gangster government." they will find out about the shadow party. "the revolt," you read these books and get some idea of what is going on in our government. host: any response to that caller? guest:sure, there is a book called "radical in chief." i am about the media and trying to create a more strict and open media or the democrat media complex does not get to control the america narrative. i don't get credit for having helped create a upington post. the left does not want to deal with this. i'm trying to report what the mainstream media does not

piforgford farmer settlement. it is a money for the scandal in which the actual black farmers who used to bring this case forward were scattered over by the usda, not once but twice, scrubber by president obama said that people could get $50,000 checks who have never got money -- who have never formed a day in their lives. it is a multi-billion dollar scandal that is going from black t farmerso indian farmers with more billions of dollars and female farmers. this is a redistribution of wealth so that the democratic party can have a stranglehold on minority votes. it is offensive and it has been done at the expense of the actual farmers that they claim to be benefiting. it is all at big government.com. host: thank you for being on

"washington journal." you can watch in this weekend on book-tv. you can find a full book-tv schedule at book-tv.org. it kicks up on c-span 2 at 8:00 a.m. tomorrow morning and goes for 48 hours of nonfiction books and daughters. also, at 10:30, erskine bowles and alan simpson, the national commission on fiscal responsibility cochairs will speak at a seminar that will be live in about 28 minutes from now. this afternoon, president obama will be at fort campbell, ky at 3:50 p.m. eastern time as he talks to the troops. enjoy this may weekend. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> this weekend on c-span 2, the origins of government from early tribal society to the first modern state in china and europe. andrew breitbart discusses his transformation from liberal to self-described conservative cultural warrior. he will be interviewed by armstrong williams. david gold field will talk about the role of religion leading up to the civil war. look for the complete schedule at book-tv.org and get our schedules in your in box.

>> you can access our program any time with the cspan radio iphone app. it is all commercial free and you could listen to our signature interview programs each week and is available around the clock wherever you are. downloaded free from the app store. >> the unemployment number rose to 9% in april but employers added more than 200,000 jobs. for the third straight month, this is the biggest hiring spree in five years. we may hear more about that from comments from the president who is in indianapolis for today touring the allison transmission plant. we will have coverage of that and we will have the president at fort campbell later today, live at 3:50 p.m. eastern. he will be back in texas next week and he will speak on immigration in el passer next tuesday. yesterday, the campaign for the white house in 2012 got under

way with the south carolina republican's hosting a debate last night with the gop candidates who have declared we got some reaction to that debate and we will show you as much as we can until our live coverage at 10:30 gets under way. crawford, what did we learn at the g.o.p. debates. >> ron paul -- a lot of new candidates were introduced. the great thing about these early debates, when the big names don't participate, you get to meet new people. herman kang surprised me. group frankoup, the luntz had on fox overwhelmingly supported him. the father of godfather pizza.

he is probably a longshot, obviously. he is articulate and plainspeaking. he is like ross perot. like donald trump without the crazy hair. >> r paul comes the closest to obama. guest: drudge did a screaming headline on the poll. i saw this yesterday. ron paul has been around a long time. he has a feverish following. he raised a million dollars -- i

learned his supporters are very supportive. i think that voice, that libertarian voice, questioning the role of government, is a worthy debate to have. a lot of americans believe this. a lot of things were said that wouldn't work in a general election. it is good to have that debate. the ytaley say things the short- shots aren't afraid to talk about. host: we talk about 2012 presidential politics. the republican field. divided by potical

affiliation. twitter.com/cpsanwj. craig crawford, of cq rolecall. guest: he used his time to introduce himself. a lot of republicans are flocking to him. the big story was people who aren't there. mitch daniels, newt gingrich. this wasn't a real debate for the real race. when we get to the crux of it -- we see a different dynamic.

guest: he is a reluctant candidate. i thrwow in a question. who do you like? mitch daniels name shows up among the conventional crowd. i think the governor of indiana has fared well and seems to have a following. unless he is planning a game -- host: were insiders surprised by

haley barber's decision? guest: this reminds me of 1992, when clinton got in because the big names didn't. clinton only ran because al gore chose not to. mario cuomo did not get in. they were afraid of george bush. they thought he was a shoe-in. clinton proved them wrong. it is looking like that on the repubican silican side. host: crawford is the guest. first tweet for them. if kaine and paul go third party, is this a risk?

guest: i would say this wld help obama. host: i think that tweeter meant that. guest: i think that would be a big boost for obama. they have enough juice going so that they'd stay in the party. host: first call. clearwater, florida. republican line. caller: ihavi have two issues. i will be concise as ican. this thing with the assassination, it is an old diversion.tric ok of he leans on his strategists on his staff, on how to divert the

thoughts of the american people, or the fact we sold our country to china. and we owe everybody substantial amounds of money. astrnterest ins nomical. maybe obama thought he should press the panic button and see, what could we do that would be considered monumental enough to divert the american minds off the financial situations. guest: you say obasama's killin gis g is a diversion, but he spent months planning this.

he was quite methodical about this. whenever a preside is trying to divert the public, the public will pay attention to what they want to. host: 90% approval rating for bush afte rthr the gulf war. obama has gotten a bouncerom the killing of bin laden. it is a poll that showas the high single digits, 9% for obama's approval rating. the same george w. bush got

after capturing saddam. if that holds, and that is the bump, it is surprising. the iraq w didn't have the consensus for hussein than fo r this. the iraq war was fairly unpopular. bump.d expect a grat eeater it will fade into memory. it helped him in the short run. he may have more umph and on the military front -- it will be hard to say he is weak kneed. a lot of people had said that. host: i get your reaction from chris in 'bama.

anyone who can't kiss grover's ring -- guest: the issue is powerful. none of these republicans who are serious and seriously taken are off the tax -- are on the wrong side of the tax issue. you have governors here with tax records, gary johnson of new mexico. i thought he was very weak. i was surprised. his record should be fairly appealing, other than wanting to legalize marijuana. but i thought he was a little unsteady in that debate.

a bize i thought his delivery last night was halting and un stasteady an tentativeseemed.

he complained about not getting enough questions, which he wasn't. but that always looks bad. host: waukegan, illinois, betty, democrat. caller:'m a 72-year-old african-ameran born in greenville, south carolina, my memory is so horrible i don't go back for family reunions. the debate was good to see the republicans have an african-american there. i wish donald trump had a come. thank you, have a good day. guest: that is an -- i'm glad you bring that up. as i watched herman cain it would be if they responded to

the first black president with their own black nominee. he is a long shot because he has no political background though he tries to make an asset out of that because they elect on experience and how is that work being out. i think he has a strong style. i was talking about gary johnson being so unsteady. herman herman cain seemed like the more veteran politician in the room. he has been a talk show host so he had a little practice. host: others have suggested allen west and herman cain be the g.o. pfpp. party. did anyone ask candidates if they approved of new g.o.p. governor attacks on public employees and public commons?

guest: they got into that a little bit. that was asked, the whole wisconsin thing. i didn't -- there were not any real memorable responses. most of the focus was in that section on unions. and whether there was union bashing. the candidates seemed to back away from wanting to attack unions. one questioner made the point in the past republicans of reagan notably succeeded by appealing to union voters, not necessarily on union issues but getting ose votes and going out of their way to bash unions might, looking at history, might not be too producti. host: next call is baton rouge, louiana, roy, republican. caller: i find it very interesting that ron paul is so consistent with the audiences at

the debates. he got applause almost on every answer. guest: even for heroin. caller: it seems to me that there are -- they are determined to make him out to be a caricature almost like a pariah. he is never taken seriously to be the republican nominee. i don't get it. if he got on stage and debated any of the democratic nominees, which will be obama, i think he would hold his own and he would get the american people to see that the primary cause of our financial woes is the way we conduct our monetary policy by giving our money -- print being our money and regulating to private bankers. if we don't cut the head off the snake it is never going to change because we will never be

suref our own situation. why don't they take ron paul seriously? guest: i think because he is so radical to conventional thinking in washington. he is taken seriouslby a lot of voters but i agree, i think the media establishment and washington political establishment -- when he says things like abolishing the federal reserve, that seems radical to washington thinking. i think is threatening to them. there is a lot of threatening talk from ron paul to the conventional establishment media and political, so there is an effort to marginalize him. but i take him seriously, i always have. i think the financial meltdown really plays into his hands. that is an example of the thing he had been talking about for years. host: do you think ron paul has a chance of getting the

nomination? guest: i'm beginning to think this could be a year when repuican voters figure, kind of like a goldwater year, where they figure obama is going to win anyway, we are going to make a statement. we are going to send somebody that scares the hole out of everybody - cares the hell out of everybody because we know we can't win. that might not be a conscious vote on the part of voters but when goldwater was nominated that was really the birth of the conservative movement in the republican party. many republicans knew they couldn't win that election but decided if we are not going to win we are going to make a statement and gold water is our man and he went out there and said -- what was it? violence in the name of liberty is no vice or something like that. maybe one of the callers remembers. host: do you think it is

president obama will be re-elected? guest: i think -- i don't think it is inevitable but as i look at the republican field, it feels like that. and obama is a great politician. when he is on the stump he can turn it up. here is why i think he gets re-elected. there were a lot of new voters, minority, ethic voters who came out it droves in 2008 to elect him. they disappeared in the midterm election. you look at a lot of races around the country, virginia, north carolina, they didn't show up, which is why democrats did so poorly. my theory is when he is on the ballot again they come back. all about obama. they are not into the democratic par party. unless they are disillusioned.

but i don't think so. i think there is a wave of voters that come back for him. host: could ralph nader do damage on the left to president obama? guest: i think a lot of democrats have become save have i to the point that ralph nader harm in the past. i have talked to a lot of voters whoegretted voting for him because they realize they electe republicans because of that. host: we have this tweet. woodbine, maryland, jordan on the independent line. we are talking 2012 presidential politics. caller: i'm a serioustifirst-ti. my statement is more about marginalizg candidates such as ron paul when he polled above

paul leand cnn showed him the bt against obama and he raised almost a million dollars yesterday alone so why isn't he a serious contender? guest: i think he might be taken more serious this time. i think the media in the past marginalized him but those factors that you mentioned are plain to see. he has been around long enough. what comes with that, though, when you are not marginalized and taken seriously is more scrutiny. and there are things in his past i don't want to delve into some of that conoversial stuff abo about some of the racist things that were said way back when on his behalf mostly, it seemed. but there are a lot o things

that were touched on. but from what i have seen he can mostly survive scrutiny, i gu s guess. unless there is something we don't know. he has been around long enough i think we know mostly everything there is to know. host: i have this tweet. was this sponsored by the south carolina tea party? guest: he was taking the 10 commandments out of alabama. i thought he would run lt time. that is when he was better known. i think the tea party is at a point where they need to reach out to some people that are more credible who actually get their and broad en support. host: 3400 tweets in --

baltimore, democrat on with craig crawford talking politics. caller: hello. you mentioned this briefly earlier. i think someone tweeted about grover rquest i think the new house republicans had to sign a pledge where they would not raise taxes and new senators. my question to you -- i didn't watch that debate -- i wanted to verify whoever runs on the republican side, i can't imagine the republicans not touching the tax taxes, period. i want to verify if you think that whoever is the nominee for the republican party would have to sign a pledge not to raise

taxes if they are going to be representing the republican party for 2012. guest: well, the trouble with that is, you know, george w. bush sr. famously said no new tax taxes, didn't say he wouldn't raise the old ones but everyone took that to mean he would never raise taxes. and when he did that is one of the biggest factors in his losing re-election. and circumstances change, so any candidate who has a real shot at winning who doesn't feel like he doesn't have to sign that pledge is not going to sign it because they don't want to bind themselves if circumstances chan change. cost them some votes, but i think a strong candide of the republican party can win without signing that pledge.

host: i have this tweet. from ohio, republican line. caller: good morning. i have a statement more than a question. first of all, i was waiting as a republican american voter and i said let's see if we can stand president i la like obama because i won't vote for him because when i call the white house comment line and his secretary laughs, i call and compliment him like hit and strike and 21st century warfare in libya and what he did with osama but he is still a democrat and i believe sarah palin can beat him. we did great last night. like i told president obama on the comment line if i had my way, it would be sarah palin and

mitch daniels and that is who he would face in 2012. look like sarah palin is going to run though. host: you don't see it at all? guest: the best sign to me was i don't think she went to new hampshire on the become tour that. would have been a no-brainer when she was touring for her new book. she didn't schedule a stop in new hampshire. that suggests to me she is not serious abt running for president. in the polling, for such a big name in the republican party, she does surprisingly poor numbers in the polls of republican voters given her attention. it suggests to me t media is more interested in lower as a candidate. host: this is diane from new hampshire with her e-mail.

guest: the problem that candidates face, the better known candidates, the well known candidates, face in the early debates is if they go to them -- i'm saying this is their thinking, i don't necessarily agree -- if they go to them they draw more attention to the lesser known candidates. there is more covera. so a tim pawlenty gives more attention if they go and their name recognition is already so high they don't need the debate for the exposure. that is the calculus that goes in it. i happen to think mitromney made a big mtake by not going because this was in south carolina and south carolinians, the republican party is very strong and tightknit and i'm

guessing they took offense of him not coming and that is a critical state ithe republican primary process. even though it is not in the first tier of iowa and new hampshi hampshire, south carolina is the ratifier of whoever the nominee will become. that was a about -- that was a bad state to skip. host: what else have you heard about money raising among the republicans? guest: the congressional and senate committees haven't done as well as democrats, i believe, in the last i saw. i think republicans in the last midterm did pretty well. buthat really plays into the republican hands is this supreme court decision allowing corporations to basically just spend all they want.

that money really flowed t >> we are live now at the annual general membership meeting of the investment company institute rid of formal national debt commission cochairs erskine bowles and alan simpson will be talking about the commission blasted recommendations to improve the budget -- commission's recommendations to improve the budget and the long- term economic outlook. this is just getting underway on a c-span. >> i might even say it affect us profoundly because there are profound decisions that need to be made. i will turn it over to paul. will introduce our distinguished guests, and you are in for an informative and enjoyable session.

>> thank you very much. [applause] we are excited to hear from these two gentlemen, because the issue they've tackled not only wisely but courageously, will have the greatest impact on the economy and financial markets of any issues we face today. when president obama signed the executive order creating the national commission on fiscal responsibility and reform, he said, and i quote, "alan simpson and erskine bowles are taking on the impossible. they are going to try to restore reason on the fiscal debate and come up with answers." well, come up with answers they did, much to the discomfort of everyone else in the nation's capitol, with straight talk about the deficit problem and the sacrifices that will be needed from all sides to put the nation's finances back on a sustainable course. alan simpson, who describes himself as the color man of the team, represented the state of wyoming, where he earned a

reputation of common sense and blunt talk. in 2006, he said his fellow republicans "had rocks for brains,"because they refused to work with democrats. the democrat he worked with, the numbers man on the team, is erskine bowles. he is a southerner, and not a westerner, but equally dedicated to public service. this is his third go at fiscal problems. we hope the third time is the charm good as chief of staff to bill clinton, he helped to shepherd the 1997 negotiations that led to the last balanced budget as president of the university of north carolina, he tackled challenges for the 17- campus system. i will put slots on the screen to illustrate the seriousness of the problem -- slides on the screen to illustrate the seriousness of the problem that the commission addressed.

this chart that shows department of the federal deficit under three different scenarios. the top line, with the least red ink, is the baseline that the congressional budget office uses. according to that line, 10 years from now, at the annual deficit will be only $763 billion. that is the rosy scenario. the other two lines are more realistic. they show what happens if we extend the 2003 tax rates and keep discretionary spending at a constant share of the economy. with those, trillion-dollar annual deficits continue to grow over the next decade. what he's been for the national debt -- the total overhang of public debt. the bar to the left on the next slide is the actual debt for 2010, and the next shows the debt held by the public under the congressional budget office

baseline. under that pact, the debt will double could we will accumulate more debt in the next decade than we did in the first 221 years of the republic. that is the most rosy scenario. as you can see, the most realistic ones increase the debt further. under either of those, the debt will exceed the size of the economy. with that as a prologue, let's get straight to the heart of the matter. mr. bowles, you have described the past as $2 in spending cuts for every $1 of tax hikes. can you give us the broad outlines of the commission plans to? >> sure, and thank you for having al and me here. i guarantee you will enjoy the color man in a lot more than a numbers guy. these charts are great. if you go back to the previous chart and you look at the

enormity of the problem we face, the commission's plan takes the deficit during that time period down to around $279 billion. we cut the deficit in half by 2015, and we cut it to about 3/4 in 2020. we take the deficit-to-gdp ratio -- we cut in half and take -- takeat 2.3% in 2015 it down to 2.3% in 2015. we take it that to around $16 billion, as opposed to $26 billion, and take it to around 65% of gdp and below 60 by 2023. al and i, when we started

working on this, i truly felt we were doing this for our 15 grandkids. i have in mind, he has six. the more we were doing it, the more we realized we were not doing it for our grandkids, but for our kids, and that the problem was so big that we were doing it for you all, for us. i think we face the most visible in fiscal crisis in the history of the country. i think it is as clear as the nose on my face that the fiscal path we are on is simply not sustainable. when i asked to describe the situation we face, to me is like a cancer, and it is a cancer that is truly going to destroy this country from within. let me give you one example of the arithmetic on how compelling the problem is today. if you look at last year's

budget, you can see that 100% of the revenue in this country was consumed by mandatory spending and interest on the the debt. mandatory spending is principally medicare, medicaid, social security. that means every single dollar we spend in this country last year on education, infrastructure, high-value-added research, on these two wars, homeland security, every dollar was borrowed, and half of it was borrowed from foreign countries. that is a formula for failure. if we take the do-nothing theory and just do nothing over the next decade, we will be paying over $1 trillion a year in annual interest costs. that is $1 trillion by cannot go to build roads, cannot go to build schools, cannot go to create the next big thing in

this country. to make matters worse, it is going to some foreign countries to build their roads in their schools and their businesses. as we looked at it, it was easy to see that this was not a simple problem. this is not a problem that we can grow our way out of. we can have a double digit growth over the next two decades and not solve this problem. it is not a problem we can tax our way of solely. all the people who say let's just tax the rich are not paying attention. raising taxes will not do a durn thing to change the demographics of the country. if you want to try to do with taxes, you have to raise the corporate rate to 80%, the capital gains and dividends rate to 50%. how many businesses will be it starting with that kind of tax

rate? zero. we cannot solely cut our way out of it could all those guys who go on television who say that we will cut our way out of this but let's not do anything about medicare or medicaid or social security, and we cannot cut defense, and of course we have got to pay interest on the debt -- if you exclude all that, you will have to cut everything else by 75, 80%. but we had to do is do something that was realistic, that was reasonable, that was balanced, and as you said, paul, what we did was cut the budget by about $5 trillion, $1 of which comes from revenue, $3 which comes from cutting spending. that results in the deficit reduction that we put forward. we had six basic principles that

we will get into it today, but we did not want to do anything that would hurt the fragile economic recovery. we actually get our cuts and spending back to 2008 levels, but we don't do it until 2013, because we did not want to affect the gradual recovery. second, we did not want to do anything that would hurt the truly disadvantaged and you will see a number of ways to try to avoid that. third, we wanted to make sure we state it safe and secure, so we made sure that the cuts we make a defense or reasonable. admiral mullen said that the greatest national-security problem is not a terrorist, it is the debt, because it will consume our resources. we wanted to make sure we invest in education and infrastructure, but in a responsible manner. we reform the tax code,

simplified the code, use the proceeds to reduce the deficit. and to bring down rates. lastly, what we tried to do was make sure that we really did cut spending, and we cut spending not in just a few places, but in the tax code, we cut spending in defense, non-defense, entitlement programs, wherever we could. >> senator, said that the commission -- senator, you have said that the commission's plans the slaughter's all the sacred cows in the field. you go after defense spending, medicare, medicaid, mortgage deduction, you name it. what was the thinking behind that? >> first, let me thank you, and let me say what a delight it is due out this amiable -- to have this amiable, and in throughout

this joyous activity. [laughter] it is a thrill, and some the e- mail is so exciting you can hardly believe it. [laughter] phone calls to my home are just monitored -- no. [laughter] let me say that when we sat down with the president, everything is on the table, including your new health care. he said, "that is fair." but it took us three months to establish stability in the commission. the first few weeks or "who is the biggest spending president in the united states before this one?" answer, george w. bush. never vetoed a single spending bill in the first 6.5 years until it can to stem cell research. republicans said, well, this guy has outstripped in three-to-one.

erskine and i had a great idea, to 28 two-person report, just the two -- to do a two-person report, just the two of us. there are too many conditions that do mush. the fact that we talk in our position, we got more people on board -- we toughened our position, we got more people on board. "god, you are not going to touch this." "yes, we have to." we hit everything. it is not about cutting social security. it is not about the cat food commission -- those people are goofier than a peach orchard . [laughter]

in the year 2037, you go up to the window and get a check for 22% less. if that isn't stupid, i miss something. -- i have missed something. erskine and i go all over the country, and we say that if you spend more than you earn, you lose, and if you spend a buck -- the american people have this figured out, and that government, democratic and republican, are stupid. you cannot borrow 41 cents for every buck you spend. we had them all. -- hit them all. defense -- how many contractors do you fund? it is a range, between 1 million and 10 million.

narrow range there. conrad said he tried for 10 years to get an audit from the defense department, and they finally said, "we are unauditable. you cannot audit us because we don't know what is their." all of them are incendiary. here is one -- don't throw anything. i am a veteran. if i stayed in the reserve another few years, i would be a military retiree. 20 years. there are 2.2 million of them. 2.2, that is a very small cohort. they have their own health-care plans called try care. -- tricare. not part of the va, takes care

of all their dependents, and the premium is $470 a year, no copay, and it cost you any $53 billion a year. billion ad me 53 year. try to touch it? you are cremated. at some point, for heaven's sakes, this is the stuff we have to deal with. why shouldn't it be means tested? many of those military retirees were never in combat. it is guys who could act in the national guard for 15 to 20 -- who could have been at the national guard for 15 to 20 years did you use in motion, killed, or racism to kill off any -- you use emotion, guilt, racism to kill any reasonable prospect.

socials a credit, -- social security, cat food commission, it is unbelievable. try to stop me, i will. [laughter] is a bunch of fakery going on, and it is hard to watch for us. >> one of the great concerns that many americans have is that more and more of our debt is held outside of the united states by foreigners, which means that our nation is in debt it to countries whose interests are not always going to coincide with ours. this show where holdings of u.s. treasurys are concentrated. china, hong kong, taiwan, $12.5 billion. how much does it worry you that our growing debt is moving overseas? >> it worries me a lot, and i am

sure it worries all of you all. t's take china -- they own something between $1.30 trillion and $1.50 trillion of our dead. -- debt. they are in the process of diversifying their currencies. can you imagine -- don't think about if the dates sell our securities -- if they sell our securities. what if they just stop buying? what would happen to interest rates in the country? how would you like to have the future of your country in somebody else's hand, a country that, by the way, is quickly moving from having an export- driven economy to having a consumption economy, a country

that just by its nature, will have fewer demands for the u.s. dollar, a country that is not spending time buying our currency by buying hard assets with our currency -- but buying hard assets with our currency. i am very worried. a very big problem that we have to face up to quickly. >> what erskine said a few weeks ago, we have at 8 treaty with taiwan to protect them against china. we will protect taiwan and to do that, we will borrow money from china to do that. [laughter] >> we will defend them, we just have to borrow money from them to do it. crazy. >> the overwhelming question from everyone at this juncture is that washington do anything

without experiencing eight fiscal train wreck? shortly after your commission was announced, alan greenspan offered his view. "i think that type of budget agreement put together by alan simpson and basketba -- and erskine bowles -- the only question is will it be before and after the bond market crisis?" in a lot of people here know about the bond market and don't like to put that together with "crisis." >> i was honored to spend 18 of my years in the u.s. senate, with bob dole,-the leader, and robert byrd on the other side -- magnificent leader, and robert byrd on the other side. i learned that we never really respond when you are in congress. we react. we react when the hammer is

down. it is always the most distasteful thing you don't want to touch, so you wait and you put it off and you hold hearings and you go back and you calm your constituents. this game is pretty well over, because it is all different. is not 10 years ago. we do not have the overhang and globally. we are not ireland, we are not greece, where not a trickle or spain or italy -- we are not portugal or spain or italy, but people know about that and have heard about that. the debt limit extension will be the true moment of truth because are many people who are going to insist that they will not vote for that under any circumstances unless you cut spending. if you come out with the fact that you cut foreign aid, earmarks, nancy pelosi's aircraft, the czars, whoever they are, and congressional

pensions, we are going to get their. that may classify -- may pacify their constituents, but the bond market people will say, "we thought you had the guts to go after it medicaid and social security and the defense budget, and you didn't." when the bond market guys come up, they don't have any thoughts about compassion. it is not your uncle henry trying to get an extension on the mortgage. it is hammer time. >> what i worry about is, first of all, thinking we will get something done because of the debt ceiling crisis, and we can talk about if you would like what will come out of these current negotiations. i think we of got congressman ryan out there with the plan that is real, that is serious, just like paul ryan, honest and

straightforward. if you spend any time with paul, you would describe him as an honest and straightforward and sincere guy. the president has a plan out there now that takes about $2.50 trillion out of the budget, it takes $4 trillion of the 12 years budget. it really is, if you look at it on a comparable basis, only $2.50 trillion. our hope is that this gang of six, six brave senators, will be able to get together hopefully next weekend and put together a plastic that is basically our plan with legislative language and improves upon it. if they do, i hope you give them great support. i think the risk we run is if

nothing does happen. you all -- i have spent a good portion of my life in the markets. you know as well as i do it that when the market lose confidence, boy, it does happen and it does happen quickly. let's say we don't do anything out between -- we don't do anything between now and the election, people say, let's just wait until the election -- there is some risk, i cannot tell you how big it is, but with social security, medicaid, we cannot do anything there, republicans saying we cannot do anything on the revenue side, i will protect this and that, people site wait a minute, they are really not by to address this problem, and then you could see something quickly. i do think the debt ceiling presents us an opportunity to do something and do something -- take a substantial step forward. i think congressman ryan and

others are right that we are not going to solve the whole problem between now and then, what we can take a big step forward. >> president obama said that the commission of you that was structured in a way to rise above partisan concerns. bipartisan supermajority, 18 commissioners, to vote for the plan yacht described here. -- plan you have described here. the president and congress have put out with plan for deficit- reduction. president obama, told dollars trillion in savings, congressman ryan, $4.40 trillion over 10 years. the budget is usually constructed in a 10-year when no, -- window, the kind that congressman ryan's plan operates

in. that is the convention, respected on all sides. how seriously can we take the president's's if eastridge is it if hesident's plan stretches out to 12 years to keep his target? are these for governing or for the campaign? >> we think it was a mistake. there is another joyful part of this -- erskine is called a fake democrat. i have been called "a republican toady covering obama's fanny so he can destroy the republican party." another joyous appellation. [laughter] what the hell were we talking -- [laughter]

defense, theouch president didn't really touch defense. that was sad. both erskine and i told the president that it would and better not to invite ryan, because he took hammer blows. a president should have waited to announce for reelection after the extension, because now everything he does is tainted until after the election. you cannot get up and talk about getting there, and by partisanship, and joe biden will help, and he will do a great job, and that will be great -- if you cannot do that, go on the .tump, and rip ryan there is a 24/7 news cycle.

he went out to detroit and just blasted. then, ryan does that, and they do, and they try to nail john boehner and eric cantor. it is a poisoned well. when the president did give his speech, paul ryan left immediately, and james borrowing got up, got out, and tried to talk to him. paul ryan said you poisoned the well the well was not poisoned. we were working through stuff. now, you have this joe biden, god bless the joke, and a gang of six, because now there are -- joe, and the gang of six, because now there are seven people that do not care about doing anything on both parties. >> let me contrast these two plans. the ryan plan is basically what paul ryan is it is a serious,

straightforward, honest plan. as allen said, he made two pretty big decisions, decided not to cut differencing -- defense spending, in fact increasing defense, and also simplified the code, and got rid of attack expenditures, which are about $1.1 billion. he used all of that money to reduce rates. the commission used about 10% of the proceeds of the elimination of tax expenditures to reduce the deficit. having made those two decisions, and wanted to get $4 trillion in deficit this auctions, it forced into the -- deductions, it forced him to cut non-defense spending and other mandatory spending more than we did, and

in my opinion, it places a disproportionate burden on the truly disadvantaged. he also, on health care, made to the legal pretty big decisions. on medicaid, he decided to block grant medicaid to the states under the belief that you will give more governor's flexibility, they will be able to operate it more it efficiently and effectively, cover the same number of people at a much lower cost, and he says about $750 billion by doing that. on medicare, he did what a lot of your company's head-on -- he turned it from a defined benefit plan, to a defined contribution plan, and he did that for all people less than 54 years old. that, principally, is what his plan does, and how he gets to $4 trillion in savings.

the president came out with a budget in february, and i think it is fair to say that budget was not taken very seriously by anyone. subsequently, he has come up with a budget framework which allen was referring to a couple of weeks ago, and that is basically compared to congressman ryan's budget, more like an outline. the best part is he did say the words four trillion. that is a substantial step forward. it is, however, over 12 years, and back-end loaded, so when you compare it to the ryan plan and the commission's plan, it is probably more like 2.5 trillion. in fairness, it does not really stabilize the bat, and the debt as a percentage of gdp gets up to around 77%, and never gets to primary balance, which is a

deficit-to-gdp ratio of around 3%. but, he kind of contracts that by putting in a fail-safe provision which says if the debt does not stabilise and is not on a downward path as a percentage of gdp by 2014, then he will put in an automatic, across-the- board cuts that will take the deficit down to two 0.8% of gdp. however, in those cuts, he excludes all of the income support programs that are in mandatory spending, food stamps, workers' compensation, ssi, medicare, medicaid, and social security. from my viewpoint, as we look at what could come out of these budget negotiations, i like having a fail-safe provision

with a trigger that makes across-the-board cuts, but i would like to see those cuts ratchet down over time there as an example, you might start at two 0.8% in 2015, and then work your way down to 1.5% by 2020. i would want to have a trigger that forced those cuts to include all spending, both in the tax code and even the entitlements. the democrats would not want to cut entitlement spending. republicans would not want to cut tax expenditures. we would be able to use the money to reduce the debt. by forcing them both, you would have them use a scalpel rather than an axe. >> after the president clinton's speech, after both parties have committed to budget the

president's speech, both parties committed to the budget. standard and poor's released a rating. this is what you have to say. "if anything, they understate the extent of the problem. we are a lot further along than we were one year ago, but what we need now is action. if s&p understated the rest, what you see happening to the cost of our debt? >> if we do nothing, i think it is catastrophe. i think we face the biggest, most predictable economic crisis in history. i think it will make the crisis we just went through, which not many of us predicted, it will make it look like child's play. if you think about what happens in a crisis like this, when interest rates rise dramatically and quickly, what happens to inflation, what

happens to businesses and the cost of capital, and the availability of capital as they get crowded out of the markets, as we have the government having trillion dollars deficits as far as the eye can see -- i think it could be unspeakable. that is why i think we need to step up to this problem. we need to put politics aside. we need to pull together, rather than a part, and do what the gang of six is doing -- senator kent conrad, tom coburn, michael, senator dorgan, -- michael crapo, senator dorgan, and, help me out. >> you have warner. >> those six guys to come together and do what is right for our country. we could solve this problem today, and america could compete with any country in the world

because our balance sheet problems are not nearly what the problems are in other countries as they face a people that do not have the right to vote, or do not have democracy. but, our problems with our financial structure are so deep that if we do not face up to them, we will see this problem, and see it really, really quickly. >> one of the reasons we were delighted to have you join us today is that it appears part of the difficulty has to do with the myths that surround this area. it is clear that the seriousness of our budget situation has not registered with many americans. i had the opportunity to meet with senate budget committee chairman kent conrad, and he emphasized that to make in our discussion, and here is a statement that he made in april of 2011, just last month "the only thing that enjoys majority

support among the american people in terms of spending cuts is to cut foreign aid. foreign aid is less than 1% of the federal budget. when you are borrowing 40 cents of every dollar you spend, you're not going to solve the problem cutting foreign aid." i think i would put waste and fraud in that same category. the budget, as you have already discussed, is brought was split between mandatory spending -- medicare, medicaid, social security, interest on the debt, and discretionary spending. how much of what you have in mind in your plan depends on cuts in discretionary spending, and what impact would that have on americans quality of life? >> i think it is 12%. when you chop around in the discretionary budget, and do not

forget the biggest part is defense. it is $700 billion. it is huge. kent conrad is a warrior, and an amazing man. but, when he has been doing his work, he has been doing this for 20 years, let me just say that the greatest myth of all is social security -- that somebody stole 2.5 trillion dollars. cheap, corrupt politicians stole the reserves for social security. the greatest myth is this -- hang on tight, i went to the aarp and set a fine line, stop me -- social security is not a retirement program. it was never intended as a retirement program. it was set up in 1937 and 1938 to set up -- to take care of people in distress. it was to give them 43% of the

replacement rate in their wage since -- wages. life expectancy was 63, and that is why they set retirement at 65. the beginning of the ponzi scheme. and never had anything to do with disability insurance. was not added to it. that will be broken eight years. disability insurance is being used and over use right now to be broke, and guess who will take care of that? the fed. it was never intended to take care of children in college up to 22. we never built for that to read what i was a freshman in the university in 1950, 16 people were taking into the rich were paying into the system, and one taken out today, 3.1 are paying into the system, -- taking out. 3.1 people are paying into the

system today. we changed the price cost index. the law said that if inflation was 0, the cola would be zero, so what happens? inflation is low, and they do not get a cola, and the cry is like the whale of a title to -- whale of a coyote. what did you do with people when you talk of a life expectancy today is 78.1, not 63, and we say we are going to raise the retirement age to 68? it is 66 now. if you cannot raise the retirement age to 68 by the year 2015, there is no hope. if you cannot get yourself organized to figure out how to take your social security in the

year 2015 at 68 -- here is the key. the loss of social security is so clear that the schedule benefits cannot be paid, and that is a clear word, they will give only the payable by the fed. now, that may sound like garbage, but that is a real gut- rancher, because that is the one that will hit in 2037. last may, there was less coming in than going out. so, you get to this point, and you'll get payable benefits, and not scheduled benefits, and you can sue, moan, and shrieks, and it will not do you a lack of good. that is to feed to me. we went to the aarp, and said we think you ought to help. there are 38 million people bond together by a love of airline discounts. [laughter]

>> and insurance discounts, and their magazine has picked up. it is a thriller sex over 50 is a thriller, and now they're into sex over 60. their ads are about how to get something. they don't have to pay for, medicare will. read the aarp magazine. it is a marketing instrument. are these people patriots or marketers? that is a harsh statement, and i intend it to be. they have not helped one bit. they say we have two modest things to suggest, we say what are they, and we are still waiting. they hammer as daily in their magazine. anyway, that as a myth.

social security is what you say -- is the most noble experiment in the world's history, and it is the most thing you pay into with your income, but for heaven's sake, if we cannot get these modest things, change the bend point, big time language nobody understands, but it does mean we had the guys who have the most, we hit the more, progressively, which is what everybody asks for. the greatest, distressing is you have not seen anything yet. they have to talk about social security, or anything is a fake right now. when that happens, the savagery and the disgust that will reign over your head about what we are doing to the poorest segment of society when we said the lowest 20%, we will give them 125% of poverty pavement, and we will give the seniors more than they

get, they will get a 5% over 80. we have done everything we can in our proposal, and finally we say if you cannot read and .rite, forget our web site if you cannot believe -- understand what we did to make this program solvent, and have to believe the people that make money. 30 million people paying $12 dues, how much do think you have a role in around at the aarp? they are 1.5% of all mailings in the united states carry one. -- states. 1.5%. [laughter] >> mother never told me. you could have saved me. >> [laughter]

>> you anticipated one of my questions. i wanted to do the discretionary spending. >> well, that is right. you do that. i got that off my chest >> and you did a darn good job of it, by the way. [laughter] >> we cut the discretionary budget by $1.70 trillion over the next 10 years. we cut it proportionately between the defense and non- defense. the good thing is when people ask us specifically, what would you cut, we can't tell used which we could tell you exactly what we would cut, dollar for dollar. we also put a fire wall in between defense and nondefense, so a future congress could not go in and take all the cuts out of the defense or non-defense. as i said earlier, we tried to

get our spending back to 2008 levels, by 2013. i think the republicans are right, you can get it back there quicker, but i think you run the chance of disrupting what i believe is a very fragile economic recovery. we cut health care by about $500 billion. we cut other mandatory spending by about $250 billion. we cut social security to get it to 75-year solvency. >> obviously, the biggest driver in this whole situation of the deficit is mandatory spending, and as president obama pointed out in his april 13 speech on our current course, by the year 2035, health-care social security and interest on debt will consume every dollar we are paying in taxes. the fastest growing item on that

list is health care what medicare being the largest component. both plans tackle medicare, but they do it in different ways brian would turn medicare into premium support -- ways. representative brian would turn it into premium support. he believes that it will rain in the cost and inflation. the president's council on big savings from slowing the growth of medicare, but was going to rely on a board of exports. your commission called for a long-term global budget that limits growth and federal health spending to the growth rate of the economy plus 1%. it does contemplate a premier support plan, but only has one option. this is the thorniest part of the debate. how confident are you that any of these approaches will bring

health-care spending under control? >> i am positive we have to bring health care spending under control, because it is the big enchilada. it is the biggest fiscal crisis challenge we face. if you look at medicare, medicaid, and the chip's program, it is about 6% of gdp right now, and will be 10% before you know it. that does not count words that most people do not even understand -- the to a $76 billion it will take to do the "dot fix." what the democrats have tried to do is they have this new affordable health care act which they believe the pilot programs will slow the rate of spending to gdp + 1%. alan simpson and i did not by that, neither did the commission members who voted for that plan,

so that is why we put in the other $500 billion of cuts, a specified to specific cuts, some to medicare, medicaid, and other health-care programs. our hope was those cuts would slow the rate of health care spending to gdp + 1%, but we had our doubts. therefore, we put in this global cap that would contain the rate. we said you will have to take on some enforcement mechanisms that will be tough to swallow. you will have to do such things as probably move the medicare eligibility age to match social security. you will have to look at block granting and medicaid, lookit premium support plan like alice rivlin and paul ryan recommended that you will have to look at a robust option, or a single player plant. all of those have to be on the table with these other steps do

not work. we did try to do some things that would test whether or not some of the things that paul ryan is recommending what works. as an example, in our plan, we test market giving the governor's allow more flexibility in 10 states over the next decade -- the governors of lot more flexibility in 10 states to see if it would bring down the cost of health care while still covering the disadvantaged. we also decided to test a pre and support plan to see if it would work with that group of people before we took it to the market as a whole. as paul said, paul ryan keeps all of the cuts in the affordable health care plan, but goes to block grants in medicaid, and a premium support plan in 10 years from now for

people 55 and other. the president's feeling was instead of making additional cuts, he cut about $300 billion of additional spending out of medicare and medicaid, and that he said he is when you have is enforcement mechanism as an independent payment advisory board, a group of experts that will make recommendations as to how we bring down the cost of health care, and congress can either except it, or not accepted. if they do not accepted, then the secretary of health and human services would come up with something. if she cannot, then there recommendation goes into effect. we will have to do something like this, because it you do not, health care will literally consume every single dollar of revenue that is being generated in the country today. >> we could not even wrap our arms around it.

it is on automatic pilot. you can not put anything in there that makes the congress do something in 10 years or five because we will not do it. i say we. we never did. the dock fix was never done and it never got done because they are pretty tough. these things never happen. now, you have another thing that should not be mentioned, but you have to, with the supreme court decision, you have an on limited glut of money coming into campaigns, and it will be just hang on tight. there will be anonymous eds. there will be no limits how we got to the -- limits. how we got to the subject of a corporation being the same as a citizen under the first amendment, that just opened the treasury doors, not the treasury, the unions, businesses, you will have to

get on board. this is a monstrous thing. there is a way to do something about health care honestly, and i will tell you what it is. do not say anything. i will not grant. you reduce money to the providers. there is less money for the physicians. he began to affluence test the patience. you make the patients pay more in copiague, and get hospitals to keep one set of books instead of two. you get medicaid to quit working over the governor's to see how much they can get, and there you go. that is a start. do you think any of that will ever start? forget it. >> i would add my personal opinion. the current system does not make any sense. we spend twice as much as any developed, but -- country as any -- on a per-capita basis and gdp.

on outcomes, we rank 30th. we have the greatest technology, and the greatest innovations, but nobody is able to take advantage of it, and we have these 50 million people out there that do not have health care insurance. it seems to me there are some basic things we have to do. we have to get all of these people in the game. we need to get health care insurance for everybody. if they get healthcare -- they get health care, but they just get in the emergency room, where the cost is five or 10 times the amount of the doctor's office, and do you know who pays for it? you do. you pay for and higher taxes and higher premiums on your own insurance policies. i would like to see everybody have a medical home, and access

to a primary-care physician. today, that is impossible because we do not have enough primary-care physicians, because we do not pay them off, so we need more primary care physicians, mourners practitioners, -- more nurse practitioners. in my opinion, we have to make sure that everybody who gets health care has some skin in the game. on insurance, i would say we have to make sure that all of these people, all of the drug companies, are going to have to make a sacrifice. the drug companies are going to have to allow medicare to compete with the drug companies. today, the va, as alan was talking about earlier, actually pays 40% less than medicare

does, which means you are paying an excess amount. in addition, i think all people are going to have to make greater use of generic drugs we will have to have malpractice reform, so doctors no longer practice defensive medicine, the way they do today. i think we will have to switch from paying on a fee-for-service basis, to pay down and out come basis. lastly, we have to do something about this end of life scenario, where most of the money is spent on health care. so, we have some big problems to address. [applause] >> somebody in the commission said anytime you go to the doctor, regardless of who you are, you ought to slap $5 on the table, and let them know that you're getting the best health care in the world for $5 per bag disappeared quickly, because that is evil.

that is less than a movie ticket. everybody would have skin in the game. there is no skin in the game won a third party payor is paying, and a beautiful woman in wyoming at 90, had a heart attack, she lasted 10 days. video for the best care on earth, and -- they gave her the best care on earth, and 10 days later, it was $350,000. add that up, and we are not wanted to care a pre-existing conditions. we assume there will be in tough these are not cruel things. this is reality. this is where it is headed. this is totally on automatic pilot. >> we need to address the medigap so everyone has skin in

the game. my state of north carolina plays this silly game with a tax what they charge providers. then providers will be allowed to charge more to the state for medicaid. by the way, since it is the federal government that has to match it, it will cost you about $50 billion over a three- year period. it would make a lot of sense for the taxpayer to get rid of the gains. >> if i did move this along to the subject of taxes. that is an extraordinarily important point, too. obviously, one of the biggest issues -- i just went to see if we can take a quick comparison between the two. can we get the slide? here we go. president obama increases

revenues $1 and in taxes for $3 in spending cuts. and you see the rhineland plan cuts taxes $2.3 trillion, repeals health care tax reform for the top-rated 1%. president obama accordingly says he will raise taxes. house republicans say they will cut taxes, which seems to be digging deep budget hole deeper before they start to fill it. the president calls for $1 in new taxes for every $3 in spending cuts. how do you get there? >> 8 is easy. -- it is easy. forget the bush tax cuts. what we have is the most

archaic, anti-competitive -- you could not dream up a worse tax code than we have in this country to complete in a global marketplace where capital is fluid across borders. what we do is broaden the base, simplify the code, and eliminates or greatly reduce these tax expenditures. it is $1.1 trillion in the tax code. everyone in congress is bragging about getting rid of $16 billion worth of earmarks, when there is $1.1 trillion in the tax code. we use 90% of the money to reduce rates and 10% to reduce the deficit. what does that mean? we could set rates at 8% of 2 $70,000, 14% up to $210,000, and

the maximum marginal rate of 23% above $210,000. he could also take the corporate rate to 26%, and we can put in a territorial plan that will regulate all those trillions of dollars and capture those he's back to this country -- fees back to this country. i think that is the kind of plan that truly make sense. it is broadening the base. it is lowering rates. it generates about $100 billion of new revenue we will see each and every year to reduce the deficit. >> i think we were stunned when we found $100 billion in the tax code which has had no oversight whatsoever. there is no oversight. they did find in there. they were on their way in. they all have something to do

with something that had a very powerful force in the lawmaking institution to inject that into the tax code. packwood used to speak of it. the amenity. it is a stunner. nk them all. you can get rid of some things. if you want it, paid for it. quit making promises you cannot keep. >> we would keep the earned income tax credit, the child tax credit, we change the mortgage interest deduction to 12% credit in gives you a 12% credit on charitable contributions. if you do that -- because all of this things cost money -- the example we came up with, you

take the same break points and rates up to 12% of 2 $70,000, 22% of 2 $210,000 and have a maximum rate of 28%, and still get the corporate rate down to 26%. again, all of it costs money. someone has to pay for it. as you look at adding that each of these tax expenditures, someone has to pay for it. it is just spending, but spending in the tax code. >> i wish we had more time. i am sure everyone has benefited enormously from the point of view you describe in the information about these things you have imparted. we thank you very much for your leadership. the last slide is of a quotation from winston churchill to the effect of "the americans will always do the right thing, after

they have exhausted all other alternatives." i will let you respond to that. >> i will be more nuanced. when we see each other, we know we have done america a great service and achieved tremendous success, because we have effectively pissed off everybody in america. [laughter] [applause] it's true. >> somebody asked me the other day, if everything is so bad, why are interest rates higher today? i said, because we were looking at the horse in the glue factory. >> i was a governor. i like that one. >> i am convinced we will do the right thing because we have to.

we have no other choice. if we do the right thing and get our fiscal house in order, then this country can compete with any country on the globe. if we do not, we are going to be a second-rate power before you know it. let's do the right thing. let's put some pressure on our congressmen and senators to step up and put politics aside and pulled together instead of pull apart and it lets address these hard fiscal problems and make good choices. thank you. >> thank you very much. [applause] >> [unintelligible] [applause] >> gentleman, thank you very much indeed. >> we are going to bring you the

comments of the sec chair mary schapiro onion just a minute. we want to remind you that the u.s. house is coming in for pro- forma session at noon eastern. back to earlier today, this membership meeting of the investment company institute. they heard from the securities and exchange commission chairman mary schapiro who gave information on regulatory changes resulting from the dodd- frank law. we will show you as much as we can before the house comes in. >> i am sure someone will show us where it is. oh, it is right here? oh, lunch is here.

♪ >> good morning, everyone. and a warm welcome to you. i hope you were able to join us last night. it was an extraordinary musical offering by the original cast of "the jersey boys." it was terrific. heading into our 53rd general membership meeting, it has been terrific so far, but we will save the best for last. we have dynamic sessions planned for today, with a look at pension policy run the world and of fiscal responsibility commission to kick off today, i am honored to introduce our next speaker, mary schapiro, the chair of the united states securities and exchange commission. she will be taking questions after her remarks, so please

write your questions on the blue cards that have been provided in hand them to our staff. she was appointed by president obama, unanimously confirmed by the united states senate, and sworn in during january 2009. a swift confirmation was a testament to her track record as an effective regulator and a strong consumer advocate. in 1988, president ronald reagan appointed mary schapiro commissioner of the sec. she was named acting chairman in 1993 by president clinton. president clinton later appointed her another commission until 1996. in 2006, she was named chairman and ceo of the nesd, and she oversaw the merger with the

regulation of in york stock exchange. she became the ceo of the financial industry regulatory authority the theme of this general membership meeting is investors. your career signals a lifetime commitment to protecting investors and the integrity of our capital markets. all this to investing in and depend upon our financial markets -- and that means all of us -- are greatly in your debt for the strong and able leadership you are providing. last year, we eagerly anticipated your remarks. but now something we know as the flash crash kept you away. in addition, you are playing a round table next week to explore possible future performance of

money-market funds. with all that you have before you, we are grateful for your time today. thank you for sharing your views and insights on the challenges and insights facing the commission. that is in german, please join me in welcoming -- ladies and gentlemen, please find me in welcoming mary schapiro. [applause] >> good morning. it is a real pleasure to be here. thank you for the lovely introduction, fall. -- paul. i know that we share a commitment to stable financial markets that provide investors the opportunity to achieve economic security they desire. of course, as you know, markets are not always stable, and one year ago today, we got a reminder of how unstable the candy.

at 2:42, stock prices began to fall with almost unprecedented speed. i doubt that have already lost almost 4% on the day -- a dow that had already lost almost 4% on the day plunged 600 points and five minutes. then, just as suddenly, the markets reversed themselves. between 3:00 p.m. and 4:00 p.m., 17 million trades were executed. in that time, investors suffered steep losses and companies saw their petitions harmed a study is evaporated significance of may 6 is greater than the harm caused by these wildly swinging prices. it led to a significant well in consumer confidence.

because well every investor access financial risk, that operate under the assumption that america's markets are structurally sound, that the funds you represent could entrust their capital to the world's most sophisticated financial markets. the less confidence declines, the ramifications in lost wealth and capital can be grave. so we responded vigorously. later that night, our staff is city -- joined with cftc staff -- an early analysis. but the following month, we had a proposal for marketwide circuit breakers this rapid response reflected not only the

significance of the event, but also our efforts to engage in a comprehensive review of the u.s. equity markets. let me make one thing clear before i kill one. today's financial markets are fast, adaptable. they are and in many ways a marvel of capitalism and technology. but our markets are extremely complex, with 15 equities and options exchanges, three electronics communications networks, and more than 200 broker-dealers. this complexity means that when things go wrong, the consequences can be sudden and severe. it is important that we identify and put in place systems that can minimize harm should a breakdown occurred.

we should strengthen the system overall separate towns can be prevented and in the first instance. at our july 2009 conference relief, we began executing a broad market agenda. be unacceptable events of may 6 have been the focus of the efforts for that day. on may 6, a combination of how the rhythmic -- algorithmic trading processes generated a fall in the equity markets. the first casualty was the s & p futures. this was transmitted across the markets trading strategies. next, the liquidity crisis and in hundreds of individual securities.

at the worst end of the spectrum, more than 300 securities suffered a decline of more than 60%. ultimately, more than 20,000 trades were broken, many of which were executed at prices -- as noted in the report released last september, this significance was exacerbated when many market participants temporarily pause in reaction to the sudden price declined. some market participants widened their quoted spread, and others reduced liquidity. others withdrew completely from the market. all these were rational responses from individual market participants, but in the aggregate, they were extremely destructive. the resulting in extreme price moves across hundreds of

securities at once were unprecedented in modern u.s. equity market history. the sec felt response -- sec's response bolstered confidence in investors. now, this applies to all stocks in the russell 1000 index, to more than 300,000 etf's, and other exchange traded products. last year, the commission approved rules to bring order and transparency to the process of breaking its trades. the commission also enhance rules for market makers and eliminated some quotes. executions against subquotes had significant impact on trade on may 6. also last of number, the

commission adopted new rules requiring brokerage-dealers with market access to put in place market control. the lengthy and laborious details and investigations of may 5 also underscore the need for the reconstruction of trades. we will have a system to provide the sec direct and timely access to data on all orders in the national market system. this would allow us to rapidly reconstruct trading activity. we proposed the system of such -- the creation of such a system last may, and we're considering options as congress prepares its recommendation to the commission. in addition to these actions,

the cftc and sec him -- formed a committee to consider market disruptions that may have contributed to the volatility of the day. in april, we proposed a major expansion on enhancement to the pilot of circuit breaker programs aimed at addressing extraordinary volatility. this proposal, dubbed the volatility plan, is available on our website, offering many potentially important changes. first, it would expand the pilot circuit breaker program. it would extend circuit breaker protection to all u.s.-listed equities and provide circuit breakers during the opening and closing periods of the day which are currently not covered by the pilots of the program. would address

weaknesses in the pilot program that would permit a single erroneous trade, and finally, the volatility plan proposes cutting in half the signals that would trigger the mechanism and this would reduce the scope. we need to consider several important questions. first -- what is excessive short-term volatility? what level of volatility is appropriate in continuous trading? at what point should circuit breakers take effect. this includes market traders. and finally, high frequency traders who often derive significant benefits from their role as defacto market makers often have the obligations of

market makers with respect to the impact of their technology and trading strategies on the market. in answering them, we should be protected by capital formation and protecting the interests of investors. regarding the first question, it is impossible to make an argument that occasional instances of extreme volatility are simply a fact of life in the market. news reports should get price in quickly. the events of may 6 crossed an important threshold. first, tremendous harm was done that day. secondly, largely resulting from the regular but unavoidable of currents, this was not a technical market structure

problem. approximately two-thirds of the intraday decline on may 6 was reversed within minutes, as buyers rushed in to take advantage of the drop. since that day, we have heard over and over again that given the opportunity, investors would have been strong buyers during the decline, but during the decline, sell orders outpace the ability of many market traders to trade. indeed, many market for dissidents feared a cataclysmic event of which they were not aware, and investors stayed on the sidelines until the fear was allayed. while it is difficult to determine the exact point at which short-term volatility becomes excessive, it is nonetheless a critical question.

it needs to be underscored because the cancer points as to a possible solution. excessive volatility arms harms companies, and many investors were harmed when they relied on the integrity of the market, suffering when their orders were executed at temporarily disrupted prices. on the other hand, many short- term traders enjoyed a highly profitable dead. the importance of these actions can best be understood by comparing their actions to those of their predecessors during the market crash on may 28 of 1962. there are a number of similarities between 1962 and 2010. neither of these price moves could be explained by a news event. both days, some market data

systems were overwhelmed by the heavy volume and in both instances, the sudden decline struck at investor confidence, leading them to questioned the stability of the equity markets. the differences are even more striking. first, the magnitude of the decline. it was much more severe in 2010 than in 1962. in 1962, the intraday lows were 6.3% compared to 9.9% on may 6, and one of the worst hit individual securities in 1962 dropped 9.3% in a 12-minute time, while in 2010, many companies lost a greater proportion of their value in seconds. the biggest difference and one that may help us understand the magnitude of the decline is the volume and trading behavior of the professional traders who

were expected to be the primary liquidity providers. in 1962, the specialists represented approximately 70% of the market volume and were net buyers in the aggregate during the decline. in 2010, the high frequency traders represented well more than 50% of the market volume and they were not aggressive sellers during the broad price declined. -- net aggressive sellers during the broad price declined. they took liquidity rather than providing it. i think there activity that they should cause us to thoroughly examine their current role furious the final -- their current role. the final question is more difficult periods -- is more difficult.

naturally, we are mindful of the unintended consequences that could result from imposing obligations. for example, imposing significant obligations for market quality for some firms, leaving them free to of -- to operate without those obligations could create an unfair playing field. in addition, we need to assess the entire regulatory structure surrounding high frequency trading firms. to current regulations reflect their impact on trading? are there current algorithm programs to determine their functioning in market conditions? we are considering other changes as well to offer investors a measure of needed protection in the near term. the volatility plan proposed by the federal exchange, would come up for example, and momentum to

the source of the price declined. the trigger is designed to be more effective to prevent runs on individual stocks and the broader market. the proposed plan would have made a real difference on may 6. the proposed plan leaves 98% of the trade in 84% of the security involved on may 6 would not of been involved by the current level of circuit breaker protection. under the proposed volatility plan, there would be a brief limit state, and which there would be seconds to correct itself naturally. in a down market, there would be 15 seconds for buyers to respond and stop a cascade of prices. if the plan is approved, this brief period would allow minor

liquidity and balances to be corrected without the need for a full trading pause. >> a portion of the remarks this morning. we will have the entire event later in our structure. now to the u.s. house. no legislative work today. the speaker pro tempore: the house will be in order. the chair lays before the house a communication from the speaker. the clerk: the speaker's rooms, washington, d.c., maye 6, 2011, i hereby appoint the honorable

michael k. simpson to act as speaker pro tempore on this day, signed, john a. boehner, speaker of the house of representatives. the speaker pro tempore: the mark will be offered by the d farr. the chaplain: let us pray. gracious god, we give you thankers in rich spiritual traditions you have bestowed upon this nation. may we be worthy of the heritage we have received. grant us the disposition to be still and to pray. the courage to respect the prayers of others. and the faith to know our prayers are never in vain. then, having prayed, grant us

the willingness to bridge the divides that arise in a thriving democracy. lift our eyes that we might see above the immediacy of the present clamor. to the feast that is forged by a life spent in intimacy with you that we might tsao peace in our land in this house and in the garden of our soul. in your name we pray, amen. the speaker pro tempore: the chair has examined the journal of the last day's proceedings and announces to the house his approval thereof. pursuant to clause 1 of rule 1, the journal stands approved. please join me in the pledge of allegiance. i pledge allegiance to the flag

of the united states of america and to the republic for which it stands, one nation, under god, indivisible, with liberty and justice for all. the chair lays before the house a communication. the clerk: the honorable the speaker, house of representatives, sir, pursuant to the permission granted in clause 2-h of rule 2 of the rules of the u.s. house of representatives, the clerk received the following message from the secretary of the senate on maye 5, 2011, at 5:20 p.m., appointment, board of visitors of the united states coast guard academy, congressional executive commission on the people's republic of china. with best wishes, i am, signed sincerely, karen h. haas, secretary of the u.s. house of representatives.

the >> letter, a private meeting with some of the participants in the raid that killed all some of the last the that killed osama bin laden in pakistan will have live coverage, beginning at 3:50

p.m. eastern. former new york city mayor rudy guiliani is in washington, d.c.. you can see live coverage at 4:00 eastern on c-span2. for -- former navy seal, we will talk to him and what are -- about what it is like, and working for the chief -- cia. >> this weekend, on booktv, the origins of government from early tribal societies, to the first modern states in china and europe. on "afterwards" self journey from liberal to warrior. look for the complete booktv schedule at booktv.org.

>> the national rifle association vice-president wayne lapierre is calling for the resignation of attorney general eric holder. at their recent convention in pittsburgh, he criticized the justice's department program aimed at stopping the flow of weapons to the mexican cartels. this is about $1 and behalf. -- one hour and half. most of the news media has ignored that our federal government has fund the week of guns into to mexico.

they should be investigated by every news organization in this country. we deserve to know the truth. please watch. >> they blamed honest, law- abiding gun dealers for a river of guns. >> this war is being awaited with guns purchased, not here, from the united states. >> they blame us for a mess they created, but was exposed by the nra. >> nearly 90%. >> 90%. >> net% of the guns recovered in mexico come from the united states. >> they blame our second amendment, attacking our firearms free of -- freedom to advance their own agenda. >> there is one issue where mexico needs your cooperation, and that is consider reinstating the assault weapons ban. [applause] >> it turns out this numbers game has ats name written all

over it. they opened a floodgate of guns, using a strategy called letting dogs walk. thousands of guns and the up in guy hands of drug cartels, and it was, -- and not in the hands of drug cartels. >> the government was actually encouraging the gun dealers to sell multiple firearms to known and suspected traffickers. >> the strategy was to let bygones walks, track them across the border, and then take down a major cartel, but keep a secret from the mexican government. he was a strategy doomed to fail from the start. >> the atf screwed up. it is up for them to follow what. that is the ball that got dropped. >> this attorney represents carter's country in houston,

that was falsely labeled by "the washington post" as one of the biggest sources of firepower by the cartels. >> bill carter was angry, and felt used by the atf because they thought they were doing exactly what atf wanted them to do. they were doing what is called stall and call, stall the purchaser, and called atf, and say there is something suspicious going on here. often, they would not have gone through with the sells, except they were encouraged to go through which the sells by the atf agents. in some occasions, atf asked the store people to follow the purchasers to the parking lot, and get a license number if you can. >> carter's country shared the same concerns echoed in damaging e-mails to the atf from a gun shop owner in phoenix, and recently obtained by senator

chuck grassley. the owner wrote that he wanted to help atf investigation, but not if it risks the safety of the agents that protect our country. >> i have never let a gonna walk. a lot of people will get hurt with these firearms between the time we let them go, and the time they're recovered again in a crime. >> atf agents confronted their bosses over and over again about the strategy could no longer remain silent and spoke with cds news. >> i knew it would not end well. >> then, on december 10, 2010, their worst nightmare came true -- border patrol agent brian terry was gunned down. >> it was crushing. >> two assault rifles atf lott walked were found at the crime scene, and all of these agents want is for the family of agent

bryan. to know the truth. >> i have done everything i can for them to get the truth. after this, i do not know what else i can do. >> the truth has been hard to get to read all the documents confirm whether the agents and other insiders are saying, that the strategy was approved all the way to the justice department, that is not what the administration says. >> we cannot have a situation where guns are allowed to walk, and i have made that clear to the united states attorneys, as well as the agency in charge. >> i did not authorize this. eric holder, the attorney general did not authorize it. >> original it, they tried to blame the gun dealers, then when it became obvious this was a loud, each time we went up the chain to figure out why they thought it was ok, we get stopped. >> in fact, chairman darrell issa is threatening contempt hearings because atf has refused

to turn over documents to his committee. >> at this point, we believe it goes to the highest level of this administration's political appointees, who allowed this cover-up to go on toward >> it is it is of stonewalling. >> senator chuck grassley has also made clear that any claim by the justice department that atf never knowingly approved or allowed the sale of assault weapons and -- weapons is simply not credible because of new evidence he obtained. >> they wanted to prove there were guns flowing to mexico, so they set up and a legal pipeline. it started in a criminal enterprise people are dying. >> i am not surprised, given that it is the atf. as always been a rogue agency. look what they did in waco, texas. this is one of the saddest days in u.s. history. >> we love this country. we respect its leaders.

respect requires truth, and the straightforward, simple truth is this -- when it comes to the obama administration, we have had it. we have had it with eric holder. [applause] >> we have had with hillary clinton and the rest of this administration, and lord knows americans have sure had it with the arrogant, sanctimonious, gone-hating liars' that call themselves the national news media in this country. [applause] >> we respect, and we admire the law enforcement officers, the dedicated field officers that work every single day in this country under difficult conditions, but there is a big difference between the good field agents and their bureaucratic, politicking bosses

back at atf headquarters in washington, d.c. [applause] >> when it comes to those scheming bureaucrats in washington, gun owners have had it. our rights have been attacked before, and the media has often conspired to shane and blame american gun owners for violent crimes. together, we have fought with pride, and defeated those threats, but we have never witnessed anything like their rotten level of corruption, conspiracy, and cover up confronting us today, all because they hate americans and our rights more than they care about the lives of innocent people. i will say that again. our government has been willing to let people die to would bands their assault on the second amendment. our seven -- southern border

proves it. when atf officials order lawful gun dealers to make illegal sales, that is correct. when atf authorizes and watches thousands of guns walk across the border, and fall into the hands of mexican drug cartels, that is not just bizarre law enforcement, it is government- sanctioned gone running. when the administration stonewalls congressional investigations, that is a conspiracy to cover up the truth. when almost every