend growth rate of the economy. on the inflation front, prices have risen significantly recently reflecting geopolitical developments and robust global demand among other factors. increases in commodity prices are in turn boosting overall

consumer inflation. however, measures of underlying inflation, though having increased modestly in recent months, remains subdued, and longer-term inflation expectations have remained stable. consequently, the committee expects the effects on inflation and higher commodity prices to be transitory. as the increases in commodity prices moderate, inflation should decline to its underlying level. specifically, a participant projections of inflation havene a tendency of -- that is noticeably higher than january projections, before declining to 1.2% to 2.0% in 2012, both about the same as in january. the committee economic projections provide important context for understanding today's policy action as well as the committee's general policy strategy.

monetary policy affect output and inflation with a lag, so current policy actions must be taken with an eye to the likely future course of the economy. the committee's projections of the economy, not just current conditions alone, must guide its policy decisions. the lag with which monetary policy affects the economy provide that the economy focus on meeting its objectives over the medium term, which can be as short as a year or to but could be longer depending on how far the economy is from the conditions of maximum employment and price stability. to foster maximum employment, the committee sets policy to achieve sufficient economic growth to return the unemployment rate over time to its long-term normal level. at 8.8%, the current unemployment rate is elevated relative to that level, and progress toward more no -- more normal levels of unemployment seems likely to be slow.

the substantial ongoing slack in the labor market and the relatively slow pace of improvement remain important reasons that the committee continues to maintain a highly accommodative monetary policy. in the medium term, the committee also seeks to achieve a mandate consistent inflation rate which participants longer- term projections for inflation suggest is 2% or a bit less. although the recent surge in commodity prices have led inflation to pick up somewhat in the near term, the committee continues to project inflation to return to a mandate of consistent levels in the medium term as i have discussed. consequently, the short-term increase in inflation has not prompted the committee to tighten policy at this juncture. importantly, the committee outlook for inflation is predicated on long-term inflation expectations remaining stable. if households and firms continue to expect inflation to return to a man they consistent level in the medium term, increased -- to

a mandate consistent level in the medium term, inflation -- not commodity prices and in nominal wages. thus besides monitoring inflation itself, the committee will pay attention to inflation expectations and possible second round effect. in the aftermath of the crisis, the committee has not only reduced its target for federal funds rate to a very low level, but has also expanded the federal reserve's balance sheet substantially. the committee at this meeting continues its ongoing discussion of the available tools for removing policy accommodation. at such time has actually become appropriate. the committee remains confident that it has the tools that it needs to tighten monetary policy when it is determined that economic conditions warrant such a step. in choosing the time to begin policy normalization, as well as

the pace of that normalization, we will carefully consider both parts of our dual mandate. thank you again, and i would be glad to take your questions. >> mr. chairman, tomorrow we will get a premium first quarter gdp number. your own projections for the year have been downgraded at this meeting. what do you see as the cause of the weak growth, even with the monitor of the payroll tax cuts? >> you are correct. we have not seen the gdp number yet, but we like the private sector forecasters that are -- most private sector forecasters are expecting a relatively weak number, something under 2%. most of the factors that account for the slower growth in the first quarter appear to us to be transitory. they include things like lower defense spending than was

anticipated, which will presumably be made out in the -- be made up in the fourth quarter. other factors like the weather and so on. there are some factors that may have a long term implications. for example, construction, both residential and non-residential, was weak in the first quarter. i would say that roughly most of the slowdown in the first quarter is viewed by the committee as being transitory. that being said, we have taken our forecast down just a bit, taking into account factors like weaker construction, possibly a bit less momentum in the economy. >> mr. chairman, given what you know about the pace of the economy now, what is your best guess for how soon the fed needs to begin to withdraw for normal

stimulus to the economy, and can you say what is your definition of what "expanded -- "extended period" means? >> we are in a moderate recovery and we will look carefully first to see if the recovery is in need sustainable as we believe it is, and we will also look closely at the labor market. we have seen improvement in the labor market in the first quarter relative to the latter part of last year, but we would like to see continued improvements and more job creation going forward. we are also looking carefully at inflation, the other part of our mandate. as i have noted, headline inflation is at least temporarily higher, being driven by gas prices and other commodity prices. our expectation is that inflation will come down towards a more normal level, but we will be watching that carefully and also watching inflation

expectations, which are important that they remain well anchored if we see inflation remained under good control. to answer your question, i do not know exactly how long it will be before the process begins. it will begin on the outlook and on those criteria which i suggested. the extended period language, the condition on exactly the same points, extended period, conditioned on resource slack, on subdued inflation, and on stable inflation expectations. once those conditions are violated or we are moving away from them, that will be the time that we need to begin to tighten. extended period suggests that it will be a couple of meetings probably before action but unfortunately the reason we use the vague terminology is that we do not know, certainty, how quickly a response will be required. therefore, we will do our best

to communicate changes in our view, but that will depend entirely on how the economy evolves. >> mr. chairman, thank you for doing this. this is a tremendous development. there are critics who say that fed policy has driven down the value of the dollar in the lower value of the dollar reduces the american standard of living. how do you respond to the criticism that fed policy has reduced the american standard of living? >> thanks. i should start by saying that the secretary of the treasury of course is the spokesperson for u.s. policy on the dollar, and secretary geithner had some words yesterday. let me just add to what he said first by saying that the federal reserve believes that a strong and stable dollar is both in american interest and the interest to the global economy. there are many factors causing the dollar to move up and down in short periods of

time, but in the medium term, where the policy is aimed, we're doing two things. we are trying to maintain low and stable inflation by our definition of price stability, by maintaining purchasing value of the dollar, keeping inflation low. that is good for the dollar. the second thing we're trying to accomplish is get a stronger recovery and achieve maximum employment. again, a strong economy, growing, attracting foreign capital, will be good for the dollar. if we do what is needed to pursue our dual mandate, it will also generate fundamentals that help the dollar in the median term. >> i cannot help but noticing it has been unsuccessful so far. >> well, the dollar fluctuate. one factor that has caught fluctuation has been quite

extreme, the safe haven effect. for example, during the height of the crisis in the fall of 2008, money flowed into the treasury department. a lot of what you have seen over the last couple of years is the unwinding of that as the economy has strengthened and as uncertainty has been reduced. that is indicative of the high standing dollar still retaining in the world. the best thing we can do to create strong fundamentals to the dollar in the median term is to keep inflation low, maintaining the power of the dollar, and second, to maintain a strong economy. >> many americans are upset that gasoline prices are rising so

fast and that food prices are also going up. can you talk about whether there is anything that the fed can or should do about that, and can you also comment, elaborate on the increase we have seen in the inflation forecast that the fed put out today? >> sure. thanks, john. first of all, gasoline prices obviously have risen quite significantly. we of course are watching that carefully, but higher gas prices are absolutely creating a great deal of financial hardship for a lot of people. gas of course is a necessity. people need to drive to get to work, so it is obviously a bad development to see gas prices rise so much. higher gas prices, higher oil prices also make economic developments less favorable. on the one hand, higher gas prices add to inflation.

on the other hand, by draining purchasing power from households, higher gas prices are also bad for the recovery. they cause growth to decline as well, so it is a double win a coming from higher gasoline prices. ammy -- it is a double when t coming from higher gasoline prices. on the one hand we have a rapidly growing local economy, emerging market economies growing very quickly. their demand for economies including oil is very strong. indeed, essentially all of the increase in the demand for oil in the last couple of years, the last decade, has come from emerging market economies. in the united states, our demand for oil, imports, have been going down over time. the demand is coming from a growing economy. on the supply side, as everybody

knows who watches television, we have seen disruptions in the middle east and north africa and libya and other places that have constraints, supply has not been made up, and that has driven gas prices up quite significantly. this is a very adverse development. it accounts in the short run for the increase in our inflation forecast in the near term. there is not much that the federal reserve can do about cast prices per se -- about gas prices per saye. after all, the fed cannot create more oil. we do not control the growth rates of emerging market economies, but what we can do is basically tried to keep higher gas prices from passing into other prices and wages throughout the economy and creating a broader inflation which will be more difficult to

extinguish. again, our view is that most likely -- we do not know for sure but we will be watching carefully -- that gas prices will not continue to rise at the recent pace, and as they stabilize or even come down, as the situation stabilizes in the middle east, we will have to watch it very carefully. >> thank you. mr. chairman, you stated several times this year that the recovery will not be fully established until we see a sustained period of stronger job creation. first, has it become truly established yet? if not, what is your definition of a sustained. -- a sustained period and stronger job creation? >> we made a lot of progress last august when we began to talk about another round of securities purchases.

growth was very moderate, and we were quite concerned that growth was not sufficient to continue to bring the unemployment rate down. since then we have seen a reasonable amount of payroll creation, job creation, and that picked up in the most recent few months. together with the decline in the unemployment rate, from 10% down to the current rate of 8.8%. the labor market is improving gradually, as we said in our statement. we would like to make sure that that is sustainable. the longer it goes on, the more confident we are giving it is encouraging to see the improvement we have seen in recent months. that being said, the pace of improvement is still quite slow and we are digging ourselves out of a very deep hole. we are still something like 7 million-plus jobs below where we were before the crisis, and so clearly the fact that we are moving in the right direction, even though encouraging, does not mean that the labor market

is in good shape. obviously it is not, and we have to continue to watch and hope we will get stronger and increasingly stronger job creation going forward. >> robin harding from "the financial times." you say in your statement that maugre expectations -- that major inflation expectations remain stable, and you expect that it to run to core inflation at some period. is there anything the federal reserve can do to prevent the public from may be in direand indirectly -- >> again, the inflation expectations that we are concerned about our median term inflation expectations, so we have seen, for example, in the financial markets, in the indexed bond market, or in

surveys like the michigan survey, we have seen near-term inflation expectations rise significantly, which is reasonable, given the higher commodity prices, higher gas prices. for the most part, although there has been some movement here and there, i think it's fair to say that the medium-term inflation expectations have not moved very much. they still indicate confidence that the fed will ensure that inflation in the medium term will be at the mandated consistent level. what can we do? we can communicate and try to make sure the public understand what our policy is attempting to do. to be clear what our objectives are and what steps we are willing to take to meet those objectives. ultimately, if inflation persists or if inflation expectations begin to move, there is no substitute for action and we would have to respond. while it is very important for us to try to help the economy

create jobs and support the recovery, every central banker understands that keeping inflation low and stable is absolutely essential to a successful economy. we will do what is necessary to ensure that happens. >> mr. chairman, what will be the impact on the economic recovery, job creation, and rates on mortgages and others when the fed ends its $600 billion buying program? a quick follow-up is -- will the fed -- how long will the fed to continue to allow for reinvestments? >> as i have noted, as you are all aware, we will complete the program at the end of the second quarter, $600 billion. we are going to do that pretty

much without tapering. we are going to let the purchases and. our view is that based on past experiences, based on our analysis, the end of the program is unlikely to have significant effects on financial markets or on the economy. the reason being that, first, just a simple point that we hope that we have telegraphed and communicated what we are planning to do, and the markets have well anticipated this step. you would expect that policy steps which are well anticipated by the market would have relatively small effect because whatever effects they would have had have already been capitalized in the financial markets. secondly, we subscribe generally to what we call here the stock view of the effect of securities purchases, by which i mean that what matters primarily for interest rates, stock prices,

and so on, is not the pace of ongoing purchase but rather the size of the portfolio that the federal reserve holds. so when we complete the program, as you noted, we will continue to reinvest maturing securities, both treasurys and and b.s., and so the -- we should not expect any major effect of that. put another way, the amount of these, monetary policy easing should essentially remained constant going forward from june. at some point, presumably early in our exit process, we will -- i suspect, based on conversations we have been having around the fomc table -- it is very likely that an early step would be to stop

reinvesting all or part of the securities which are maturing, but take note that that step, although a relatively modest step, does constitute policy tightening, because it would be low in lowering the size of our balance sheet. that being said, we therefore have to make the decision based on the outlook, based on our view of how sustainable the recovery is and what the condition of the situation is with respect to inflation. we will base that decision on the evolving outlook. it depends on the outlook. the committee will have to make a judgment. >> [inaudible] >> is it in the fed's power to reduce the rate of unemployment more quickly? how would you do that, and why are you not doing it?

>> i should say, first of all, that in terms of trying to help this economy stabilize and then recover, the federal reserve has undertaken extraordinary measures. those include obviously all the steps we took to stabilize the financial system during the crisis. many of which were extraordinary measures taken under extreme circumstances. even beyond the steps we took to stabilize the system, we have created new ways to ease monetary policy. we have brought the federal funds rate target close to zero. we have used for word guidance in our language to affect expectations of policy changes. as everyone knows, we have been through two rounds of purchases of longer term securities, which seem to have been effective in easing financial conditions and

providing support for recovery and employment. going forward we will continue to make judgments about whether additional steps are warranted. but as we do so, we have to keep in mind that we have a dual mandate, that we have to worry about both the rate of growth to but also the inflation rate. as i was indicating earlier, i think even purely from an employment perspective, if inflation were to become unmoored and inflation were to rise significantly, the cost in terms of unemployment loss in the future as we had to respond to that would be quite significant. so we have to make sure that we are paying adequate attention to both sides of our mandate. we have done extraordinary things to try to help this economy recover. >> mr. chairman, it is the view of the lot of economists that the second round of quantitative easing has not done much to help the economy.

what positive effects can you point to directly, and if there are positive effects, can you really afford to in the program in june with the unemployment rate still around 9%? >> thank you. first, i do believe that the second round of securities purchases was effective. we saw that first in the financial markets. the way monetary policy always works is by easing financial conditions, and we saw increases in stock prices, we saw it reduce spreads in credit markets. we saw reduced volatility. we saw all the changes in financial markets, and quite significant changes that one would expect if one was doing an ordinary easing of policy via a reduced federal funds rate. we saw the same types of financial market responses in the first round, which began in march, 200 we were able to get the

financial easing that we were trying to get. we did get very significant easing from this program. you would expect, based on decades of experience, that easing financial conditions would lead to better economic conditions, and i think that the evidence is consistent with that as well. as i discussed in more detail in my humphrey-hawkins testimony in the beginning of march, between late august when i first indicated that the federal reserve was seriously considering this an additional step, and earlier this year, not only the federal reserve but many outside forecasters, upgraded their forecasts. we saw strengthening labor market conditions, higher rates of payroll, job creation, etc. now, the conclusion therefore is

that the second round of securities purchases could only be validated if one thought that this step was a panacea, that it was going to solve all the problems and return us to full employment overnight. we were clear from the beginning that while we thought this was an important step, at an important time when we were worried about a double dip, worried about deflation, we were very clear that this was not going to be a panacea, that it was only going to turn the economy in the right direction. we published some analytics which gave job creation numbers which were significant but not enough to completely solve the enormous jobs problem that we have. again, relative to what we expected and anticipated, i think the program was successful. why not do more? this is similar to the question i received earlier.

the tradeoffs are getting less attractive at this point. inflation has gotten higher, inflation expectations are a bit higher. it is not clear that we can get substantial improvements in payrolls without some additional inflation risk, and in my view, if we are going to have success in creating a long run sustainable recovery with lots of job growth, we have to keep inflation under control. so we have got to look at both parts of the mandate as we choose policy. >> mr. chairman, what is the right response is high oil prices persist? on the one hand they push inflation higher. on the other, they could hurt the economy by hitting spending. in the current environment, what is the best strategy? >> we are going to continue to see what happens.

our anticipation is that oil prices will stabilize or tend to come down. if that happens, or if at least oil prices do not increase significantly further, then inflation will come down and we will have -- we will be close to our medium-term objectives. as we look at oil prices, as you point out, we have to look at both sides of the situation. i do think that one of the key things we will be looking at will be inflation expectations, because if the medium-term inflation expectations remain well anchored and stable so that firms are not passing on at least on an ongoing sustained basis these higher costs into broader prices, creating a broader inflation in the economy, as long as inflation expectations are well stabilized, that will not happen, then we will feel more

comfortable just watching and waiting and seeing how things evolve. if we fear that inflation expectations look like they are becoming less anchored, we would have to respond to that. >> you have talked a lot in the past about the problem of long- term unemployment. can the fed effectively reduce long-term unemployment? >> first, you are absolutely right. long-term unemployment in the current economy is the worst, really the worst it has been in the post-war. . -- in the postwar period. we know the consequences of that can be very distressing, because people who are out of work for a long time, or their stskills can atrophy, they lose contact with the labor market, with

other people working, the networks they have built up. we saw it in the european experience in the 1980's and the 1990's, that a high period of unemployment with long-term unemployment spells, can lead to launder unemployment for a more protracted period. that is one of the reasons the federal reserve has been so aggressive. by getting unemployment down, we hope to bring back to work some of the people who have been out of work as long as they have. in that respect, try to avoid the long-term consequences of people being out of work for months at a time. that is part of the reason we have been as aggressive as we have. as the situation drags on and as the long-term unemployed lose skills and contact with the labor market or perhaps just become discouraged and stop looking for work, then it becomes really out of the scope

of monetary policy. at that point, job training, education, and other types of interventions would probably be more effective than monetary policy. >> do you think that is out of the scope of what the fed can do? >> indirectly, if we expect that we can help the economy recover, and help job creation proceed, some of the people who get jobs will be those who have been out of work for a long time. that being said, we do not have any tools for targeting long- term unemployment specifically. we can try to make the labor market work better, quality speaking. >> peter barnes of fox business network. last week standard and poor's put the united states debt on a negative watch for the very first time ever. what is your reaction to that, and are you concerned, are you worried that the united states will lose its aaa credit rating?

>> in one sense, s&p's action did not really tell us anything because anybody who reads the newspaper knows that the united states has a very serious long- term fiscal problems. that being said, i am hopeful that this event will provide at least one more incentive for congress and the administration to address this problem. i think it is the most important economic problem, at least in the long term, that the united states faces. we currently have a fiscal deficit, which is simply not sustainable over the longer term. if it is not addressed, it will have significant consequences for financial stability, economic growth, for our standard of living. it is encouraging that we are seeing efforts on both sides of the aisle to think about this issue from a long run

perspective. it is not a problem that can be solved by making changes only for the next six months. it is really a long run issue. we are still a long way from a solution, obviously, i think it is of the highest importance that our political leaders to address this very difficult problem as quickly and as effectively as they can, and to the extent that the s&p action gets a response, that is constructive. >> mr. chairman, john barry. in the past there have been times when fiscal policy has tightened and the federal reserve has chosen to ease its policy and response partly to the extent of the economy at the time. congress appears intent at this

point in cutting spending significantly, might restrain the economy as it appears to be doing in britain where they are following a similar path. is there anything the fed can or should do if indeed there are large budget cuts sometime in the next 18 months? >> first, let me say that addressing the fiscal deficit, particularly the long run unsustainable deficit, is a top priority, and nothing i would want to say would be construed as saying that anything other than a temporary. it is very important that our leaders address this issue. i would say that the cuts that have been made so far don't seem to have had very significant consequences for short-term economic activity. my preference in terms of addressing the long-term deficit is to take a long-term perspective. it's a long-term problem.

if congress and the administration are able to make credible commitments to cutting programs or in the way changing the fiscal profile going forward over a long period of time, that is the most constructive way to address what is in fact a long- term problem. if the changes are focused entirely on the short run, they might have some consequences for growth, and in that case the federal reserve, which is as always going to set monetary policy to meet our mandate, we will take those into account properly. but so far i have not seen any fiscal changes that have really changed our near-term outlook. >> thank you, mr. chairman. i would like to ask about the uncertainties in the global economy. in the meetings, the committee

noted that the development increased uncertainties. what is the assessment of those risks for uncertainty such as the tragedy in japan or the crisis in europe, and the crisis in the middle east? what would be the potential effect on the u.s. and the world economy? >> one of the things that our projections includes, we are only producing the forecast today with our -- within three weeks, we will include the detailed projections as we normally do. one thing we included the views of the participants on the amount of uncertainty in the forecast going forward. i think i can say without too much fear of giving away the secret that fomc participants see quite a bit of uncertainty in the world going forward, and a lot of that uncertainty is coming from global factors.

i have talked about middle east, north africa developments, which affect oil prices. conditions in emerging markets which affect commodity prices and other things. european situation continues. we are watching that very carefully. obviously you asked about japan. let me first say that i have had a lot of contact with my japanese counterparts, the central bank governor and other people in the japanese government. we collaborate with them on the foreign exchange intervention, as you know. we are very admiring of the courage of the japanese people in responding to these situations, and of the central bank of japan, which has done a good job in providing liquidity and helping to stabilize financial markets in what are very significant disturbances to

the economy. the implications for japan have been discussed at some length, and i think the governor recently talked about them. in the near term there will probably be a decline in japanese public reflecting the destruction, reflecting electricity problems, etc. we believe that will be relatively temporary and that the economy will start to come back, but this is a major blow and it will take a lot of effort on the part of the japanese people to restore the economy and to recovery for the united states we are looking at this very carefully. thus far, the main impact of the japanese situation on the u.s. economy has been through supply chains. we've noted some automobile companies, for example, that have had difficulty getting certain components which are manufactured mostly or entirely

in japan. and that has led a number of companies to announce that they would restrain production for a time. there may be some moderate effect on the u.s. economy but we expect it to be moderate and to be temporary. again, the most important issue here is the recovery of japan and our good wishes go out to the japanese people and their efforts to overcome the adversity that they're facing. >> mr. chairman, you have often stressed, as you indeed did again today, the importance of keeping inflation expectations low and stable, to keep inflation itself under control. but irrespective of inflationary expectations or psychology, isn't it possible that the fed's policy providing monetary tender, is that --

>> well, we view our monetary policies as being not that different from ordinary monetary policy. it's true we have used some different tools but those tools are being used through different financial conditions and we have a lot of experience understanding how financial conditions, changes in interest rates, changes in stock prices and so on, how they affect the economy. so we're monitoring the state of the economy, watching the evolving outlook, and our intention, as is always the case, is to tighten policy at the appropriate time, to ensure that inflation remains well controlled, that we meet that part of our mandate while doing the best we can to ensure also that we have a stable economy and a sustainable recovery in the labor market. so the problem is the same one

that central banks always face which is choosing the appropriate path of tightening at the appropriate stage of the recovery. it's difficult to get it exactly right but we have a lot of experience in terms of what are the considerations and the economics that underlie those decisions. so we anticipate that we will tighten it at the right time and that we will thereby allow the recovery to continue and allow the economy to return to a more normal configuration at the same time keeping inflation low and stable. >> many of the commercial partners of the united states are very concerned about the evolution of your foreign exchange rate. if in one particular case the dollar would sink to a terrible level which would hurt the u.s.

economy and in good prospect for the world economy because it effects so many people, would you consider changing your monetary policing according to that threat? >> as i said earlier, we do believe that a strong and stable dollar is in the interest of the united states and is in the interest of the global economy. our view is that the best thing we can do for the dollar is, first, to keep the purchasing power of the dollar strong by keeping inflation low, and by creating a stronger economy through policies which support the recovery, and therefore cause more capital inflows to the united states. so those are the kinds of policies i think in the medium term will create the conditions for an appropriate and healthy level of the dollar so i don't think i really want to address a hypothetical, which i really don't anticipate, because i

think the policies that we are undertaking, notwithstanding short-term fluctuations, will lead to a strong and stable dollar in the medium term. >> mr. chairman, anthony mason shes cbs. this is that rare news conference that actually makes news before it happens. can you talk a little bit about your decision to take this historic step of holding a news conference after a fed meeting? what choices did you make? and facing the media comparing facing congress? >> thanks, mom. well, the federal reserve has been looking for ways to increase its transparency now for many years and we made a lot of progress. it used to be that the mystique of central banking was all about not letting anybody know what you were doing.

as recently as 1994, the federal reserve didn't even tell the public when it changed the target for the federal funds rate. since then we have taken a number of steps, a statement with -- includes a vote. we have -- we produce very detailed minutes which are released only three weeks after the meeting which is essentially a production lag. we now provide quarterly projections including long-run objectives as well as near-term outlook. we have substantial means of communicating through speeches, testimony and the like, and so we have become i think a very -- a very transparent central bank. that being said, we had a subcommittee headed by the vice chair of the board looking for different steps to take to provide additional transparency and accountability. and the press conference was -- came right to the top because this is an area first of all

where global central bank practice includes now many central banks do use press conferences and we have some experience with them. and secondly, it does provide a chance for the chairman, in this case, to provide some additional color and context for both in this case both the meeting and the projections that are being made by the committee. so we thought it was a natural next step. we're not done. we're continuing to look for additional things we can do to be more transparent and more accountable, but we think this is the right way to go. i have always been a big believer in providing as much information as you can to help the public understand what you're doing, to help the markets understand what you're doing and to be accountable to the public for what you're doing. now, of course, the fed didn't do this for a long time and i think the counterargument has always been that if there is a

risk that the chairman speaking might create unnecessary volatility in financial markets or may not be necessary given all the other sources of information to come out of the federal reserve, it was our judgment after thinking about this for sometime that at this point the stay digsal benefits for more information, meeting the press directly outweighed some of these risks and i think over time, you know, we'll experiment to try to make sure that this is an effective venue as possible. >> last question. >> mr. chairman. i wrote a book looking at 800 years of financial history. . i discovered when you have a financial crisis it takes a lot longer for them to recover. are people expecting toosm from the federal reserve in terms of

helping the economy recover and has that hurt -- >> ken rogoff was a graduate schoolmate of mine. i played chess against him which was a big mistake. i enjoyed that book very much. i thought it was very informative. as you say, it makes the point that as an historical matter recoveries following financial crises tend to be relatively slow. now, what the book didn't really do, though, is give a full explanation of why that's the case. certainly part of it has to do with the problems in credit markets and my own research when i was in academia focused a great deal on the effects of problems in credit markets on recoveries. other aspects would include the effects of credit problems on areas like housing and so on, and we're seeing all that, of course, in our economy. with that said, another

possible explanation for the slow recovery from financial crises might be that policy responses were not adequate. that they -- that the recapitalization of the banking system, the restoration of credit flows and monetary and fiscal policies were not sufficient to get -- to get as quick a recovery that might otherwise have been possible. and so, you know, we haven't allowed that historical fact to disswayed us from doing all we can to support a strong recovery. that being said, it is a relatively slow recovery. you can identify reasons for that. credit factors are one. another very important factor is that, you know, this was triggered by a bubble in the housing market and the housing market remains very weak, and under normal circumstances, construction would be a big part of the recovery process.

there are a number of factors and now we're seeing high oil prices and a number of things, there are things which are holding the recovery back. so there are good reasons for why the recovery is slower than we would like. at the same time, it's very hard to blame the american public for being impatient. conditions are far from where we would like them to be. the combination of high unemployment, high gas prices and high foreclosure rates is a terrible combination. a lot of people are having a very tough time. so i can certainly understand why people are impatient. i guess the only thing i can say is while the recovery process looks likely to continue to be a relatively moderate one compared to the depth of the recession, i do think that the pace will pick up over time and i am very confident that in the long run that the u.s. will return to being the most productive -- one of the fastest growing and

dynamic economies in the world. and it hasn't lost any of the basic characteristics that made it the preeminent economy in the world before the crisis, and i think we will return to that status as we recover. thank you very much, and thank you for coming. >> today, a look at campaign 2012 with the republican party chairman of island and new hampshire. they will discuss how gop presidential candidates are preparing for the new hampshire primary and iowa caucuses. that is at 6:00 p.m. eastern here on c-span. monday, michael steele, a former republican national committee chairman, talks about the 2012 gop presidential field. after that, joseph boardman,

the president of amtrak, on the future of writers ship. then lee's story on the prosecution -- then louise story on the prosecution process. >> president obama has announced a number of changes to national security team with current cia director leon panetta replacing robert gates as defense secretary and general petraeus taking over the cia. host: caller[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> every morning, it is "washington journal." weekdays, watch live coverage of the u.s. house. weeknights, congressional hearings and policy forms.

on the weekend, you can see your signature interview programs. you can also watch our programming in a time at c- span.org. it is all searchable at our c- span video library. c-span, washington your way. the public service treated by america's cable companies. -- created by america's companies. >> and mike mullen made remarks and military leadership and developments in the middle east, north africa, and asia. this briefing is hosted by the national press club. it is one hour 9 minutes. >> admiral michael mullen is here for the fifth consecutive year. thank you for being here. it is early, earlier than we

normally start. so a double thank you for this. i was thinking that we could view this as good practice for tomorrow and we have to give up even earlier for the royal wedding. [laughter] we may not offer as much glamour as their royal wedding, but i am sure we will have a lot of interesting substance to deliver here today thank you to admiral mullen be here. admiral mullen has been here serving your country for 40 years, from the naval academy in 1968 and going off to fight in the vietnam war. he has been the chairman of the joint chiefs of staff for about three and a half years. before that, he was the chief of naval operations. he has served as the very top of our nation's military leadership under two presidents, democrat and republican alike.

that says something about how they view him as being a straight shooter and a very talented man. it has also been a time -- a decade of continuing war, and endless war. he has had the job of running those wars. the world is not a very peaceful place. the embers are hot in north africa and the middle east and in iraq and afghanistan, north korea, iran, and we are keeping a wary eye on china as well. of course, that is not to mention the continuing threat of stateless terrorism, all the -- or the threat of cyber attacks. but, of course, he's also concerned of the leave and the forces down there and

putting pressure on many defense establishment. and these are some of the topics we'll address with admiral mullen, again, welcome and thank you for being here. before we get to the hot news of the day, today's headlines and yesterday'sheadlines, in recognition in like five months or somethi in the end of your terrific military career, i thought i'd start with this question. in your long service and especily in your tenure as in your joint chiefs of staff chairman, what did you see your principal accomplishments and strengths? and on the other side of the coin, what has particularly concerned you about the military operations, its reputations and its country and the world. >> from its accomplishments i guess i'd put at the top of the

list having to go into iraq in 2004. and assuming the job of cno in 2005 and 2006 were the navy at that time is putting thousands of sailors on shore and coming in as chairman just as we initiated the surge and remembering very well actually as if it were yesterday how bad things were there and i was in iraq last week. and it's night and day. it's truly been an extraordinary shift change and the creation of an opportunity for 26 milli people that just didn't exist a few years ago. and that came at great price, obviously. and that is a reflection, i think, of our military's ability

to adapt and change from the classic conventional force to -- i call it the best counterinsurgency force in the world. but it's also more important -- it's a refleion of the extraordinary young men and women who serve, 2.2 men and women, active guard reserve who serve in a joint way many of us could not imagine just a few years ago. and i'm very proud of them. they could not have succeeded without the extraordinary matchless support of their families over the course of this decade. families are obviously critical, always have been critical. but from my perspective what's happened in the last decade is they've become important. and even when you're back from

deployment, thetressors that they're under as well as those who arectually deploying some believe even more because of the worry every single day wheyou have your husband or your wife in the fight. so probably the single biggest area that i am most proud of and just privileged to serve for every day are those -- are those young men and women who make a difference. >> and on the other side of the coin, while you've perhaps started to answer this question, what has concerned you about -- about the military and the status of the military? i know you've talked about the isolation of the military, if that's the right word, only 1% of the families who are actively participating in the military

but there may be other things as well. >> well, two immediate thoughts. first of all, i've spoken consistently about the needsor the military to stay apolitical, in what is seemingly increasingly a politicized world, not just the united states. and i think a lot of that has just to do with the 24/7 news cycle and the need, i think, to ensure that we are absolutely neutral. and we serve the civilian leadership, and we need to be very much mindful of that in how we speak about it in how we engage, whether you're active or whether you're retired. so that's something i think we just have to constantly keep out in front of us to make sure we're not coming off track here. i've been in too many countries

where that was not the case. it's a fundamental principle for us as a country that we need to make sure that is very clearly and cleanly sustained. and then secondly is what you mentioned, tim. i do worry about the contact we have with the american people. the coming up next we have with the american people. we're less than 1% of the population. we come from fewer and fewer places in the country. and i worry about the things that we don't do anymore. through brac we've moved out of neighborhoods all over the country so we're not in the churches, coaching the teams in the schools, living in the neighborhoods. so the relationship or the understanding is often created by just what's in the media and i don't expect that's going to change in terms of physical size. we're not going to move in.

i think we have to recognize that as a challenge. and the reason i'm so concerned about it, is america's military must stay connected to the american people. and if we wake up one day and find out that we're disconnected or almost disconnected, i think that's a very bad outcome for the country. so we all to have work on that. that's part of what military leadership must do and also i think in being a two-way street connecting with leaders and the ameran people throughout the country. and one of the great avenues for that our guard and reserves who live throughout the country, who serve, obviously, out of communities, local communities, and i think we can do a better job connecting there to ensure that -- that that very important connection between the american people and our military is healthy.

>> we have one more question on this. there seems to be at least here in washington a great deal of support for in particular wounded warriors and people who are coming back from having served and getting out. getting out of the service. is that something that is -- is on the surface -- does it go deeper? do you think that sentiment exists across the country? >> i think it goes much deeper than here. i have traveled fairly extensively over the course of the last year, year and a half to meet with local leaders in big cities and in small rural areas. about a month ago i was out in boise idaho a month ago. i find, one, the american people support their men and women and that i ever families, two, that the local leadership that i meet

with is -- they're passionate about connecting with our veterans as they return home and their families. and i've tried to work to be able to better make that connection. the way i describe it here in washington, our yellow pages in the pentagon is still about 4 inches thick. those of us that work in the pentagon don't understand it. if i'm out in rural america and i have a good idea, how do i connect with someone in the pentagon or the va to try to get that idea across the goal line to help and support our young men and women, a they are by and large- most of your young men and women are not going to stay in the military, make it a career, although we have a substantial number that do, they are returning at a time at a very robust gi bill so tens of thousands of them are going to

school and i think there are generations -- i call them -- they're wired to serve. so they're in their mid 20s. they've seen sme difficult times in some cases clearly. but i think they offer a gradually potential in the country and with the local investment customized locally which must be because i don't think dod can do it. i don't think va can do it. i think the three of us, dod, va and communities across the country, working together can focus on employment, health and education. and i think with a small investment there, they'll take off and provide decades of service. they, i find, while some of them, and particular the wounded, their lives may have changed but their dreams haven't changed. they still want to go to school, start a family, put their kids in good schools. typically two incomes and they'd like to own a piece of the rock so what i've tried to do is connect with community leaders

in ways to be able to creat the knowledge of those who are coming home, who they are and where they're going and what the opportunities are with those who have given so much. part of this focus has been for the families of the fallen, those who paid the ultimate price. and sometimes we have to be more active in pursuing them in terms of support because their lifeline has been that military member. so the services are all very focused on that and i know in community after community after community they all want to say thanks and to make a difference in their lives so that they can -- they can literally put food on the table and take off for the next chapter of service wherever it might be.

>> at the same time, you've also expressed concern about homelessness. you referred to what happened after vietnam in that regard. and we have the new effort by michelle obama and stan mcchrystal who support military families. what's the impetus of that as you see it. >> well, many of the issues those -- the military leadership and our spouses have been working on have actually now been raised to the level of the president anthe first lady. and the vice president and dr. biden -- dr. biden and mrs. obama have come to together in this initiative called joining forces. and it really is support our military families. and one of the things they do they give a great voice a it's back to this connection piece so

i'm very encouraged by that. and it's focused on the needs of our families. andaising the awareness and the opportunity to -- to reach out to them. they are a wonderfully -- military families, a wonderfully independent group. they won't ask for help. it's part of what gets them -- you know, allows them to be as strong as they are, and yet there are -- there are -- we live in a time that has been particularly stressful, tenth year of war, multiple deployments. we see -- my wife deborah sees thousands who have pt dramatic stress symptoms. kids, children, who are exhibiting the same kind of thing. and again, it's back to this connection. so i really do applaud the efforts. there's been a lotf work that's gone into it and i'm very thankful that the president and mrs. obama and the vice president and dr. biden have

taken this on. it's really a big deal. >> let's turn to the top of the news here. we've just learned that leon panetta and david petraeus will be cia director. you've worked withboth. you're not going to comment of the nominations before they're made by the president. but hypothetically -- [laughter] >> are there tea leaves to be read in the appointment of a military man to head the cia at this particular point in time? >> actually, even hypothetically i can't even answer that question. [laughter] >> again, you said it very well. i mean, obviously, the policy is anything before anything official is announced, i really can't comment on it. suffice it to say, that i've

worked very closely with leon panetta as well as with dave petraeus. in dave's case in 2004, and i have a great admiration to both men, who are wonderful public servants and their service in their current positions have been extraordinary, and then we'll see what happens. >> okay. i won't ask my second question on that. [laughter] >> let's turn to the budget. the budget trends today and what they portend. you have said that the greatest long-term threat to america's national security is america's debt. you also have said, i believe, the years of pentagon budgets including the off-budgeting of the wars has destroyed budgetary discipline in the pentagon.

budgets already tight. personnel reductions have already been taken with senior officer abolished and ses positions as well. i know that you're concerned and many military leaders are concerned about the claim of personnel on resources in the defenseepartments and the health costs, benefits costs associated with that. how do you view the budget going forward. what are the key challenges as you -- as you see, if you do see, a period of declining defensbudget? >> well, i do see that. and the reason i talk about the debt as the single biggest threat to our national security is -- it's basically n very complex math. i think the worse situation that

we are in as a country, fiscally, the likelihood of the resources made available for national security requirements continue to go down is very high. this is the third time i've been through this. we did it in the '70. we did it in the '90s. when you look at the data going back to the '30s, our defense budget goes up and down. and it does so on a fairly regular basis. so certainly this is not unexpected from my point of view. what i've seen and i've been in the pentagon most over the last decade, with the increasing defense budget, which is almost double, it hasn't forced us to make the hard trades. it hasn't forced us for prioritize and it hast foed us to make the analysis and it hasn'torced us to get to a point in a very turbulent world of what -- what we're going to do and what we're not going to

do. and so i see that on the horizon and we need to be paying an awful lot of attention to that. i have said the defense needs to be on the table. and i'm comfortable with that. that said, i'm required to articulate our national security requirements and certainly advise the president and others but particularly the president about how we best can achieve them with the force that we have and we find ourselves at a particularly difficult time for, let's say, modernization of our air force. we are running out of life in those assets that we bought in the '80s under the reagan administration. at a time where i don't have to tell you or this audience where our national security requirentsontinue to challenge us. if we'd been sitting here a few months ago and