a penalty. they did not use the word penalty only once. they used the term penalty repeatedly. they did not use the term tax. in the overall comprehensive act, when they wanted to tax they knew how to do it and used the beyond that, they pegged the power to craft the mandate precisely to their commerce power. q l.i. been to ignore the repeated sexual references -- who am i to then ignore the repeated textual references? you really were opposing it. >> i think it refers to tax alone about 34 times. penalty has been meant to mean tax. there are other provisions in the affordable care act that use it. they often use them

interchangeably with the word "penalty." does it function like a tax? hear it and natalie functions like a tax. -- hear it absolutely functions like a tax. if you have not met the requirements, you have to pay. call me with one thing. you have to check off a box on your 1040 income tax return reporting whether or not you have insurance, right? if you do not have insurance, then the penalty kicks in.

>> correct. >> is there any enforcement mechanism in the statement? where would i find it? >> it details it in a supplemental briefing. it is two things. the secretary of the treasury would be able to offset future credit against any unpaid taxes. united states could bring a suit against the person for the collection of the taxes. >> it to be clear that the irs could not do under this statute what it here to fore can do if i have a problem with my taxes. they came garnish. they can do all kinds of things. it is that she says they cannot do any of it. -- this statute says they cannot do any of it.

>> that is correct. they said they do not want this part to be there. the rest was. congress may findings. i think he answered that. you had findings of the commerce clause. they said it doesn't matter if congress goes there so long as it is justified by the copyright powers. doesn't matter if congress goes there so long as it is justified by the copyright powers. here it is undoubtedly justified. this raises billions of dollars a year. it is about taxes just as the overall structure is. wasan we stiltell whether it the intention to generate revenue as opposed to compelling compliance? >> i do not think anyone can tell their intent. i think the practical up?

congress knew very well. that is the relevant text. >> is the primary purpose to propel conduct or to raise revenue? >> i do not think that the statue says anything about a primary purpose. i agree with that. he said they did not say anything either way whais the primary purpose? >> i do not think it specifies what it is. that is my answer. the question is the practical effects. >> there are exceptions in the penalty. is that correct? >> there are three exemptions. they do not have to subscribe to the mandate. you have five exceptions to the penalty. there have been some suggestion

that a large percentage of those persons cause problems by the same people who are exempted from the penalty. what did the government say about that? >> and may not matter. let's take it under the ball. isn't correct that a lot of these people are the larger share of the problem? >> many are exempt. this is going to what i was saying. >> it is because of low income. what congress was doing was there. >> i do not have a percentage. do you know what the data tells us? >> i do not think congress testified. here is the reason why. congressas legislated comprehensively.

it was a deep mistake for them to isolate out the minimum coverage provision. they were trying to reduce the percentages. is this economic or not? they say when they were regulated, and they are entitled to it. >> i have a question about essential coverage. this was used in the health care reform. are you with me? >> i think so. >> it has nothing to do with the level of coverage. is that correct? use a minimum essential coverage. this term is not defin in this way. is that correct? >> it is defined separately. it includes the goal.

>> it can be satisfied by a deductible. >> that is correct for the people under the age of 30. yocan purchase virtually any plant that is sponsored by an employer no matter what the coverages. >> i do not believe that is the case. >> large employers placed it on them. then we go to the mandate. the mandate says he can satisfy minimum coverage by virtue of any plan from an employer sponsorship. >> it includes goals. it restricts them. i will giveack to you. -- get back to you.

>> all of the government breeds, no one has outlined or summarize the contents of that. it might be helpful if it would go through the act and tell us what is in the pages. i have. the large group employers have very few requirement as to what has to be in their plan. individual markets are totally different. you can satisfy this mandate by purchasing very little coverage. it makes it up. it makes it not affected. do you understand my point? >> i do. >> does the government agreed that you can satisfy it by

purchasing very little coverage? >> it is under page 30. i agree with this. >> how about a large group of employers? are you familiar with what you have to buy it there? -- to buy their? >> i will give back to you on that. congress is entitled to the difference i which it deals with the problem. it is undoubtedly economic. >> we are going to give you your full time. i want to ask you to questions. as you know, this law was struck down in the district court. the to make the argument in the district court that without an individual mandate the whole bill goes down? was that your argument? >> it was not.

>> the second question is, i read somewhere that at one point time this law did have eight clause in it and it was taken out. is that correct? >> there was one in a version of the bill. it became the affordable care act. the supreme court has said that it cannot defer anything. >> we do not grow in the entrance. >> the housing dropped. >> thank you very much. >> we gave you your full amount of time. of time. >> there is a great deal about this place that is complicated.

i think the constitutional issue with respect to the indivial mandate is quite simple. it boils down to the question of whetr or not the federal government can compel an individual to engage in commerce to better regulate the individuals. we do not have a case that is directly on point. it is odd. we do not have this case. the reason we do not is that for 220 years, congress never saw fit to e this particular power. it is a rather astonishing fact. a.q. think about the federal code which is littered with -- if you think about the federal code which is littered with provisions, how much more of fission can the federal government be to compel people to regulate them? to regulate them? i would suggest that this is the

dog that did not bark. >> there are a lot of people that do not have insurance already engaged in commerce. at some point in time in their lives, unknown to any of us, they will need health care services. >> they are not engaged in congress. beer city in their livings. they are not doing anything. -- they are sitting in their living rooms. they are not doing anything. right now, and they are not. >> so we have clear undisputed facts that as we sit here right now, i am not talking about next week or next month, i mean right now, the uninsured make up

approximately 20 each year. they have routine checkups. 50% have one in the past, too. if you accept this, as we sit here, and of this group of uninsured, a there are bound 20 million to the emergency room each year. if that is true, why would that not be in every classic sense activity? >> that is activity. this is something they can regulate.

>> i want to be sure there is no dispute. dispute. it was disputed on all sides. >> there is no dispute of material facts. there are uninsured people. >> there are large numbers of uninsured americans each year. the study says 20 million a year if you actually go down to the emergency room to consume services -- who actually go down services -- who actually go down to the emergency room to consume services. tell me why that does not constitute an every meaningful sense activity? it has in the aggregate a it has in the aggregate a substantial effect on commerce.

that is not the market that this statute regulates. if congress wants to pass is that you -- a statute that says if you pay for your health care in cash it will cost twice as much. that would incentivize them to buy health insurance. it is not sure that that is the market being regulated. the market being regulated is the market for health insurance. the mandate is clear. we must by qualifying health insurance. that is why the question i submit is whether the federal government has the power to compel you to engage in congress. >> we are regulating how and when you pay for health care. i understand the mandate only says coverage. this is to regulate how and when you pay for health care.

>> why is tha not part of the equation here? >> as saying it does not make it so. if you look at this statue -- >> u.s.a. in the air not regulating the conception of healthcare. >> the first finding says the mandate will have an effect on congress. this is not what they tell you to look at. but there answering this in the first sentence. >> it is the same mistake. the mandate h an effect on how people pay for health care. because of the mandate people will be more likely to pay with it for insurance. i do not deny it. that is not what they are regulating. maybe they do not do what they are saying. whathey seem to be saying are

two things. two things. they seem to me to be saying "we have a problem with 50 million uninsured people." what the problem yields, because many of them get sick at unpredictable times and are forced to go to the emergency room and will not be turned away. that six powerful cost to other people who do buy -- that shifts powerful cost to other people who do jack up the premium for everyone else. they are concerned about how and when we pay for it the service that they can stand. it is from the finding.

they purport to regulate activities that is commercial and economic in nature. their words are economic and financing decisions about how and when health care is paid for. i goes to the consumption of the service itself. they seem to be saying "we are regulating into regulated in sure she is -- into regated insurance is." this is what ey say they are doing. do you agree they will have the power to regulate in both areas? but not if it involves compulsion. one in the markets fear regulating is the health care

insurance market. they have a lot of authority to regulate health insurers. they have a lot to regulate people that voluntarily purchase health insurance. they do not have the authority to compel people. >> this is very important. i thought they conceded that congress could regulate under the price of payment at the time of consumption. it can compel an individual who does not have helped insurance to pay a penalty at that time. it coerces the mandate.

can they do it? >> in the health-care market at the time of consumption, yes. it is coercing someone that is already engaged in activity. it feels coercive if you a an innkeeper and to yardy set up the in. >> i just want to be clear that i understand the position. at the time of consumption, the government would have to read wer the state of an individual with the conditioning this service upon obtaining insurance without which we can penalize you in one way or another. >> i'm with you entirely.

that is not what they do. that is not what they do. under this, all the things u to not have requirements. you are forced to buy it. they assume everybody will use it. it. there are lots of different ways congress can incentivize people. they can pass a tax and give people a tax credit for paying for qualifying insurance. that is the way the federal government usually operates. >> that is another way of saying they could have done what they did better. it was more directly. it. regulated in

if it is rational, doesn't my job stop at the end? they can make thes kind of calculations and determinations. >> absolutely not. they could have done the same thing constitutionally. instead, they took the easy way out. this is chock full of incentives. what you do not see is when congress goes the last mile and say we are not going to rely on incentives to get you to do what we want you to do. we are going to force you to do it. the only provision out there is the individual mandate. >> i think this is fair. >> the government points out that both of the cases where criminal conduct cases. criminal conduct cases. >> the area they were regulating

generally speaking was traditional police power areas. those cases are different. they may give it some principles. >> i do not think there is a single case just like it. >> it seems to me one of the keys that we see is that economic activity can be a very important limiting principle. would you agree with that? >> i would agree with that. it is one of the more important imitating -- important limiting principles. this case comes down somewhat to whether or not the decision -- because if you are making a decision, and let me put aside

activity. do not call this inactivity. consider it activity. it does not help me pernally. i want to focus on economics. isn't it accurate that when i decide how i spend my money i would rather take this trip by duct then buy health insurance? how can that be anything other than an economic decision? that is not an economic decision. >> it to assure other characterization that this is an economic mandate. -- it was your other characterization that this is an

economic decision. >> i do not know if it is about insurance or health care. and maybe th. and deciding to pay for my health care because i'm not gorgeous i am deciding to pay for my health care because i am not -- i am deciding to pay for my health care because i am not covered. >> that is fair enough. mande should be very far. >> let me go to the economic mandate. i think this has a team of economic activity. we go to the economic mandate. you will tell me how to make that economic decision. you would agree that congress would say if i went to the hospital and did not pay, we now recover you -- we now require you to pay for insurance. you to pay for insurance. i can stand healthcare this past

year. >> this one's a little hard. >> that is why i asked the question. >> i am not sure they can impose a decision based on tax concept. then there is no choice. >> let's focus on the moment of consumption. the uninsured walks into a hospital bleeding from a gunshot wound. has no insurance. never had insurance. does not have a dime. does congress have the power to compel, co-workers as a condition of co -- coerce a condition of treating it to buy

insurance? can they penalize you for not doing it? " i think they can. >> can they go so far as to say the mandate of hospitals shall not treated those without insurance? >> putting aside that might violate somebody's constitutional right to have their treatment refused, yes. >> i appreciate your point. i'm just asking about commerce laws. >> no government would ever do that. they could. thfact that there alternatives, it does not weaken it. you are not talking about a choice among rational means. we are talking about one choice the government said that tripped the wire the we have gone 220

years without any concrete stripping it. we did with out any congress tripping it -- we have gone 220 years with out any congress tripping biit. >> this is all about individual liberty. that is really where you are going. what i find so interesting is that you argue that in the district court. he argued other things. you squarely argue that one of the things francks is that it entrenched on individual liberties. it is made someone buy something they did not want to buy at a time they did not want to. you pegged that specifically to

the 10th amendment residual power to the people clause's and to subsistence due process. he made this argument before. am i right that this argument has been abandoned? i have is thatat there seems to be an individual liberty issue. it is looking behind commerce clause analysis. i am trying to analytically distinguish between the two and it just them plainly and nestly. >> here is why i think that you cannot. cannot. if you look at the supreme court cases, with a horizontal or vertical, almost every one says the reason we do it is to protect individual liberties. it is hard to divide the substance provisions of the

constitution's from liberty association. the argument has a home in the text of the commerce clause. it is the word "regulate." compelling someone is not regulating. it is not forcing them. we all except that due process is sort of a last refuge. it is the argument you make when nothing helps you. i think this is almost a clue here. if they had understood the breath of the modern commerce clause and they understood the commerce clause to include the power to compel, do you really think that we would be a provision of the bill of rights that specifically limited the federal government to exercise the power to compel an to the commerce clause? i'd bet my bottom dollar there be a number of>> the only pointg

to get that was when you try to ground that individual liberty, what you have to grounded in is the testament of due process. if you do not do tha you cut adrift. as opposed to the problem you faced in lopez were you had a clear collusion between the national sovereign and the undeniable state police power of the other. you do not have on the individual mdate, you do not have that kind of tension directly. the tension is between the national sovereign and the compulsion to the individual on the other. >> i tried to distinguish between the due process and the

10th amendment. the 10th amendment is very much in this case. it is a reflection of the limitations of powers. i think the commerce clause only gives the government the power to regulate and n to compel. the 10th amendment reinforces that by giving power to the states. that is the answer as to why this is an individual rights case and a commerce clause enumerated. >> does the power congress has include the power to stimulate commerce? >> it does. >> you understand why i asked. >> there is a difference between stimulation and compulsion. what was the federal government doing screwing around with these incentives for whe production? they wertrying to preserve,

stimulate the price of wheat. the more direct way is to mandate people buying wheat. >> he makes that argument. he walks in and says, a book, if you penalize me and say i cannot grow more wheat, to consume at myself for my own family, if you do not let me do tt, you are forcing me to buy the product on the open market. your compelling need to do it. i do not want to do it. the supreme court says in one word that is tough. we can make you do it because they have the power to regulate. roscoe was taking activity in an economic market. that is what the supreme court reiterated. they also said in the same opinion there is the difference

between supply and demand. i bet that justice jackson would have had a differ reaction that case if it forced individuals to buy wheat as opposed to put limits on how much roscoe could produce. i think those are different regulations. that does not mean the means is important. >> it was very telling in a case where a homegrown marijuana was just an instant away from the interstate market. this is a temporal problem. we are an instant away from needing health care. this is not come parable. even though you are not currently consuming health care, just like the homegrown

just like the homegrown marijuana, why are we not all, 25 million are consuming health care without paying for it. why isn't everyone else an instant the way? >> there is a constitutional difference between being an instant away because you're engaged in economic activity. my problem is, in every market we are all an instant away from participating if the government can tell if you have to participate now. >> we are not an instant the way for making economic decisions not to buy insurance. the uninsured have already made the economic decision. they are operating under no insurance.

so it is not a matterf something in the future. it is going on right now. >> the idea that most of the uninsured already made that decision as opsed to fighting themselves uninsured. >> they have made that decision. that is part of the findings. >> with respect, the way they responded to that promise to say, we will make you make another decision. >> i want you to help me which way you prefer to have it. you say the purpose of the commerce clause argument is that this is not an essential part of larger regulation. is that correct? it is not an essential part of this larger regulation because

of the clause. >> i want to be careful how i answer you. >> before you answer, the other part is you say to strike the mandate. because it is an essential part of regulation. it seems like you have to pick one. >> i am going to try not to. it is not in the way congress used the term in cases like barbie. they're trying make the argument you can put anything as part of a broader regulatory regime. that escapes the lemon. -- limit. somehow that might be ok. we do not think that is the right way to look at it we think it is distinct. you have to analyze the mandate as the mandate. we will take the positn that when you look at this act, it is

not aimple matter of saying it is a mandate. look at the way the mandate -- it is the driving force between all the health insurance. how're they going to do that? when you look at the people that are out there, there's a part of peace that to the response to every group. for the people already qualified for medicaid, those people, even if they have not enrolled, they assume medicaid will take care of that. they force them to enroll. as the people between the current enrollment limit, medicaid will take care of those people. between 133% of the poverty level, there are subsidies and the health-insurance market that the statute creates. for people above that level, it is the employer mandates that

the care of them. it is hard to say -- if you take away the driver 10 -- >> there is still the 10th amendment argument. there is some tension there. >> there is some tension there. it is on both sides. byis the judge's reaction the number of times he read in the brief how essential the individual mandate was to the rest of the statute. >> your position is if the mandate tells it all fails. suppose the government says if the mandate fails, the only thing that needs to -- is the preexisting guaranteed. that you could limit it. that is where they would limit and say the rest stance. would you take the position that if you're going to fund the mandate, you could do that. ?

there is no other provision that must bell as a matter of constitutional law if the mandate fails. >> we take the position that the secondary matter, that the government has got itself pregnant on the health care reform. i think theyre right. you cannot separate the individual mandate from the guaranteed issue. i do not think it is any different for the other provisions, the medicaid reform, the employer mandate, and the health exchans. all of those are equally tied. >> you do not think the issue is more tied and then a number of others? >> i do not. think they areied together. they are reforms. they are reforms. >> we are about to run out of time. i want you to speak about medicaid expansion in just a moment. the supre court created the coercion doctrine. as far as i can tell, it is

still viable lot. it is on the books. every circuit save one, the fourth circuit, the rest of the circuits seem to ignore the cores and doctored. it is a pretty powerful argument that you have on this medicaid expansion. >> a couple of things, a chief justice. i think it is true. there are a lot of circuits to seem to deem coercion -- despite what the court has said. if you want to look at those cases and the pathology of how the circuits got to the wrong answer, i think it is because a lot of them started with the d.c. circuit case that was decided before dole. the court picked up that language and the ninth circuit picked up on that even though it was after dole. of course there is no limits on

spending power. under garcia, there are no limits on the -- >> accepting with you that the doctrine of coercion is alive and well, it is abundantly clear that it is, theres holding that applies and rejects the doctrine in that case. what you can help me with is its application to the circumstances of this case. the supreme court teaches us that there is a difference between into spent on the one hand and coercion on the other. why is this provision coercive? >> a special when you couple with that that every single state can opt out if they choose state can opt out if they choose to opt out. >> in theory, but not in fact.

it is telling that 26 states do not like the conditions. none of them have pulled out. it is unthinkable. there are two reasons why this the case that crosses the line. the sheer volume of the federal money as they combine with the fact that the money that is tied to these conditions is not limited to the new money or the new conditions. the best illustration of that is the maintenance of effort provision. that tells the states then anything they voluntarily did anything they voluntarily did before, they can not change until a point in the future. it is a backward looking provision. it ties into what they did in the past. we should be focused on the preexisting pool of money. they condition the whole thing

on that one department. here is the second thing. the biggest proem on the commerce clause is the lack of a limit in principle. when we make that argument, we do not have a limiting principle. i think there is a limiting principle. principle. i think you can strike this case down as unduly coercive. the key is the relationship between the medicaid conditional program and the individual mandate. no other spending condition i am aware of is tied as this to a mandate. i want to be clear about this. there is no plan be in the statute. there is no alternative for how the individual mandate is going to be satisfied for individuals above and below the poverty level other than medicaid. we know congress wants to force a mandate on the demand side.

on the supply side, the only way the statute supplies anything to those people is a conditional medicaid program. the only reason congress can overcome the disconnect between having a mandate and a condition on supply is the statute knew the states did not have a choice. >> let me ask the question differently. as i understand the thrust of the argument, uncle sam pays between 50% and 80% of all of the medicaid expenses that all of the states consume. the difference is the nature of the service provided. what the government has said is, if he do not comply with the expansion of to 133%, you are out. we will not give you a dime.

that is coercive because the amount of money is so large, larger than any other course in case. the question i have is, congress did something else, too. it seems to have removed some of the sting from the argument. they said, we mandate you cover everybody up to 133%. but we're going to pay for it ourselves. for the first three years. we will bear all 100% of the cost. in 2017, we will bear 95%. in 2020, we will bury 90% of all the costs forever so that the actual cost in terms of your

money tends not to be quite so great given that the federal government has assumed all of the cost or virtually all of the cost. dozen that remove some of the course of bite? >> no. this is the critical thing. part of what is critical for the spending clause argument is that they have not limited the new conditions to new mone if of congress did was cover people between 100% of the poverty level, we will give me a whole bunch of money, we would not be here saying that was coercive. the problem is theeople who are already eligible. what happens to those people? right now, there ar a lot of people who are eligible for medicaid benefits but are currently enrolled. -- not enrolled.

those people will be forced into medicaid by the individual mandate. that is the reason that states have independent standing to object to the mandate. the individual mandate makes the maintenance of the medicaid program for people who are currently elible vastly more expensive. to give you an idea of the magnite, this is an expert -- excerpt. the state of florida estimates the state of florida estimates that that people, people already eligible but not enrolled, it will cost the states $574 million. that is the impact for which there is no new money. to make matters worse, that is why this maintenance provision is so pernicious. the rational reaction of any state would be to say, whoa.

we are going to get all these new people. let's modify our program so we can reduce the cost of servicing all these people. that is what the maintenance provision tells them they cannot do. they cannot change the level of benefits. the individual mandates forces these people want to them. they were eligible, but there were not enrolled. but now federal law tells them they must. that imposes a huge cost. it is enough to create a spending clause problem. >> let m ask you one final question. you have gone over your time. because we have vast to these questions. with respect to the question that judge hall has asked concerning sever ability, i want to flip around the conventional

theme. if the mandateas if the mandateas constitutional, but were beyond congress's spending power, with those provisions be tied together at the hip or would they be separate? >> i was a separate but i would concede that the argument is not as strg. individual mandate is the center of the wheel. all of these various provisions for how the individual mandate is satisfied are the spokes. if you got rid of one the spokes, like the medicaid expansion, the hub would come down/ . . if you take that out, the spokes

come with that. >> to you agree that it hardly matters whether it's you have -- there are plaintiffs to do. the states to not have to. it makes no real difference. we do not have to answer the academic question if whether the states can carry this forward. it does not matter here. doesn't matter to you? >> i want to agree with the general on this by saying i do not think it matters. the only way my matter is for the scope of the injunction. i am looking forward to a day when there is that injunction. i see that is a good thing. there is an argument that you might want to say that everybody has -- for the reason i just explained, the argument that states have a standing is not that difficult. because of the individual mandate -- >> i want you to make the --

does that matter? does that matter? >> the only way iould see is the way an injunction is written. you could probably right around that and not have to decide the issue. >> back to the effects, the same question, is that in the commerce clause or in both? >> i do not know that my answer is much different on that. i would be happy to live in a world where justice scalia's opinion was the law of the land. as the general said, justice scalia is so clear about that. it is necessary and proper. he is trying to correct the -- >> can you get at it? can you articulate that doctrine? ordeal have to bring in the necessary clause.

that is my question. >> i find it difficult to explain why it is the federal government as to regulate substantial effects without relying on the necessary cause. >> that is what i thought. it is hard to know what is going on. >> we e going to take a 15 minute recess. >> all rise. >> i would like to start by answering the main question this morning. are we regulating health insurance for the payment. it is undisputed that it is only regulation of health insurance

that is going on. you have to pay a penalty if you do not buy health insurance. they impose a penalty without regard if you see a doctor or failed to pay the doctor. the government says one of our reasons is to make sure that doctors are paid when they provide service. that is true as well. it does not matter. they are using an improper means to beneficially affect health care service. congress made explicit findings that violence against women caused billions of dollars. the court said that is a permissible goal. it is the same we're dealing with the dead. but you used improper means. you are not regulating commerce. you are not regulating commerce. here they are regulating the economic decision to stay out of the the commerce.

the other point is there is a subset of the people we are regulating. they do go to the doctor and they do not pay the doctor. that is commerce-affecting activity. that is negative. it is irrelevant. it does not matter whether the classification happens to encompass people that they could have regulated. if that were true, lopez would have been decided differently. at lea 90% of the people had the guns near the school. they got them through interstate commerce. a huge subset of the people being regulated could have been regulated under a proper commerce law. whether they had gone through interstate. the court did not say it does not matter if it is over broad and improper. they said you cannot capture

things that are not commerce. congress has not given the power to beneficially affect commerce. congress -- >> let me tell you why lopez does not give you very far. there was a single statute. congress put in the interstate nexus. the law was upheld. you follow me? lopez does not help you at all. let's go to morrison. what part of lopez has anything to do with this case? to do with this case? how could it possibly help you? >> the thesis of the government is this, if we over regulate, as long as a subset of the people we to regulate engaged in commerce, it is ok. my point is that a very substantial subset of t people regulated in the lopez la were

engaged in commerce. >> that is the same thing here. health insurance is in interstate commerce. >> it is not buying insurance. >> howdy is described not buyin insurance as inactivity? >> i am happy with your characterization. let's call it an economic decision. my decision is to not buy insurance. the government is compelling need to make a decision i do not want to make. by their on finding it is a disadvantage to me. the congress's expressed findings was that the mandate would lower insurance premiums. by 15%. the only way my insurance company can lower everybody else's is if i have made a bad

deal. what really the government is telling you is because some some said -- subset of the group, these people.e >> do you agree if i'm going to the hospital, i have to buy insurance? >> that is a pot i would like to focus on. that is right. >> they could do that. you agree. >> yes. >> can you do it in advance or must you do it at the time of consumption? so it is now a temporal issue. >> let's think about the temporal issue. every 22 year-old is going to enter the job market. there is all kind of restrictions you can impose on employees to contribute to pension.

pension. the onlyifference between a law requiring employees to contribute to 401k's and college students is temporal. the real difference is the employees have entered the labor market than the students have not. if you give congress the power to regulate people who are not in the market, you give them the power to regulate everything. lopez tolus that things affecting congress as too broad, now we're talking about this that -- >> why isn't everyone in the health-care market because of the uniqueness of health care? >> i would like to make two points. that is a factual dtinction. this is a smoke and mirrors attempt to create a principle. the judiciary cannot tell congress if they have the power

to regulate purchases. by definition, as the government points out, those policy decisions are given substantial deference by the judiciary. what difference does it make it is unique? >> the judge's question is the difference is we are faced with a real argument, not an insubstantial one that there is this parade of hypothetical problems at the doorstep. if you do this, they can do that. to which the answer that the question is suggesting is not so fast. if this is really different and unique, then you have nothing more than a holding.

you take the next case at the next time in the crucible of the next set of facts. if it is not unique, if what is common dominates over what is disparate, that may be a very germane to the thrust of the argument that two out swept the door open and limited power. i would suggest to you that whether or not this market is unique is an important part of the calculus. ev though it requires you look at the economic reality. >> i have two points. even if it is unique, that is for congress to decide. if the have the power to do it, they do not have to limit themselves. number two, let's examine the next case. let's see how unique this is.

but they say it is unique because you have to enter the market. >> is it different from life insurance? flood insurance? >> it is not different from flood insurance for anybody who lives near water. and taxes and death are inevitable. we know everyone will eventually die. any time you fail to pay a service provider for a good or service, you are shifting costs. >> that is true insofar as it goes. the additional point is it is not just the youth have cost shifting. the market is unique because unlike a whole bunch of others, virtually everyone will find

themselves in the unfortunate position of having to consume health care services. while other people might have to consume food and shelter, they do not involve cost shifting in the same way because here we know the hospital and providers will not and cannot turn away someone knocking at the door with a stroke or a gunshot wound. that is what makes this different. >> there is some moral imperative to provide health care. i agree with that. i cannot believe people think there is not the same imperative to feed stving people. the government can require private individuals to provide those kinds of services. they come provide doctors and insurae companies to provide

low-cost circumstance -- services. how do we deal with that? we have dealt with it through the spending power. if i constrict one individual to serve ather below cost, i will compensate him because he is serving the public interest out of the treasur congress did not want to do that. instead they constricted my ient and others to bring them into subsidized these premiums that they neither need nor want to give this $30 billion a year subsidy to those people. that is not regulation of commerce. that is the now we way we have done it throughout our history. we have required services, but we have compensated them. >> you are making policy arguments as opposed to

constitutional arguments. >> if i sounded -- >> congress makes those decisions. whether if it is up the outer edge of t commerce clause. >> your honor, when we make the cotitutional argument this is not commerce. all iear is policy arguments. they have to solve the problem. i am saying, you are right. that is not a decision for the court. the only question is whether they are regulating power. compelling people to buy health insurance is not regulating commerce. this will create a huge problem if we allow these people not to pay those doctors. the subsidy they are mandating is $28 billion annually. it ostrips any kind of concern

they have about unpaid care over -- on their own analysis. at most, for all the reasons you went through, -- >> i do not think you concede the first point. the government suggests that the liting principle is that we are regulating economic activity. i know you disagree with that characterization. if economic activity that affects interstate commerce is constitutional. >> that is a truism. they're cfusing what is required with what they are regulating. >> we're trying to determine if there regulating economic activity. >> i would say making an economic decision not to engage in the activity of purchasing health care cannot be economic

activity. they try and twisted by saying -- >> is at an economic decision? >>very decision to be inactive, not to buy something, it is an economic decision. if that gives congress the power to regulate, they can tell school boards, we are overriding your decision not to buy this kind of textbook. we are compelling you to buy this kind. the activity we are compelled is economics. purchasing textbooks. guns. the most basic requirements of child care. all these sorts of things we thought were reserved for the state as some kind of limiting principle in terms of what the spheres of influence between state and fudge of government are. >> the collision of the tension is not between the national

sovereigns and the state postal police power but between the national power and some notion of individual liberty. isn't that really the tension we face on the mandate as opposed to the issue of coercion with the medicaid provision? >> i have two answers. the reason the economic liberty is important -- >> i am not saying it is not important. the nature of the tension that you are arguing is of a different character than the tension the supreme court was troubled about in lopez where was a collision between a national sovereign and the invasion of the state's constitutional power. here we are not concerned about the states police power as that residual clause in terms of

individual liberty. isn't that the reality we face in regard to the mandate? >> i would respectfully disagree for three reasons. the first is, as we know, congress is limited to certain powers not to protect the states. as these court has said, to protect individual liberty against centralized government. so no, it is at the core what lopez was saying. we do not -- there would bene government with police power. they can only do things thaare necessary and proper. here they have taken a new power. they have taken upon themselves the power to compel contracts. that cannot be proper because it

is not incidental to commerce power. it is not appropriate that as it is not the sort of thing the federal government the -- does. it is what states do. it is at the outermost boundary of the police power and raises the most serious kinds of due process if the state were to compel somebody t buy goods. we know it needs to be within the spirit of the constitution. >> let me go back to my question. the same question i had put to your colleague. have you abandoned the claim that there is a fifth amendment issue and/or a 10th amendment

issue as well? what we have to focus on the commerce power issue and that issue alone? >> yes and no. no on the 10th amendment. it references people as well as the state. the state. for other reasons, if congress feeds its power is it is by definition invading the provinces of sovereignty. it is absolutely at the core. close to what thiit is the courts found. it can pre-empted. but it cannot tell us to pass a law or tell us to enforce a law. when someone enters commerce, congress has little power arbor what they can do. they cannot compel them to

engage in commerce. the court found this distinction in essential to its necessary finding. >> accepting that as true, you still have to apply at principle to the residual clause in the amendment dealing with the people. a similar kind of analys ought toe adopted as to the people the supreme court crafted and adopted as to powers reserved to the state. you have to do that. you have to make that analog. you have to make that mp. is there no case out there anywhere that has done that? this would be the first time.

>> i must respectfully disagree. i think lopez and morrison were all about individual liberty. they were not concerned about a law regulating guns. it would not be concerned if they had prohibited violence against women. >> i thought the problem in lopez that cheap justice rehnquist was dealing with was that the national sovereign had presumed to regulate in a non- economic area. an area dealing with criminal condt, possession of a gun within 1,000 feet of a school. the fear that animated that opinion was a powerful concern. that national sovereign was invading the state. i am not sure you can make the

same argument in quite the same way with respect to the individual. i'm not sure i understand how you get around that issue. >> we are on the same page. obviously they are concerned about the federal government about the federal government asserting state like police powers. the court has told us because it denying the federal government is designed to ensure individual liberty. they have said that in every federalism and separation of powers case. the reason is not because of some state legislature in georgia, but that the citizens should be subjected to aegime far away. i do not disagree that the problem was them asserting the police power. i do not think it is much of a leap to say the reason they are

concerned is because it infringes on individual liberty. i do not believe the notion that it was criminal was what motivated lopez and morrison. i take the supreme court at its word. everything aects economic activity. you can use any means to affect economic activity, you have exceeded the congress' power. that exactly the government is making. we want to beneficially affect econom activity down the road. if congress has the power to affect economic activity, it has the power to do anything. violence against women affects economics. guns and commerce affects activity. you need to come up with a limit

in principle. -- limiting principle. every compeled picture is economic activity. every failure to pay as a cost shifting. it may not be to an insurance company but it shifts to the sellerr other consumers. it creates this unprecedented and a historical power to compel people to engage in economic activity even to their disadvantage. it is difficult to understand why they could not eliminate restrictions and lopez. if that does not do it, the regulation argument does. >> in morrison, they severed the provision. there was a regulatory scheme. the supreme court severed a

narrow provision. i want to speak of that here. i understand what judge vincent did. the plan to support tt position. and some that iit were unconstitutional, why would not be wholly severed as a legal matter? is there any health care provision that must fail? i know there are arguments why it is essential, but are there -- >> it never deals with unconstitutional parallels. >> there is a presumption even without a clause. >> there is a presumption which is weekend if you deletit. >> likening not sever the mandate from the rest of the

provision? tell me legally why you cannot do that? >> i would like to agree with the government on this point. it is inextricably intertwined with the provision. >> all of them? >> guaranteed issue was the statutory provision. >> pre-existing is what he said. >> the other provisions were the community -- >> how about annual mits? does that fails? >> necessarily it does for the same reason. >> all health-care reforms fail. >> this is a central part of the act. this is the patient protection and affordable care act.

>> is that based in anything written in the statute? written in the statute? is there anything in the statute that intertwines the mandates in title 26 or title 42? >> i do not know of anything in the u.s. code is intertwined. >> related or anything. cracks in the findings they said this is -- >> i am in the statute. >> than i am at a loss. i do not know of such a statute. it is not in this act. it is not in any act anywhere as far as i know. the answer is no. the supreme court has told us to look at whether or not congress would haveassed the law anyway because the main purpose of the law -- >> it is impossible to tell

whether they would have done it without the mandate. >> we have better information than we doith most laws. we know that the house passed a rule that said you cannot change a comma. that was the vote. we know it was almost not passed because of provisions involving ortion in all these other things. that they viewed as essential to getting it through. in a more realistic level, i have never seen a statute so intertwined. the name was to insure sick people. the individual mandate was designed for the expressed purpose of compensating the insurance companies r the cost. we arerotecting patients on the one hand.

we are compelling people to come to the individual insurance market. that is the operative assumptionhich every other part of the act was based on. that there would be affordable insurance out there. when you mandate employers to do it. when you put these taxes on companies. when you set of these health care exchanges. the dominant premise was that there would be affordable insurance out there. without the mandate, without the subsidy they are imposing on my client, $30 billion a year, none of this insurance is going to be affordable. congress would have never impose threquirements. >> would they bring healthy people into the market? the extension, your kid a large pool of new consumers, healthy individuals. is that correct? is the answer yes?

>> yes. >> there are provisions that wi aid the insurance companies with regard to the insurance ol. >> maybe i did not understand the question. the requirement they can limit cost hertz the insurance companies. the requirement they have to ensure people up to 26 hurts them because they are adding new clients whose health-care expenses they ha to pay. it is basically all additional cost. you have to expand your client pool. >> not bigger than the health market reforms. is that what you're saying? >> but the government said we will pick up the tab for a lot of people you do not want to ensure. we're going to expand medicaid. that helps them. it is taking them off the doll. congress is trying

sang, at this point you cannot afford the individual mandate. we're going to put you on the state one. again that is based on the assumption that there is universal coverage that tries down the insurance clause. they subsidize people for these health care exchans. that number was set on the assumption that the health care costs would be driven down by conscripting young people to engage to their detriment which were dry everyone else -- >> healthy people c still buy catastrophic coverage. >> i do not think -- i still think of a 31-year-old as young. they cannot buy a catastrophic insurance. what they call catastrophic is not anyone's normal idea of a catastrophic coverage.

you have to have the health benefits of the savings act. there needs to be a number of benefits. the deductible includes the three primary physician visits per year. getting hit by lightning in a serious disease, what most people think of catastrophic. that is not an option available. that is part of the cruel irony of forcing them to buy this plan when it is economically disadvantageous. i see my time is running out. >> we thank you. >> thank you.

i have four points i would like to start with. the first is that the plaintiffs had made a major concession. the government can regulate to the point of fail. now the only dispute is about timing, the means congress chose. chose. congress has since -- substantial deference. their solution is to ban the an insured and leave waiting victim's at the door. that is what happens if people do not have money to pay under their system. it is proper for congress not to have to do that. congress is reacting to a real- world problem, a problem worth $43 billion in uncompensated care. they say other solutions exist. as judge marcus points out, if anything, congress's means are

far more rational. they decided touild the system. >> to say it is a temporal jump does not yield the inevitable conclusion that the jump is not a big deal. you understand? you can make the jump in a lot of different industries. your colleague throughout the question, mr. carvin, i think it is a fair question to ask, i wanted to ask it to you directly. if they can compel this, what rchase could they not compel? >> as i said earlier, we are not arguing that the failure to buy something is what causes the economic activity that congress is regulating. he is looking at the wrong side of the transaction. he is looking at the means and saying if you can do that, the failure to buy something, it

will always be commerce. that is not what congress said. congress said the status quo was once that was leading to cost shifting. you can imagine a president that forbade the government from forcing the purchase of a good in terms of a substantial commerce clause authority. it would not matter one bit. we're talking about the means. with respect to that, while there may be jumps in timing, in many circumstances this is not one of them. here health insurance is the way that most health care is paid for. 80% comes from non-out of pocket cost. will congress decided to do -- >> it pays for a 37% of health care. medicaid, medicare, many other

ways account for 70%. private health insurance pays for 30%. >> of course congress allows medicaid to be part of the solution. my only point is that congress was building on this existing apparatus. it was not a jump in some dramatic step. the incentives and other plans would not work. they knew that if they wanted to get r of discrimination against those who have pre- existing conditions. the way to do that was to have a minimum coverage provision. there was not another option. they said the massachusetts solution was the way to do it. if you are a truck driver, you have to have insurance. that brings me to my second

point. about rates and how we were an instant away from the market there. i think that is right. millions of amerins need health care. that is what makes this market unique. i take my frien do not disagree. one brief points to the rational decision to sell insurance. his answer here to you was, that was economic. the failure to buy something is not economic. this court dealt with and responded to -- >> they have not enter the stream of commerce gap. >> exactly. this court dealt with that question in maxwell. the panel said that child

pornography, it was not commercial. it was impossible to think of anything farther away from the commercial. then this cour said where congress meant regulates activity, whether economic or not. so long as the ability do so undermines our ability to effectively -- >> that is the majority opinion. >> it is. >> let's go back to the qstion about making an individual purchase of anything. fld forke the energy example. consumption is a national problem. it has life affects as well as do health care. everybody consumes energy on some level. by then, couldn't you require

the purchase of certain types of cars or solar panels? once we go down this road, because there is a a health care problem, we are going to require you to purchase health insurance. >> absolutely not. >> and none of those car, theances, the ca food, you have a right to go in there. if you walk campanulas, you cannot say to give it to me. healthcare is different. it is why his question was correct to say. is isunique. that is what stops the slippery slope. shifting have the cost here have here. >> can congress increases by

>> can congress increases by passing a lawyer shop provide health care -- and pass a law providing an healthcare? >> on page 25, they say precisely that in responding to it. if you are wored about it, how can you increase your power to the activity? there will be no limits. that is exactly what this judge said in maxwell one. it took courage congress to paint with a factor brush. on page 25, it rejects that. it is up to congress. >> let me ask a question abo insurance generally. i agree with you that health

insurance is unique to the extent that really cannot predict when someone will need it. i think that it does differentiate health-insurance from other projects such as automobiles and so forth. i am not sure that makes health insurance unique. it isn't that really an aspect of the insurance industry as a whole? flood insurance, fire insurance, home insurance, life insurance, natural disaster insurance, although those pride for eventualities that are known. >> absolutely. >> how does that make health insurance unique from all the other kinds of insurance?

there is st shifting here. someone else picks up the tab when you do not have insurance. that is why its activity to not be insured. congress found specific findings of $1,000 a year to you and me. when they say it seemed unual to compel the purchase of a good, i think that is a liberty of market. they did not have a president that says -- precedent that says the court can mix and match liberty concerns. >> why not? >> i think they both it dealt with that. did they deal with them in separate places. >> the reality is that there is a powerful factual different

between claiming there is some liberty interest to grow marijuana in your backyard in california and telling someone they have to buy a product they do not want to buy life insurance. it is critical. >> dealing with the forced detention of individuals after they served their sentence, the court said that is a due process challenge. we will not consider this with respect to it. i think there is clear guidance from the supreme court. the concerns are off the table. i know they tried to get a lot of rhetorical forest. maybe the argument that violate the attention of ayn rand but not the united states. they also said congress had not

done anything like this for 220 years. >> is that accurate? >> i do not want to quibble. >> congress hasot done anything at all like this and 220 years. i do not know. is that accurate? >> here are some examples we think are close. therder people to have guns and knapsacks. >> it was not specifically pegs. this is just a question of books proper. if i could spend a couple of minutes on the conversion.

the first point is that even if you think that there is some coercion doctor, this is opposed. >> the supreme court has said there is. this case is not close to the line. did you do not hear a word in theargument about what district court point to. >> i do not understand what you just said. it seems to me that the supreme court of the united states says with respect to whether spending and taxing goes too far beyond the constitutional limits, that a limit provide it. it says we have a four part test that we will apply. what is more on top of that, we are concerned about the problem

of coercion. when it morphs into coercion, that may bring a bellhat yields the conclusion that the legislation has gone too far. the federal government said he will deprive the status of dakota 5% of the money they would otherwise get. but i think it is forceful. maybe it is not. there is a specific statute that says congress reserves the right to "alter, amend, or appeal any provision." states have been on nice. congress can change the rule.

>> is it your view that all they have to do is to place tax legislation. we are giving you money. we reserve the right to change the terms and conditions and that it can never be the worst? >> that is precisely whathey say with respect. they point to the specific stute. he can now change the rules. that is actually happened several times. conagra said the exact same thing it is doing today. you have to cover patients appeared in 1989, pregnant women and children under the age of sex. same exact threat to the overall brand appeared >> it is not overall relevant to looking at

overall coercion. -- the same exact a threat to the overall brand. overall relevant to looking at the overall coercion appeared >> it is the same threat the the -- coercion. it is the same threats. statue to 1396c says that if the state is the not meet the education requirement comment the secretaryas aood there a long process over exactly what she will do. >> i understand this. i thought that what congress said was you have got t increase your coverage to include 133% of the poverty

level. in the past, you only had to go up to the poverty level but was 12,000 and change for individual. if you do not do that, we -- the power is there to cut the state's off from a dime from any medicaid coverage at all. what did they fall within the first hundred term or the 33%. -- whether they fall within the first 100% or the 33%. >> it is in the power. you also have lesser remedies available. >> what to be lesser remedy? >> partial withdrawals of funds as opposed to full. in the west virginia case, it said we should wait and let that

process play out and see what the secretary does before getting into it. that makes sense. these days do not have to spend a dime for the expansion of medicare costs. >> your suggestion is to wait till another day. >> that is part of the answer. this is not even come close. >> u.s. and counsel for my purposes of the question that congress and the secretary says to the state of florida by way of example, if you do not to raise the eligibility pool to 133%, if you will not get a dime for medicaid. we are cutting out what we did you which amounts to billions you which amounts to billions of dollars.

would that be coercive? >> you have that statute. this is about eligibility to a program. it is our program. it is our dollars. >> i want to turnack to the enforcement mechanism. the government argues it. it is essential to the entir regulation. individuals have a choi. the penalty is $95 to begin with.

is this correct? >> yes. >> there may look at i'm not going to buy insurance to pay the penalty. there is no interest that accrues. accrues. there is no levy. my question is how is that penalty even more the medical bills? >> i do not think it'll be any different. how can that be so essential to reducing unpaid medical bills? it is collectible.

it is collectible. >> it'll cost more to pursue the lawsuit. >> we will make sure that the statute does not say 695. sometimes it can be more or less. >> for most wages adobe $6.90 -- it will be 695. >> this is the appropriate way of enforcing it. it would reduce days that are uninsured by millions and millions. >> the cbo says even with this mandate 8 million will be

exempt. out of that 8 million, only about 4 million will pay the penalty. that is how it works. >> i'm not sure if that is correct. it is a substantial number. there is no distinction in the wall that is more essential than the difference between a constitutional argument in a policy argument. much about what we heard about today, it they turned out to be policy arguments. and do not think they go to the commerce clause. commerce clause. if they say congress cannot

regulate, then on the grounds that it is not interstate commerce, i wondered what the limits are in ture cases. >> thank you. i want to take this opportunity to thank all of you lawyers. this was very helpful to us. it was a very difficult case. it will certnly affect all of the citizens of our nation.

tomorrow morning, at 7:00 a.m. eastern time. have a great day.

>> good morning, everybody. good morning, director mueller, i prematurely our last hearing here complimented you and said this is the last time you have to come to the hearing and put up with the senate jea, --judiciary committee. welcome back. over a month ago met with the president. he had requested congress authorize a limited extension of robert morris services, director of f.b.i., we have a law that normally limits the f.b.i. directorship to one 10-year term . a way to span presidential terms and give it the kind of independence that somebody in this position wants and needs.

the president spoke of the ongoing threats facing the united states and the leadership transition at other agencies like the defense department. and central intelligence agency. he asked us to join together in extending director mueller's leadership for the sake of our nation's safety and security. i was convinced of the call the president made. following the death of osama bin laden i urged all americans to support our president, his efforts to protect our nation, and keep americans safe. with the 10th anniversary of september 11, 2001, attacks approaching and the face of continuing threats, threats both within and without our borders, we must all join together for the good of the country and all americans. i'm pleased in a law enforcement matter like this we have kept it out of any kind of partisanship. republicans and democrats have

expressed support for the president's request to maintain stability and continuity in the national security leadership team. senator grassley, this committee's ranking republican, joined me along with senators feinstein, chambliss, chair and vice chair of the select committee on intelligence, introducing a bill to permit the gum gum -- incumbent f.b.i. director to serve for up to two additional years. chairman lamar smith, the house judiciary committee, has spoken to me. he support's the president's request. and i was encouraged to see reports that senator mcconnell, the senate republican leader, supports the president's request. the bipartisan bill in the committee's agenda provides for limited exception to statutory term of the service to the f.b.i. director. it will be on our agenda tomorrow morning. it will allow direct mueller to continue service for additional two years until september 2013

at the request of the president. this extension is intended to be a one-time exception. something incidentally that director mueller has personally urged, and not a permanent extension or modification of the statutory design. the president could have nominated a new director of the f.b.i., someone who could serve for 10 years. would be there well after president obama's own term of office expired, instead the president is asking congress to extend the term of service for a proven leader for a brief period give the extenuating circumstances facing our country. bob served this nation with valor and integrity as a marine, as a federal prosecutor at all levels. he againancepsed the call of service when president bush nominated him in july of 2001 to serve as director of the f.b.i. i was chairman of the committee at that time. i expedited that nomination through the senate.

he was confirmed in just two weeks. from the nomination to the confirmation. in the days just before september 11, 2001, bob mueller served tirelessly and selflessly as the director of the f.b.i. i felt president bush, even though of different party than i, made a very good choice and i saw no need to expand the hearing to hold it. we moved very, very quickly. director mueller's handle the bureau significant transformation since september 11, 2001, with focus. he's worked with congress in this committee, testifying as recent as march of one of our periodic oversight hearings. it was very evident at that hearing, if i could be personal for a moment, that bob mueller was raised -- laid down the burdens of this office and take off with his family as he's done throughout his career.

bobe is now answering duty's call. i should tell you, director, what the president said to me when i asked him if he had talked to you about this idea, he said, not yet, but bob mueller is a marine and he answers the call of duty. those are the president's request as a patriotic american bob mueller is continuing to give his service to a grateful nation. senator grassley asked director mueller appear at today's hearing. he's cooperated and has been doing so. i thank him. today we also welcome back to the committee, jim comey, who served as u.s. attorney for the southern district of new york and for two years as deputy attorney general during the george w. bush administration, where he worked closely with director mueller. i told mr. comey earlier it was nice to have him back in this room where he spent a lot of time in the committee walls, hearing testimony about the constitutionality about passing exception to the statute. which we created the 10-year

term. i thank senator grassley for his cooperation. i hope we now have the hearing. we report the bill in the form that senator grassley suggested without unnecessary delays. i yield to senator grassley and then to director mueller. >> thank you very much for holding this hearing and welcome back, director mueller. this hearing is the first hearing in 37 years to specifically address the 10-year term of director of f.b.i. in 1968, congress passed a law requiring f.b.i. director to be appointed with advice and consent of the senate. despite the passage of this law, director 4506r -- hoover served until his september in 1972. following his death, a number of high profile scandals came to light. this committee held a hearing in 1974 to address legislation limiting the term of the f.b.i. director to provide for

additional congressional oversight of the f.b.i. director and most importantly to insulate the office from political control of the president. in 1976, congress acted by limiting the director of f.b.i. to the current 10-year nonrenewable term. congress did so to prevent the accumulation of excess power by the director, as well as to provide some political independence for the f.b.i. the statute expressly prohibits reappointment of a director. despite knowing about director mueller's impending term limit and initiating a search for a successor led by the attorney general and vice president biden, president obama chose not to send the senate a nomination for director of f.b.i. instead, the president has decided that notwithstanding those statutory provisions, director mueller should continue to serve in this position for another two years. although i do not think that our

position on legislation to permit this result should depend on personalities, director mueller has performed admirably has f.b.i. director. and was the recent death of bin laden and the approaching 10-year anniversary of the september 11 attacks, we do in fact have unique circumstances warranting a one-time limited extension of the term of this particular director. against this backdrop and somewhat with a heavy heart, i join in co-sponsoring s. 1103, a bill that would extend the term of the current f.b.i. director for two years. but two years is as far as i will go. director mueller has done a fine job, but he's not indispensable and the likely continuation of the war on terror for many years is not so singularly a circumstance to justify extending the f.b.i. director's term. in two years no matter what, someone else will be nominated and confirmed for this job.

although i support this bill, i have resisted efforts to simply pass it with minimal deliberation given the substantial presidential value of any extension of the f.b.i. director's terms, we have a duty to ensure that the regular order is followed for the consideration of this bill. first i believe that the 10-year limit has achieved its intended purpose. until director mueller, no director subject to the limit has served the full 10 years. the limit has been successful in reducing the power of the director and preserving the vital civil liberties of all americans. second, the 10-year limit has provided important political independence for the f.b.i. director. only one director has been fired in this period and this did not occur for political reasons. and third, the prohibition on reappointment has also served the director's independence by eliminating any potential that the director will attempt to curry favor with a president to

be reappointed. we should proceed cautiously in setting a precedent that a 10-year term can be extended if we are going to extend director mueller's term, we should establish a precedent that doing so will be difficult and that unique circumstances necessitating it exists as those are circumstances at this particular time. we didn't just introduce a bill and hold it at the desk. instead we introduced a bill that would amend existing law. we are holding a hearing as in 1974 we have called the director of the f.b.i. to testify. we are pointing out the special circumstances behind the bill and recognizing the constitutional issues that may arise at extending the director's term and without actually voting to advise and consent to his serving an additional term, we have called experts to address constitutionality. we will hold a committee markup and if successful will seek floor time to pass the bill.

that is how we should proceed. changing the 10-year term limit is a one-time situation that will not be routinely repeated. acting responsibly requires no less. for all these reasons, mr. chairman, i especially thank you for holding this hearing. i thank director mueller for testifying and all the other witnesses that have come. thank you. >> thank you very much, senator grassley. director mueller, the floor is yours again. >> thank you, chairman leahy and ranking member grassley and the other members of the committee who are here today. i thank you for your introductions and for the opportunity to appear before the committee today. as you pointed out, my term as f.b.i. director is due to expire later this summer. however in early may the president asked if i would be willing to serve an additional two years. upon some reflection, discussion

with my family, i told him that i would be willing to do so. now the president has asked that congress pass the legislation necessary to extend that term and if this committee and congress see fit to pass the required legislation, i look forward to continuing to work with the men and women of the f.b.i. as the committee is well aware, the f.b.i. faces a complex threat environment. and with the past year we have seen an array of national security and criminal threats from terrorism, espionage, cyberattacks, and traditional crimes. these threats have range interested attempts by al qaeda and its affiliates to place bombs on airplanes, to lone actors seeking to detonate i.e.d.'s in public squares and on subways. a month ago as chairman pointed out the successful operation in pakistan led to osama bin laden's death and created new urgency concerning this threat picture. while we continue to exploit the

materials seized from bin laden's compound, we know that al qaeda remains committed to attacking the united states. we also continue to face the threat from adversaries alaa he in yemen who are engaged in efforts to persons in united states to commit acts of terrorism. these figures no longer need or speak personally with those to influence. they conduct their media campaigns from remote regions of the world and sent on fostering terrorism by lone actors here in the united states. alongside these ever evolving terrorism plots, the espionage threat persists as well. last summer there were the arrests of 10 russian spies known as illegals, secretly blended into american society in order to clan dess tanly gather information for russia. we continue to make significant arrests for economic espionage as foreign interests seek to

control technologies. the cyberintrusions at google last year as well as other recent intrusions highlight the ever-present danger from internet attack. along with countless other cyberincidents, these attacks set to undermine the integrity of the internet and businesses and people who rely on it. in our criminal investigations the f.b.i. continues to uncover massive corporate and mortgage frauds that weaken the financial system and victimize investors, homeowners, and ultimately taxpayers. we are also rooting out health care fraud based on false billings and fake treatments that endanger patients and cheat government health care programs. in the extreme violence across our southwest border to the south also remains a threat to the united states as we saw with the murders last year of american consulate workers in juarez, mexico, and the shooting earlier this year of two federal agents in mexico. likewise here in the united states, countless violent gangs

continue to take innocent lives and endanger our communities. and throughout public corruption undermines the public trust. in this threat environment, the f.b.i.'s mission to protect the american people has never been broader and the demands on the f.b.i. have never been greater. to carry out this mission the f.b.i. has taken significant steps since september 11 to transform itself into a threat-based spence-led agency. this new approach has driven changes in the bureau's structure and management. our recruitment, hiring, and training and information technology systems. these changes have transformed the bureau into a national security organization that fuses the traditional law enforcement and intelligence missions. as this transformation continues, the f.b.i. remains committed to upholding the constitution, the rule of law, and protecting civil liberties. of course the f.b.i.'s

transformation is not complete as we must continually evolve to meet the ever changing threats of today and tomorrow. and as i discussed the transformation of the bureau, i must say i am uncomfortable about much of the intention that has been placed on me or put on me, my reason of this being the end of my term. the credit for these changes goes to the men and women of the f.b.i. who have responded remarkably to the challenges i have laid out both in the past and present. let me conclude by thanking the committee on behalf of all f.b.i. employees for your continued support of the f.b.i. and its mission. the committee has been an essential part of our transformation and this legislation has contributed greatly to our ability to meet today's various threats. thank you. i look forward to answering any questions. >> thank you. your statement will be placed in the record. my questions will be brief. you and i talk often as you do

with other members. and have always been available. i remember when you testified at an oversight hearing on march 30 this year you talked about the terrorism threats facing our nation. your remarks both spoken and prepared, you expanded those today. tell us about the unique role the f.b.i. plays in preventing and prosecuting terrorist activities as compared to our other intelligence and law enforcement agencies all of whom have a role. what is unique about the f.b.i.? >> uniquely the f.b.i. has domestic responsibility, acting under the constitution, the applicable statutes, and the attorney general guidelines to first of all identify those individuals who might be undertaking terrorist threats

within the united states along with our state and local law enforcement. the other federal agencies. we also have the responsibility for working with the intelligence agencies to identify threats from overseas that may impact the domestic united states. and to assure that we gather and analyze and disseminate that intelligence and efforts to thwart those attacks. if indeed an attack takes place, quite obviously our responsibility then is to identify those persons responsible for the attack. gather the evidence against them, and pursue the case through indictment, conviction, and incarceration. uniquely we have the responsibility -- broad responsibility domestically fo -- for undertaking this particular aspect of response against international terrorism as well as against domestic terrorism which often may well be overlooked. >> one of the things, talked with the president and others

about the desire to have continuity, national security, there are a lot of changes going on, leon panetta is leaving. the c.i.a. director is becoming the secretary of defense. general petraeus is coming in to the c.i.a. the head of the joint chiefs term runs out next couple months . we have nominations pending for deputy attorney general. and also nomination pending for the assistant attorney general in charge of the national security division. in that team i assume the f.b.i. director or your designee is a major part of the team, is that correct? >> i believe that to be the case, yes. also particularly the head of our national security branch is -- as well as myself are both

part of the team. >> this is not a 9 to 5 thing i assume. i expect you probably get a few calls in the middle of the night. >> we do. it's somewhat continuous but that's part of the job. >> you served for nearly 10 years. we talked about a number of things that you tried to reform in the department and other things you want to upgrade. i know in just a few weeks ago you were contemplating leaving as f.b.i. director. since then assuming this legislation passes, which i assume it will, what would you want to build on? what would you -- give two more years, what would be a top goal in your mind? >> the areas of concentration, let me put it that way, for the

next two years should continue to be terrorism. particularly the -- in the wake of the death of bin laden, the impact that will have on his followers. guy obviously what is happening in pakistan, what is happening in yemen, what is happening in somalia bears on the threats to the united states, along with domestic terrorism. that will continue to be a focus. i will tell you that we will increasingly put emphasis on addressing cyberthreats in all of the variations. part of that is making certain that the personnel in the bureau have the equipment, capability, skill, experience to address those threats and not just the cadre of individuals that we have to date who can address any of those threats not just the united states but around the world. but all those in the bureau have sufficient understanding of the cyberbackground to be able to work in a variety of programs

and understand how those programs fit into the cyberarena. we have done, i believe, a very good job in terms of advancing our information technology. we have to finish off the sentinal project that has been ongoing for a number of years and has been the subject of discussion with this committee and i anticipate that will be coming to a conclusion on that project in the fall. in the meantime, we have kept up-to-date in terms of giving our agents, analysts, and professional staff the information technology tools they need to do the job, but we have to continue to be on the forefront, cutting edge of that technology. in terms of legislation, one area which we have raised with this committee and that is what we call going dark. where we have a court order, whether from a national security court, the fisa court, or a district court, based on protocols believe that somebody is using a communications device

to further their illegal goals, often now given the new technology, the persons, recipients, carriers of those communications do not have the solution, capability to be responsive to those court orders. we have to address that increasing gap given the new technologies through legislation so i will anticipate. that would be an issue we want to address in the next couple years. >> thank you. i'm going to put in the record letters of support from a number of people at the national fraternal order of police, national association of police organizations, so forth. one i'm very pleased to put in is one from john ellith, who is sitting behind you a couple rows back. former detailee to my staff. the reason i especially wanted that, he testified at the 1974

hearing on the bill that created the 10-year term for director. i wasn't a senator. i was a prosecutor at the time. but he then helped me a great deal once he came here and put institutional memory that is extraordinary. i know that the deputy, majority leader, has to leave. you want to make just one remark. i thank senator grassley for that. >> thank you very much. i just wanted to -- it's been my honor to work with director mueller for the last 10 years. you are an honest, honorable man and you have dramatically transformed our nation's premiere law enforcement agency. i'm glad that the president recognizes that talent and

america's fortunate you are willing to continue to serve. i fully support this extension. thank you. >> thank you. >> thank you. senator grassley. >> the president has stated that he believes that continuity and civility at the f.b.i. is critical at this time. he emphasized at this time. as i said i'm not in support of extending your term just because the president has many leadership transitions occurring at the same time. there are things the president can control like when to change leadership at d.o.d. and c.i.a. and things the president cannot control like the 10-year anniversary of 9/11 or the recent death of bin laden and the revolutions in the middle east. so my first question, director mueller, would you agree that threat environment alone is

sufficient reason to extend your term for two years? >> i leave that determination to others. as you point out, no one is indispensable. i do agree that during a transition there's time spent on that transition process. we certainly have been spending time on it. but to the extent that either i or somebody else should be part of that team, i leave that up to someone else. the president asked that i stay and as i said based on -- after reflections, talking to my family, decided to do that. i will tell you that as i said nobody is indispensable. some of the cal includes was -- calculus was should i really stay? and off the person who is in that position is the worst person to make that decision. i did go out and try to talk to

other persons both in the bureau and outside the bureau to get more objective view as to whether or not it would be the best thing for the agency for me to stay tonight even though the president asked that that be done. >> the legislation on your position is meant to -- for the last 30 or 40 years to give level of independence to the director. but at the same time recognize the president could fire a director for any reason. i'm not sure that that's fully understood so i ask these questions of you. as director of the f.b.i. with a fixed term, under what circumstances can the president remove you? >> i think i serve at the pleasure of the president. >> ok. would you support changing the law so that the f.b.i. director could be removed only for cause so you would have greater independence? >> i believe and support the law, including the 10-year term

limit. >> would you support legislation requiring the president to provide notice to congress 30 days prior to removal of f.b.i. director similar to the way law requires removal of an inspector general? >> i really have not thought about that, senator. >> ok. the f.b.i.'s intelligence analyst association supports the president's request to extend your term. the f.b.i. agents association appears to me to be a little less enthusiastic. if you are extended, how would you intend to bridge a gap if you might not agree there is a gap, but i guess that's the basis of my question, how would you intend to bridge the gap and manage the agents who believe you are creating a double standard by extending your tenure while you limit theirs to your up and out policy? >> i do believe that there's -- i understand the concern on

certain agents' part. i do think it's a different issue. the issue of having a maximum time for service as a supervisor in the bureau was a part of a plan to develop leadership. after looking at how you develop leaders in the military, how you develop leaders in corporate america, and how you given incentives and push persons. the best leaders in the organization to the top. we had had problems with that in the past and after much discussion, the decision was made to enact this. it was one of the hardest decisions i probably had to make as a director of -- during this period of time. but it has in my mind had the beneficial effect, although we do lose some very, very good supervisors who decide either to step down or retire. i have over the years explained the thinking behind the decision . over the years sought out

opportunities to discuss the import and impact of that decision. i will continue to do so. >> thank you. >> thank you very much. senator franken. >> thank you, mr. chairman. director mueller, i want to start off today by associating myself with senator durbin's remarks and commending you for your tremendous service to this nation. it is in large part because of your tenacity and leadership that we haven't seen another major terrorist attack on our soil since 9/11. that is no small achievement and i want you to know that i am grateful for all you have done to reshape the f.b.i.'s counterterrorism strategy. i don't think it should come as a surprise your department has been heavily criticized over the last 10 years for significant misuse of the department's surveillance powers and other

major civil liberties violations. i think you have done extraordinary job, but i also believe that term limits exist for a good reason. term limits are like sunshine laws, they force us to bring in new leaders who take a fresh look at things, and that is almost always a good thing. i'd like you if you could to take a minute to talk about some of the most controversial aspects of your tenure or of the f.b.i. during your tenure. how do you think you have addressed the problems that arose with the f.b.i.'s misuse of the surveillance authorities granted under the patriot act and the foreign intelligence surveillance act, specifically i would like you to address the concerns raised by the inspector general about the department's abuse of national security letters? >> let me separate national security letters out from the general discussion of surveillance. i do not believe that we have abused our powers in any way,

with maybe one or two isolated examples, and the additional authorities that have been given us under the patriot act over the years, and i don't believe the i.g. has found such substantial misuse. with regard to national security letters, we did not do what was necessary to assure that we were in compliance with the applicable statutes. it was brought to our attention by the inspector general. as i know you are aware, national security letters enable us to get not content but information relating to the existence of a communication. and there was a statutory framework for that and we should have set up a much more thorough compliance program to assure that we were dotting i's and crossing t's and we did not. as soon as we learned of the i.g.'s scrutiny on this and the

problems that were pointed out, we moved to fix them. the first thing we did is make certain we had a new software capability and data base capability that assured that all of our agents in seeking national security letters will have -- given all the information that is required under the statute. we put out comprehensive guidance to the field and additional training. we assured the national security letters are signed off on by the chief lawyer in each of our divisions. but perhaps as important if not more important is we set up a compliance program to address not just security letters but other areas such as national security letters where we could fall into the same pattern or habits. and so the national security letters i believe we addressed appropriately at the time. and it was used as a catalyst to set up a compliance program that addresses the concern in other

areas comparable to what we had found with national security letters. >> in addition to concerns about -- those concerns, a number of civil liberties groups have raised questions about the f.b.i.'s misuse of the material witness statute. mishandling of the terrorist watch list and infiltration of mosques and surveillance of peaceful groups that have no connection to criminal activity. if your term were extended do you believe that you would be in a position to give these concerns a fresh airing without being mired in -- >> i certainly -- i'm not certain it needs a fresh look because i am very concerned whenever those allegations arise. i will tell you that i believe in terms of surveillance of religious institutions we have done it appropriately and with

appropriate pred case under the guidelines of the applicable statutes. even though there are allegations out there to the contrary. i also believe that we have -- when we have undertaken investigations, individuals expressing their first amendment rights, we have done so according to our internal guidelines and applicable statutes. and so whenever these allegations come forward, i take them exceptionally seriously. i make certain inspection division or others look into it to determine whether or not we need to change anything. and i will tell you that addressing terrorism and the responsibility to protect against attacks brings us to the point where we are balancing day in and day out civil liberties and the necessaryity for -- necessity for disrupting a plot that will kill americans. it's something we keep in mind day in and day out. the last thing i would say as agents go through our training

classes, the importance of adhering to the constitution, civil liberties, is drilled into them day in and day out. every agent, this was established by my predecessor, goes to the holocaust museum, before they become a new agent, to understand what can happen to a police power that becomes un reined and too powerful. we take those allegations very seriously. >> thank you, mr. chairman. my time is up. i'd just like to say that there are exceptions of approved rules, these are, i think, unique set of circumstances that the new c.i.a. director and new secretary admiral mulen retiring and i -- mulin retiring, and i should note president obama could nominate a new director that would be there for 10 years, and by extending you for two years, he is -- in two years

he may not be the president. i think that bears just mention. thank you. >> thank you very much. dr. coburn. >> first of all let me thank you for your service. >> is your microphone on? >> yes, it is. i think it is. light's on. we'll try that. we are going to hear testimony in the next panel about some questionable constitutionality of what we are trying to do and meeting the president's request. and i have some concerns about that because if in fact there can be a legal challenge to what we are doing, based on previous statutes, and let me give you an example, with the 2005 extension to the patriot act, we added additional requirement on 215

orders for certain sensitive business records such as book sales, firearm sales, and tax return records that are relevant to terrorism investigations. they can only be obtained by the approval of you, your deputy director, or the executive assistant director for national security. could you envision a constitutional challenge to the section 215 order that was approved by yourself during your two-year extension? and could that be related to the possible unconstitutionality of this extension legislation? >> let me say at the outset that i'm not a constitutional scholar. >> nor am i. >> and i have heard nothing in my discussions with the department or otherwise of a constitutional issue that would make that a problem down the road. if that were a substantial problem, quite obviously then i would be concerned, but i have

not heard that to be the case. >> well, my hope would be that you would, after your testimony, you would have somebody here to listen to the second panel. >> i do. absolutely. >> because i have some concerns. i have no objection to you continuing in this position at all, but i do have concerns that we could get mired in court battles over a questionable constitutional challenge on this that could actually make you ineffective in carrying out your job. with that, mr. chairman, i have no other questions. >> thank you very much. senator klobuchar. >> thank you very much, mr. chairman. director, welcome. it's good to see you. thank you for all your good work. my question is i remember when we met earlier at the f.b.i. about some of the challenges you face, particularly, i'm very focused on some of the white collar crime investigations as you know, the resources necessary for those, and how that plays in with necessary

steps you had to take after 9/11 to shift resources over to the investigating terrorism. with that in mind what do you see as the biggest challenges facing the f.b.i. over the next two years? >> quite obviously a continuation of the -- addressing the threat from terrorism both international terrorism and domestic terrorism and increasingly in that area is the radicalization of individuals over the internet where the radicalizers can be offshore and the individuals can be in the bedrooms here in the united states. they need not meet or have any other personal contact but persons can be radicalized through the internet. i mentioned before cyber the increase of cyber as a mechanism for conducting the internet, for conducting all sorts of crimes, but also it being a highway to

extracting our most sensitive secrets or extracting intellectual property from our commerce. we as an organization need to continue to grow the capability of addressing that arena in the future. from a criminal perspective, making certain that we minimize whatever crime can come from south of the border in the southwest border area, and of course as you point out, we have still a backlog of mortgage fraud cases and substantial white collar criminal cases that we are working through. >> so you're concerned about budget cuts that could affect local law enforcement that have been taking up some of the slack here? >> i do. if you talk to state and local law enforcement, you understand their concerns in terms of budget cuts all the way down the line. i think we are all in agreement that we are much more effective working together.

and consequently for all of us the increase in task forces where we combine our areas ever expertise and knowledge is going to have to be at least a partial answer to the budget cuts that we see coming down the road. always my encouragement to the appropriators is that i am giving moneys, i give moneys in such a way that's an incentive for us to work together in task forces as opposed to a disincentive for persons to go and start their own look at a particular area. >> as you and i have discussed we have had tremendous success in minnesota with some of these combined efforts. i brought up the cybercrime issue, i think it's very important that we start getting something done in this area and start to be sophisticated in our laws as those that are breaking them. i have heard that because of new technologies and outdated laws there is a growing gap in the f.b.i.'s ability to get court ordered information from communications and internet service providers. in prior statements you have

referred to this as going dark. could you talk more about this problem and you see -- and how you see we could fix it? >> i did refer to it briefly before. where we have the authority to go to a court and get a court order directing that a communications carrier of some ilk provide ongoing communications to the bureau in a terrorism case, white collar criminal case, child pornography case, what we increasingly find given the advent of these two technologies is that the carrier of that communication no longer or does not have the solution in order to be responsive to that court order. so my expectation is that legislation will be discussed and perhaps introduced that would close that gap for us. we cannot afford to go dark in the sense that we have a legitimate authorized order from

a court directing a communications carrier to provide us with certain conversations related to criminal activity and not be able to get those conversations because a communications carrier has not put in place a solution to be responsive to that court order. >> that makes a lot of sense. two things i just wanted to mention at the end. first i want to thank the bureau for the help with the synthetic drug issue. senator grassley, senator schumer and i have been working on this and senator grassley has a bill to include some of these new synthetic drugs. we had a kid die in minnesota. a number of people get sick. i don't think people realize the power of these drugs and i.n.s. crease we are seeing in the use of those -- increase we are seeing in the use of those drugs. secondly i want to thank you for having kevin perkins at a hearing we had earlier to find missing children. this is the issue of trying to be as narrow as we can to get exception to the tax laws. you don't have local law enforcement trying to find a kid when it is in fact a family abduction. then you have one arm of the

government, the i.r.s. that knows exactly where that kid is, where that family is, and trying to put an exception in place that doesn't hurt privacy interests but like many of the extemmingses -- exception that is are already in that law so law enforcement can access it. >> thank you very much. senator, i understand questions have been asked. other than director mueller, we'll excuse you with our thanks for your service. you should also thank ann mueller. she doesn't get thanked enough for the support she gives you as do your daughters in this. and i appreciate that very much. i appreciate she suggests it. >> a preeshates that acknowledgement and much deserved. >> she's a remarkable woman as you know. i appreciate that. i will take a three or four

minute break while we set up for the next panel. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> this is a critical moment. we have the ability to recalibrate if that is what is needed, to read the fine and do the things necessary in the wake of the successes we have had against the al qaeda. that was the principal reason for being in afghanistan in the first place.

in order to ensure a transition, i think are a number of things that need to be thought through. we held five hearings to examine all of the assumptions guiding our strategy in the region and to chart a path forward. in two weeks, secretary clinton will testify and address investor concerns as the president decides how many troops to drawdowns starting in july. i think it would be helpful to this committee and the senate to move rapidly on this nomination and to put you in place to be part of those liberations. i know that senator mccain is here. i just want to say that we should be guided by certain truths. first that what the united states has national security interests, our current commitment in troops and dollars is not proportional to our interest or sustainable.

our military has made significant gains, clearing and holding, but as the president has said, they are fragile and reversible absent a robust presence. we have not made gains or the threat continues. i will continue to beat this drum that the principle equation with respect to our capacity to resolve concerns and afghanistan still lies in pakistan and will lie in our ability to adjust to the relationship and create a regional framework with respect to this conflict. i want to emphasize that regional framework. only a political settlement will resolve this.

every military leader has said that. there is no military solution. reconciliation is not a silver bullet. we will need to support them as they tried to make some kind of acceptable agreement. we need to reexamine the current plan with respect to the afghan national security forces. there are serious questions about size, capability, sustainability. i think we need to examine those carefully. also the majority in the committee is releasing a report regarding assistance. this is a report meant to be constructive. it is not -- it has critical observations, but made in the best spirit of a joint cooperative efforts.

we appreciate the response and assistance. we appreciate the cooperation with us to address the concerns we have. the report argues that you need three basic conditions before the money is dispensed. the projects have to be necessary and sustainable. there is a lot on the table for the congress and the president. ambassador crocker is going to have a critical role to play in making sure we get it right. >> thank you, mr. chairman. i join you in welcoming our nominee. ambassador ryan crocker returns from welland retirement to again apply his unsurpassed experience at managing civil and military collaboration. i thank him for his commitment. i know you will bring insights

and informed judgment to the job. as you pointed out, this is the sixth hearing related to afghanistan during the last two months. we have explored not is -- just what is happening in pakistan but whether our vast expenditures represent a rational allocation of our military and financial assets. our interests are threatened not just by terrorism but by debt economic competition, energy, and food prices. and numerous other forces. solving these problems will be much more difficult if we devote too many resources to one country. the question the president must answer is whether we can achieve the most important to national security goal in

afghanistan, preventing the taliban from taking over the government and preventing territory from being used as a safe haven. ambassador crocker would assume his post after a review of gallant -- afghanistan policy. this opportunity should be used to do more than just withdraw an arbitrary number of troops based on political expediency. the president should put forward a new plan that includes a definition of success in afghanistan. based on our vital interests and a sober analysis of what is up -- possible to achieve. before the country is considered secured. it should also designated eliminate those activities that

are not intrinsic to our core objectives. the ambiguity on our goals must be eliminated in order to move effectively and address our national security interests and convey -- we will maintain in the region. despite 10 years of investment and a chance to better understand the culture, we remain in a cycle that produces a relative progress but fills to deliver a secure military resolution. measuring success according to relative progress has a very little meaning. undoubtedly we will make some progress. the more important question is whether we have an efficient strategy for protecting our vital interests that does not involve massive expenditures and

does not require us to have -- i will appreciate hearing the nominees impressions of the obama administration's strategic of view and how we can improve the capacity to defend and govern while reducing our own commitment and resources. i am plod his willingness once again to take on an extremely difficult mission. i look forward to his testimony. >> as i said previously, it is a privilege to welcome senator mccain as the ranking member and a chair on the armed services committee. there is nobody with more experience in these matters in the senate. i appreciate his taking the time to be here to introduce ambassador crocker. >> thank you for your kind words.

thank you for indulging me as to introduce this great american. members of the committee, it is an honor to introduce the nominee to be the ambassador to afghanistan. his record speaks for itself. i join the committee and recognizing to members of his family who are joining him today. his niece cameron and the dedicated woman who has been by his side ever since they were young foreign service workers in baghdad. his wife christine. i understand the challenges of being a foreign service couple. i know he could have never enjoyed as many successes without the support of christine. those successes make the task of introducing him quite easy. has had thenate tha

wisdom to appoint him five times already. lebanon, kuwait, syria, pakistan, and iraq. this is only a fraction of his story. when the u.s. embassy was bombed in beirut, ryan crocker was a young officer who helped colleagues from the rubble. the united states needed to reopen our embassy after the taliban were driven from power in 2001. the secretary of state sent ryan crocker. years later, facing the same challenge after the fall of saddam hussein, ryan crocker was the only man for the job. it is nearly impossible to find other diplomats who can match his record. i met him in his earlier post where i came to know and respect him during his amazing tour in baghdad. it is difficult to remember just what ambassador crocker was

getting himself into when he raised his hand to serve in 2007. the violence interact was spiraling out of control. dozens of civilians were being killed every day. the ethnic and sectarian battle lines were drawn. iraq faced a real prospect of falling apart. and the possibility of being driven from the country in defeat. fortunately president bush adopted a policy involving consequential decisions he made in january 2007. the change in strategy, the nomination of it -- david petraeus, one of the most important and least appreciated was the nomination of ryan crocker as ambassador to iraq. if you ask ambassador crocker, he would say he was doing his part to serve the country where and when he was needed most. heroes always say that.

when ambassador crocker -- it was nothing short of a miracle. david petraeus has received huge praised for his role in iraq. he deserves every bit of it. david petraeus will be the first to affirm our military strategy would never have worked without ryan crocker's tireless leadership of our political strategy. he put the u.s. embassy in baghdad on a counterinsurgency cooking. he established a seamless partnership with general petraeus. that set the standard for several -- civil partnerships. he used a relationship of trust to push and support the iraqis in saving their country. throughout the struggle, as rockets smashed into his office, ryan crocker performed his

duties with courage, poise, a unique ability to marry vision with tactical effectiveness and a relentless work ethic that almost killed him. i commend the president for recognizing there is no better for the job -- man for the job then ryan cracker. -- crocker. a new generation of americans is writing the next chapter of our great nation. the challenge for all of us is to strive to be equal to these fellow americans. nominating ryan crocker as ambassador to afghanistan, the president has chosen name and that -- i hope all of you will reach a similar judgment can vote him out of committee so that folks can confirm him as

rapidly as possible. i would like to add that i think the chairmen and ranking member and others would agree with me that we have had a great privilege of having so many americans serve in our diplomatic service. our state department. americans are probably not appreciative of the sacrifices they make. there is no greater example of that kind of service and sacrifice than the man whose nomination is before you today. i apologize for the length of my opening statement. >> senator mccain, no apology is needed. it is an important statement. i appreciate the late then the thought that went into it. i think it is helpful to the committee. it is important for the record. i think it states in an articular away the assets that ambassador crocker brings to

this desk. it is important that you said those things. so that the message goes clear to president karzai and others in the region that this is a serious person that we all have confidence in. he brings a great deal of experience. i think your introduction was superb and welcome. thank you. ambassador crocker, you are flying alone now. you have done that a lot. we are delighted to welcome your testimony and you to the committee. you know how it works. if you want to put your statement in the record it will be put there. if you want to summarize, we can have a good dialogue. >> thank you, mr. chairman. members of the committee. i appreciate the opportunity to appear before you today as

president obama's nomination to become the ambassador to the islamic republic of afghanistan. i'm grateful to senator mccain for his generous introduction and for his recognition of the foreign service, my colleagues that have labored hard on behalf of our interests and sometimes paid the ultimate price. i am also grateful to the president and secretary clinton for placing their trust in me. if confirmed, i look forward to cooperating with you to confirm our interests in afghanistan. i had the privilege of opening the embassy in kabul in january. i worked closely with president karzai in those early days and it developed a respect for his commitment to a stable afghanistan. if confirmed, i look forward to

renewing our relationship and working together toward that vision. i also had the honor of serving as the ambassador to pakistan from 2004 to 2007. that developed my understanding of the region. i hope it will be a useful asset as we work with our international partners. our core goal and afghanistan and pakistan is to disrupt, dismantle, and destroying al qaeda. osama bin laden's death is an important step. much work remains to be done to make sure that al qaeda can never again threaten us from afghanistan with the taliban providing safe haven. our efforts to pursue this goal are focused on a three searches -- military, civilian, and

diplomatic. so afghanistan will not become a safe haven for terrorists. the military and civilian surges has helped. today, more than 1100 u.s. experts are serving alongside our troops to help establish conditions for sustainable and irreversible transitions to the afghan government. if confirmed, it will be my privilege to serve with these courageous and committed americans. working together with the government of afghanistan and our partners, we have made significant progress. as you have noted, this progress is still fragile and reversible. enormous challenges remain. governance, rule of law,

undermining the credibility of the afghan state. narcotics, economic development, increased revenues along with the capacity to provide basic services such as education and health care. failure in some of these areas can mean the failure of the state and the creation of an environment in which our enemies can regroup. making progress on these issues has been hard. it will go on being hard but that does not mean impossible. a secretary gates has noted, we walked away from afghanistan once in 1989 with disastrous consequences. we cannot afford to do so again. all of this will be an afghan responsibility realized through a transition period a key u.s. priority in afghanistan is supporting the afghan transition process that was agreed upon by the nato partners at the

november 2010 summit in lisbon. this process will enable afghans to assume full responsibility for their security across afghanistan by the end of 2014. the transition process will begin this july with the transfer of the security responsibilities to the nash -- national forces in seven provinces which i understand contain one-quarter of the afghan population. i will work hand-in-hand with our military partners as i did as ambassador in iraq to continue to this responsible transition to an afghan security lead. alongside this transition process, the government has launched a peace effort to reconcile insurgencies. president karzai formed a council that includes representatives from across afghanistan. the united states supports this effort.

over the last two years, we have laid out our ideas for reconciliation. renounce violence, abandon their alliance with al qaeda, and abide by the constitution of afghanistan. those are necessary outcomes of any negotiation. if former militants are willing to meet these criteria, they will be able to participate in the country. i will work closely with our special representative to afghanistan and pakistan to continue our efforts for an afghan-led process. i will maintain our efforts to continue reconstruction, sustainable economic development, and to strengthening afghan

institutions critical to ensuring that transition is sustainable and irreversible. we look forward to a long-term relationship with afghanistan and have initiated negotiations on a partnership declaration with the afghan government in march of this year. this political framework document will help normalize our relationship and provide a road map for political and security cooperation. we respect afghanistan's history of independence and we do not seek any permanent bases in their country or a presence that would be a threat to their neighbors. in closing, i want to thank this committee for the support it has provided and continues to provide for the bike to work the u.s. mission in afghanistan. as you know, you have held a series of useful hearings over the past month to examine our

policy in afghanistan and pakistan. if confirmed, i will listen to your guidance and continue a dialogue on our progress on the ground. i would note that i have just received a copy of the report you cite. if confirmed, i think i know where the dialogue is going to begin. i will also ensure that the precious taxpayer resources being used are applied effectively, a transparently, and with an eye toward sustainability of these efforts by the afghans themselves. as a secretary said, the united states is not walking away from the region. we will not repeat the mistakes of the past. our commitment is real and enduring. as we approach the tent anniversary of the attacks of 9/11, it is a time to remember

those who died that day and to honor the sacrifices that so many americans have made, military and civilian, to ensure afghanistan never again becomes a safe haven for terrorists. thank you, mr. chairman, members of the committee. i look forward to your questions. >> thank you very much, ambassador crocker. i want to come back to that last sentence. first of all, i support and agree with the transition process that will begin in july with the lead responsibility going to afghan in seven provinces representing 25% of the population. clearly the taliban are trying to disrupt that with their increased violence in the last days. targeting some of the governors

and high-level officials. i also am supportive of the afghan-initiated peace process president karzai has initiated with his -- last year. and the things coming out of it. my concern is pinning down our own definitions and the breadth of some of what you have said. in particular, this notion that "insure afghanistan never becomes a safe haven for terrorists." we have to bear in on this question of what that entails. what is a safe haven? how much guarantee is there? to the degree there is a safe

haven, if that is what we are worried about, and we want to spend the dollars most efficiently, the safe haven is in the western part of pakistan. we are spending $120 billion in a country where there is no safe haven and about $2.8 billion where there is a safe haven. there is a safe haven -- these folks are the problem. they are the ones responsible for most of the violence taking place in afghanistan. the question is, how do we get this right? what i saw when i was there a few weeks ago convinced me that if all we do is the current paradigm, where attacks are launched on the western part of pakistan, we are not calling to find a successful road.

i would like you to comment on that. >> thank you, mr. chairman. these are important points. i have said in testimony before during that brief interlude when i was out of service, you cannot succeed in afghanistan without a fair measure of success in pakistan. that is why i think you're legislation and a multi-year commitment was so important. these are our problems to solve. i wrestled with them as ambassador to pakistan. i had numerous meetings with the pakistani leadership to press on the networks.

clearly we had limited results. i think that is why the ministration has been right in talking about the nation's together and having the new ambassador so that you do have an approach that crosses the border. that is what the militants are doing. how to crack that conundrum, i know you have made efforts as has secretary clinton. we will have to see whether the pakistanis take this action. i look forward to working with ambassador munter and grossman.

frankly, the reason most of the problem is in pakistan and not in afghanistan is because we are in afghanistan. as we go through a responsible transition, it has to be conditions based to insure that as we draw down our forces, i am aware of the movement both here on the hill and publicly, there has to be a transition period at the end of the day, we have to be sure that the safe haven doesn't relocate from pakistan to afghanistan. >> i understand that. does it take 150,000 troops to

guarantee that doesn't happen? -- ihat is a question that's am not part of those deliberations. >> that is an unfair question. it is a question on the table. i understand you're not part of those deliberations. let me ask you this. in your testimony, you say enormous challenges remain. governess, corruption, economic growth, credibility, narcotics, sustainable development, adequate employment opportunities, increase revenues and the capacity for the government to provide basic services, education and health care. failure in some of these areas can mean failure of the state. the creation of environment in

which our enemies can regroup. can you narrow that down? which of those areas means the year of the state and are essentials to the accomplishment of our goal? >> the issues of governance, rule of law and corruption have to improve its afghanistan is to go forward as a stable state. >> are you saying corruption is essential to our goal? >> i think corruption totally unchecked becomes a second insurgency. it undermines confidence on the

part of the people. it makes groups like the taliban look attractive. mr. chairman, we are not out to create a shining city on a hill. that is not going to happen. that could apply to all of these sectors i have mentioned. there needs to be progress. we went through the same thing in iraq. we chipped away at it. over time, we got them to take some measurable steps on the issue of corruption so you have a situation today that is not a city on a hill but where they have a good chance of carrying forward without u.s. forces on the ground. it is the same kind of dynamic we have to go through

afghanistan. >> de you think that billions of dollars from america spencer contractors without adequate oversight contributes to corruption? >> it is something i'm going to take a careful look at. i have made with the inspector generals. they did a recent report. we have your staff report. i have spoken to colleagues in government. it is clear that there is a need for more contracting representatives, state and a.i.d recognizes this. the accountable assistance for afghanistan it -- initiative, the transparency, i think there

clearly have been problems. there is a recognition that we have to be a part of the solution, not a part of the problem. i am encouraged by the steps that have been taken. >> ambassador crocker, we discussed the possibility for the military -- 25% of afghanistan with the talk that this is the first of such large transition's over the next few years. hopefully occurring before 2014. i want to ask about the whole andduct of the afghan state

how the budget of afghanistan is put together. in the case of the military and police, the training has been paid for by the united states. that will be expensive. beyond that, in lightness about the commerce and afghanistan. how do ordinary people make a living? what sort of investments have been coming into the country or has been generated by success in the country? the reason i ask is because of many stories about afghanistan's economy indicate that the income coming into the government is pretty low. given the ambitions of afghans and the united states.

so that the military spends but with regard to civil society and an economy moving forward, talks have come from president karzai and members of congress that afghans have remarkable resources that might be found and exploited and sold to others in due course. that will require a considerable investment and the safety to investors or whoever is coming in to deal with this. many of the investors may not be friends of ours. or may have different foreign policy views. i do not make to make the question complex, but as you survey the scene, how was afghanistan going to raise revenue? if they're not able to raise

revenue, are you working with our state department and our officials on some estimates as to what obligations the united states may have for years to come? not simply the military idea of 2014 but some has said it could last for a long time. for a decade or decades. this has to be an important part of our calculations as members of congress working on five and tenure budget plans for the united states. this could be a major factor. if we do not get it right, it can have large consequences on afghanistan where there are

expectations the american support might be forthcoming. can you discuss this? >> thank you, senator. it is an important and complex set of issues. again, at this point i have an imperfect understanding of how afghanistan works. i have not yet been confirmed. i have not been there. i did note employment and economic development because i think these are critical factors. how does the economy work now? services are important part. agriculture is important. i am told that the agricultural sector accounts for 80% of the employment in afghanistan.

that is why we have to support its development in a reasonable way that leads to an afghan capacity to carry forward. i'm talking about the part of that is not drugs. primarily wheat. we would like to see them moving products such as pomegranates. they used to be famous for them. provide a better return to the farmer and then poppies. based on what i know, the administration is right in dealing with the narcotics issue. not to emphasize eradication but economic alternatives that cause

afghans themselves to turn away. i would make a couple of other brief points on the afghan economy. as you know, there are substantial resources over the long term. these can be a benefit to the state. this will take time to develop. it require security conditions, the development of a robust private sector. i am pleased to learn that opec is in gays in afghanistan working on upwards of 50 projects. i would like to see u.s. private investment come into afghanistan. i worked hard on that in iraq

with some success. customs revenues have to pick up. i know there is a major effort underway. our trainers are working side- by-side with the border police. corruption gets into this too. they have to increase their revenues. the final point i would make is afghanistan is a country centrally located in an important region. the afghan-pakistan trade agreement was an important step. i understand president karzai will visit islamabad in a few days' time. it is good in another itself. the leaders of the countries

should talk through their issues. one of the objectives is to lay out the implementation of this agreement. afghanistan is a trade and transit center through pakistan, into india, through the former soviet republic to the north. with iran, i think all of that can provide a major difference for the economic future of afghanistan. >> my time has expired. it is remarkable that 80% is agriculture. that is huge. the success of that is paramount. i get back to the fact that development of resources, most of the estimates for the budget,

it would appear the revenues are very small of the obligations to the security and a commercial standpoint. i get back to my problem. how long a stream of income is going to afghanistan is going to be required? or the morale of the people collapses as the economy collapses, the economy, as we're back to square one again. with the without the conflict we are going -- undergoing now. i thank you for that discussion. as we get out there, you will have more to say. >> thank you, senator. i recognize senator casey. i need to go to another committee. ambassador crocker, i hope you

will forgive me. as i said earlier, we're going to try to move your nomination as rapidly as we can. we look forward to getting you there. i thank you again for coming in and your willingness. >> mr. chairman, thank you for this hearing. it is great to see you again. we are grateful for your public service and your willingness to commit yourself to another difficult assignment. i know that you're not only prepared but i have confidence that you will be confirmed because we need you there. we need you on the ground. i wanted to raise a couple of questions. i commend the commitment your family makes when you take on a tough assignment like this.

i wanted to bring you back to a meeting that you and i had. i have spoken about this a number of times. i keep coming back to it because it has a lot of relevance to not just our policy in afghanistan but where we are now this summer making some difficult decisions. i start with the setting. it was in iraq, it was with a small group of people. you were there. august 2007. i was complaining very bluntly about the language that was used to describe progress in iraq. victory in the fight, win or lose, of language than i thought was inappropriate and sometimes misleading. i hope not deliberately so.

i will not cast the blame on who used to language, but a lot of folks did. it was wrong. i ask you at the time what language you thought would be appropriate to the mission. you said, you give a coach and cancer. what i remember most is that you said two words -- sustainable stability. that has stayed with me ever since. in light of this mission, which is as difficult as iraq. a different set of priorities. a different set of challenges in afghanistan. i asked it in light of some of the numbers that folks in pennsylvania live with and no

comparable numbers around the country. we're about 70 killed in action. 69 is the last number i saw. it could actually now be 70. that is 1/3 compared to iraq. we fell short of 200 there. we're about one-third of the killed in action as we were in iraq and afghanistan. the wounded numbers are 455 in afghanistan. 1233 in iraq. about one-third as relates to the wounded. what people want to know, taxpayers want to know, the families that have loved and lost, families that contribute time and sacrifice of their loved ones, what is the mission? what is the goal?

i would ask you to comment on that in light of the discussion we had in 2007. >> thank you, mr. chairman. i clearly recall the conversation. that was shortly before the september 2007 hearings that general petraeus and i took part in. again, as you may recall, i was not among those who had never used the word winning or a victory. not then, not now. not in iraq, not in afghanistan. sustainable stability were words or concepts that i would extend and i will stand by them now.

another way to put it is good enough governance. governance that is good enough to ensure that the country does not degenerate into a safe haven for al qaeda. that is what i was attempting to get that in my conversation with chairman kerry before you arrived. there is no intention that i see in any of my consultations here. i do not come with such an intention to produce a perfect society. we cannot. i think by judicious use of resources and redeployment and transfers of responsibility that will begin in july, we can get to the sustainable stability.

i have always been and always will be frank and open with this committee. it is my responsibility as an official, if you choose to make me one again. even as a citizen. as i look at the past, the 50 years of relative tranquillity from 1928 to 1978, afghanistan did require outside assistance. we provided some important contributions to their economic development that are still favorably remembered. i'm not well-informed enough to lay this out as a thoroughly

considered view, but i would anticipate that beyond 2014, there will be a requirement for outside assistance from the international community. part of our obligation is making sure the international community continues to understand they have a great deal at stake. this is not an american problem only or obligation. that is how i view it. it is going to be incremental. it will be issue by issue, case by case as to what sustainable stability and good enough governance is going to look like. that is what i see as my responsibility. >> i am over on my time. i will ask you in the sector around how we measure that. that is something americans are

concerned about. senator menendez. sartre, -- sorry. class of 2006. >> thank you for your service. you have served our nation with great distinction. i thank you for that and your willingness to come back into public service. i can think of no one as qualified for the position then you. it is a tough situation. at afghanistan needs to change. our role in afghanistan needs to change. we can talk about the military aspects and the fact that we are drifting toward a redeployment of our combat troops starting in the next month or two. we expect that we might be able to accelerate that considering the current status of terrorist

organizations operating in the region. having said that, i want to concentrate on the other part of our role, we also had an effort to provide economic assistance to the people of afghanistan. i know you recently got a report commissioned by this committee. let me share with you some observations that should not be a surprise. it is critical of the efficiency of the deliverance of our aid to accomplish any long term economic stability for the people of afghanistan. the questions as to whether we are operating with a leadership team in afghanistan that can deliver the type of economic promise to the people. we are creating an arbitrary economic activity based upon a war economy that will not be

sustainable. the we are creating an inflationary situation that will cause a serious problem as we transition to a country that can take care of itself. admittedly with assistance. i do not deny the long term needs for economic assistance to the people of afghanistan. my question is one of how you see your role as ambassador. to assist us in being able to evaluate how we can transition the u.s. role and be as helpful as we can so the afghans can take care of their own people and that we have at least a tryst -- strategic ally. how do you see using be information you have learned or no from the region to assist in

transitioning the next phase in afghanistan? >> thank you, senator. it is an important question. i see my responsibilities at a number of levels. first, it is ensuring that we are properly organized as a civilian mission, as an embassy, to ensure that our assistance is accountable and effective. for me that means it has to be about transition. building afghan capacity, helping the afghans carry forward without assistance at

the scale in the future. aw now that administrator sho has provided some assistance to this support. i have not had the chance to go through it in depth. i know it will be useful to me if i'm confirmed looking at how we are structured and deployed, looking out our programs and making sure they are affected. to this end of a sustainable stability, with the afghans taking the lead. obligation begins at home. within the embassy. the second thing that i would be focusing on is developing a partnership with the afghan government. our programs have to support their vision and have to be

sustainable by them. i know that we are the have in place several mechanisms that focus on transition. this is a major concern of president karzai. he has chosen someone that came to know in my early days to head it this up from his side precisely so that we do not create that unsustainable wartime economy. i understand that u.s. aid and other donors have taken steps to ensure they're not inflating salaries. i think that would be important. the worst thing we could do is be competing with the afghan government for talent.

it needs all it can get and a lot more to function as a government. that would be another key part of it. it is their country. however moves forward is their responsibility. i want to establish myself as a reliable partner but keep the emphasis on sustainable development and transition. that is what they themselves seek. thirdly, i would say this will be in consultation with ambassador grossman and others. we have a lot of international partners. nato and united nations play an important role. the secretary general has performed that role in iraq and i have cooperated with them there. i look forward to doing the same in afghanistan.

as i said earlier, afghanistan is not a uniquely american problem. it is a threat to international peace and security. it requires an ongoing commitment. what role i play in that is still something to be sorted out. clearly i believe i will have a role to play. i hope that gives you some kind of dancer. >> we are paying salaries that look like we're giving cash bonuses well above reasonable salaries to make friends with afghans which ends up supporting a corrupt system. thank you. >> mr. ambassador, i