so, a savings, not just a slowing in growth, but the savings. medicare will be solvent for many more years. that was important. solvent in the sense that the formula that we have for paying for medicare will sustain it for a longer period of time as a result of the formula we have adapted. republicans all voted against the law. they attacked us for cutting medicare benefits. i do not know whether you heard that. there has been some discussion about demagoguery by the sponsor of the republican plan. the make this clear. under the affordable care act, there were no benefits cut to medicare. the me repeat that. under the affordable care act there were no benefits cut to medicare. not one single provision in the affordable care act cut seniors benefits.

that stance, however, in sharp contrast to the medicare policies that almost every single republican voted for earlier this year. now, there were a few that did not vote, but only a very few. both the house and the senate voted. their budget ends the medicare guaranteed. their budget and the medicare guarantee -- ends the medicare guarantee. it turns the program over to private insurance companies. in other words, the reason we started medicare in 1965 was a private insurance companies would not give seniors, except a very high-cost, medical insurance. why do you think that is the case? not so much greed, but because it was not profitable to do so.

most insurance companies are in the business of making money. people invest in insurance companies. so, they would expect in return -- would expect a return on their money. you know i'm going to be 72 in just a few days. so, like you, i am a senior. what? you are older. well, you know, there is a song about older women. [laughter] the fact of the matter is we who are older require more health care. we are taking more prescription drugs. we visit the doctor more. we have more ailments, aches, stuff like that. the insurance company suggested not believe it was cost- effective to ensure seniors. so they did not give insurance. it was not available.

in 1965 we adopted a program which made sure that seniors could have affordable health care guaranteed, to give them that kind of security. and i want to tell you something, folks. my republican friends perhaps do not understand the social security combined with medicare have kept millions and millions and millions and millions of people out of poverty. if they were not for social security and medicare, millions of seniors who are now self- sufficient would be living in poverty. that is why it is so important to make sure that we maintain the guarantee of medicare. the republican proposal, which passed the house of representatives and almost every republican voted for in the united states senate -- did not pass, it turns the program over, as i said, to private insurance. it pays those companies a fixed

amount for each senior. over time, that payment, which is kind of like a voucher -- although they do not call it a voucher -- will become less and less valuable. they call it premium support, but whether you call it a voucher or premium support, what it means is there will be set figure. now, some people make the analogy to the federal employee health benefit plan. that is not true, and if you hear anybody say that, you know they're telling you a story, a fit. even a harsher word if you want to use it. they're not telling the truth. why? because under the federal employee health benefit plan, we reimburse 72% of the average premium. as health care costs go up, the

amount you receive goes up. here, they have capped it. so, as health care costs go up, go up, go up, who pays the difference? under their program, you and i do. so that increasingly, seniors will pay more and more and more dollars out of their pocket to maintain their health care insurance. their plan will impact current and future beneficiaries. today's seniors, those of us who are over 65 for 66, will pay more for prescription drugs because they eliminate the prescription drug improvements under the affordable care act, which reduce its 50% and reduce it 100% by the end of the decade. you will pay more for preventative care. remember i told you that under the affordable care act he would

get a free wellness' visit and preventative care you will not pay a coke a ford? well, they eliminate that. your costs -- will not pay a co pay for? well, they eliminate that. your costs will increase dramatically. they say it does not affect anyone 55 or older. that is not true, but having said that, a senior who signs up for medicare in 2022, somebody who is 54 today, will pay over $6,000 per year more for health care. $6,000 more. you would pay $6,000 more for your health care in 2022. that is more than twice as much as seniors pay today. despite individual seniors paying significantly more for totalcare, our nation's

health care spending still will not decrease. now, let me make a comment on that. our country is confronted with a very serious fiscal challenge. none of us ought to kid ourselves. i have three children, three grandchildren, and two great- grandchildren. if we do not get a handle -- let me, before i do that -- how many of you have grandchildren? how many of you have great grandchildren? fewer of us have great- grandchildren, right? we care about them. we love them. we want them to have a good life. am i correct? we therefore have a responsibility to get a handle on this deficit and the debt that confronts our country.

we would be irresponsible not to do that. as a result, i have said all the hours the deters -- all of our senators need to be on the table. we need to look at all -- all of our expenditures need to be on the table. we need to look at all items. that means we have to look at entitlement programs, of which medicare, medicaid, social security and pell grants and others -- not tell grants, but other entitlements are. we have to look at them. but we do not want to do is undermine the security that they give to us. we must not take away the guarantee that gives people the security that in their senior years, they're going to be self- sufficient and not put into poverty.

i think we all agree on a. is that correct? we have to look. we want to make sure that our grandchildren and great- grandchildren are not poverty- stricken. we do not want to break their bank, correct? they may well have their terrorism threat. they may have their health threat. they may have a natural disaster threat like katrina or something, and we have to make sure that they have resources available to them to pay their bills as we pay our bills. total spending in each medicare beneficiary would increase by 40% under the republican plan. so, the cost would go up for all of us. that budget also cuts over $700 billion from the medicaid program. so, not only is the medicare program substantially affected, so is the medicaid program. now, i do not know whether any of you here access medicate --

medicaid, and you do not need to tell me, but i want you to know that almost two-thirds of every medicaid dollar is spent on seniors. and the disabled. furthermore, in our district alone, medicaid pays for the care of 64% of all nursing-home residents. almost two out of every three nursing home residents is of medicaid. why is that? because having a nursing-home care is very expensive. what happens? most of us do not have the resources to pay for maybe one, two, three, four years in a nursing home, max. and then you run out of money. we're not going to throw you out on the streets, so what happens? medicaid comes in. you have paid yourself down to be medicaid eligible.

this would turn -- the republican proposal would turn medicaid not into a guarantee program, the so-called grand program, where states would get a designated level of funding, not based on what the rising cost is, based on what the designated some as. um is. it puts both the availability and quality of care at risk. finally, it cuts the budget for our health care programs, but gives trillions of dollars in new tax cuts to the very wealthiest americans. now, i am for working hard, and i want to work with my republican colleagues to come up with the bipartisan plan that will bring our debt and deficit down. we must do that.

my father's generation was called the greatest generation. we do not want to be called the most fiscally irresponsible generation. we want to make sure that our kids inherit a solvent nation. that is our responsibility. i am committed to that end. but very frankly, cutting from seniors to give to the wealthiest in america is not, i think, sound public policy. the me show you this chart over here. i will speak up so you can hear me. in this chart -- remember i talk about seniors would have to pay $6,000 more? you think, well, that means we will bring down the deficit, right? it would mean that that is all that happened, because we would be paying more, government would be paying less, but let me show you what they do. they take 33 seniors payne

$6,000 more, and give the average millionaire -- paying $6,000 more, and give the average million their aged give the average millionaire a $200,000 -- give the average millionaire at $200,000 pay cut. you would think, therefore, that we could bring costs down and either pay off the debt or pay some other costs that would not involve boring, right? but if you then cut the taxes on the wealthiest in america making over a million dollars on average by $200,000, all you have done is taken it from the seniors pocket and given it to the wealthiest americans pocket. now, let me say this. i'm for people working hard and

making a lot of money. god bless them. we all want to do that. we want to make as much as we could. we worked hard and some people made a lot. i do not begrudge them that. the we all need to pay our fair share. we do not need to take $6,000 out of the pockets of seniors -- now, if they are millionaires, fine. are you a millionaire? >> i am not. >> the bair the millionaires in the room? [laughter] apparently, you are in this crowd. you're going to pay $600,000 more, but you're not getting a two hundred thousand dollar tax cut. -- you're going to pay $6,000 more, but you're not getting a two hundred thousand dollars tax cut. a lot people to create businesses, create jobs, build

wealth and do well. god bless them. but i do want them to pay their fair share for what they get in this wonderful country of ours. i have talked to a lot of people who have done very well, and they do not begrudge doing that at all. they understand. they get a lot. they get roads. they get national defence. they get police. and education. they are hiring workers so they need good education. does not make sense to shift the burden and put it on these 33 people so that you can give one person a tax break. finally, the me say that -- as i have said before -- that we believe we have to get this debt under control. but the solution to our debt and

deficit problem must be balanced in its approach. it must be sensitive to the folks who have done so much to make our country great, and it must be sensitive to the people who have a need for health care to make sure that they get health care. how many of you think that not having health care is an option? raise your hand. all of us understand, health care is not an option. if you do not get health care, the probability is you dial lot earlier than you ought to die. die a lot earlier than you ought to die. or you become disabled and cannot work and you become a burden to your society and your family. health care is absolutely essential. let's reform the tax code to

make it simpler and fairer. we need to do that. i'm for that. let student with a lower tax rates and reduces the deficit. we must -- let's do it in a way that lowers tax rates and reduces the deficit. we must do that. not one of you disagrees, without objection. but let's look at ways we can save in every part of our budget, and by the way, that means defense as well. i'm for a strong national defense. i am for making sure that america can respond to every challenge that confronts us, but i am also for making sure that we spend the money as effectively and efficiently as we expect to spend money on any other objective. we should not and medicare's guarantee. why? because it will undermine the health and well-being of our seniors. and i am a senior. but very frankly, let me tell

you, i am lucky. i'm pretty healthy. i have a good health insurance program. thank you very much. and by the way, i want to make it clear. i have the same health care program every other federal employee has. the federal employee health plan. i painted that. how many -- i pay into that. how many people were federal employees here? we have a number. it is a good plan. we pay into that. but there are some people who do not have that insurance, and there are some people who do need to supplement whenever they have through medicare and medicaid. i have three daughters. they have all got their own families. they are paying their mortgage payments. they're trying to get their kids to school, pay on their car, groceries.

they're making loans every week at the banks of the -- so that they can pay for gasoline. [laughter] i tell you. it is terrible. let me tell you what is driving oil prices. opec has said there's plenty of oil. there is not a shortage of oil, and demand is down, but the price is up. do you know why? speculators. speculators are driving up the price of oil. they are bidding on oil. they never expect to get a drop of oil delivered to them. they're just trading it. and they are driving up -- and frankly, opec says -- that is agreed. we're getting to your point. speculators are driving up the cost. ladies and gentlemen, i'm here to tell you that i want to make sure that we address the

deficit, bring the debt down, that it the same time, strengthen social security and medicare and make sure it is there and is sustainable -- from a cost standpoint, sustainable -- over the years, over the decades, during the next century, but without undermining your in your children's dependence on it. how many of you grew up in prince george's county? live in prince george's county? 16 years or more? that will do it. that will do it. i have been here 57 years. i have not been here quite 60 years.

80 years! you have been here all your life. there you go. 75 years, wonderful. how much? 71. all right, well i have been here since i was 15, and i'm going to be 72 on the 14th of june, so 57 years for me. yes ma'am, questions? does eight years count? absolutely, you bet. >> can i just say, in her san what you're saying and i appreciate you coming here to talk -- i understand what you're saying and i appreciate you coming here to talk to us, but i am nervous because i am not medicare eligible at this point. next year. i stay cobra, which is an enormous monthly fee. i hear a lot of political talk

about medicare and social security. you have addressed some of that, but i do believe -- you said there is demagoguery going on. and some of it is. but how -- i am asking for -- to be -- have my mind put at ease. how do i look to next year in october when all of the aged when i will be medicare eligible -- in october when i will be medicare eligible and feel comfortable about it? >> very good question, and i'm glad i am here to give you the assurance that you need. first of all, there was an election just a few weeks ago in the 26th district of new york. when the republican plan to slash medicare was discussed --

when i say slashed, what i mean was eliminated. but it would not eliminate it for you. you will be eligible in just a short time. i want to guarantee everybody that the president of the united states, nor do i believe the united states senate -- the house has passed something but we can control it. i will vote against it, but we cannot control it. i will guarantee you that you will become eligible and it will be there for you. because president obama will not sign a bill that will eliminate it. i do not think the united states senate will pass anything that will eliminate it. the house so far has not done that, although they have reduced your benefits as a scene -- as a senior on prescription drugs and wellness benefits that i talked about earlier. medicare will be there for you. what we want to make sure is

that medicare will be there for everybody forever so that our country can have the kind of security and stability that medicare and social security give us. again, i want to make it clear, i do not want you to go away from here being in any way misled. we need to deal with our debt and deficit. medicare and social security are an issue. social security is really not part of the deficit, but it does need to be made sustainable so that our kids will have it there. that is our responsibility, in my view. but we do not need -- as has been suggested -- to eliminate the guarantee of availability of two critically important security for our country. and for my kids. and for my kids. we think it is a senior issue. this is not a senior issue. this is an issue for our

country. my kids know that that is going to be self-sufficient from health care and from social security. they think i'm going to be ok anyway, but the fact of the matter is they do not want to have to worry about being able to pay for me as well as their kids. social security and medicare are not as the seniors issue. it is a family issue. yes? >> i will be 71 in july. >> i will be 72. i am an old man. you're a young woman. i got a. >> a lot of seniors have retired. some have not retired. i feel that with as much renton's the that they have to pay, i do not understand -- rent

and stuff that they have to pay, i do not understand how seniors can live off a little bit of money that they get. it does not make too much difference. when social security goes up, our rent will go up. i do not understand -- if it was left up to me, i'm going to be honest with you. i get $500 a month. >> for everything? >> just for the rent. i feel that they could in all that they had, even some through slavery times, just to get where they are today, and and yet the richman is buying gold and we have nothing. man is buying gold and

we have nothing. i know it is a robbery. it is not fair for seniors to have to live the way we're living. >> i do not know that i can agree with your $500 cap. that would be nice. [laughter] the problem is, if you have a but under a dollar cap, there may be nobody's applying -- if you have a $500 cap, there may be nobody supplying housing. many say this. times are tougher now. we have too many people out of work. we have too many people who are not making enough money working one, two, three jobs. things are tough. we need to get this economy working.

i have an agenda that i call make it in america. many of you made it in america. make it in america means you high five, you're going to make it. you're going to win the test, as the job. but it also means this. we need to manufacture it in america. we need to make it in america. we need to create good manufacturing jobs in america so we have a lot of people paying into social security, you know, so we have people on roles, so that we have the cash flow. social security is essentially a pay-as-you-go program. it started in 1935. there were 15 people, 16 people supporting one person. now we have about three people supporting one person. that is why we have a financial challenge in social security that we need to solve. but in solving it, we need to

make sure that it is available, even if it is not as much as we would like. we have to do it is fiscally responsible for our children, grandchildren, great- grandchildren, and at the same time ensure that we have a guarantee for our seniors so that they can live in dignity. yes ma'am. >> it took three cars to get my medicine the other day. >> 3 cards? >> 3 cards. a call the lady that gives me my insurance. she says i am in the doughnut hole. i said, i am going to eat my doughnut hole. then my children are going to eat the doughnut. [laughter] then the sugar is going to go up. >> you are in that 2800-6400.

what you ought to know is that under the affordable care act currently, we reduce your cost 50%. there is still a cost, but we're phasing it out. you heard me say, what the republican budget would have done is eliminate that reduction. when i started talking about this, i tell people, there is no way they can fix cholesterol. my doctor said that i could do this diet stuff, and it did not work. try this bill. that is good. your cholesterol is down? that is good.

i think we are telling c-span more than you want them to know. [laughter] mwai are health care costs up? they are up -- why if our health costs by up? we are all living longer. we are living longer. we are healthier. we have two things that we did not have in 1965. what are we using prescription drugs before? keep your sugar ok. keep my cholesterol ok. because you're sugar and cholesterol are okay, you are taking that pill every day, you are healthier longer. that saves money, but it also costs a lot of money.

we have extraordinary diagnostic tools available to us to find out what is wrong with us. you go in and you have a nickel or a pain, they can take an x- ray and -- you have an ache or a pain, they can take an x-ray. they will find all 95% of what is wrong. the doctor says to you, you have something wrong and i am not sure what it is, but we can do i? right. maybe i will find out 15%? or you can do when mri and we will find out 9 percent -- 95%. what will you choose? you will choose what gives the doctor the most information. it is 10 times more expensive. costs are going up, but a good diagnosis, prescription drugs, and we're living longer. we've got to make sure that we bring health care costs under control. it will not be easy.

i have to go pretty soon and you have to, too. we have to bring this died down, this deficit down, because we owe it to our children and grandchildren. >> i want to thank you. thank you for being here in my district. i am not a senior, i will be one day. i am only celebrating 10 years in prince george's county. >> you have 40 or 50 years until you are a senior. >> i want to thank you for your efforts. he came to the senior center about a year or so ago. you were debating the affordable health care plan. i want to congratulate you and your democratic colleagues for getting it done. it has taken over 40 years for

us to try to do something for us to reform the system. i also appreciate your comments about the deficit and having a balanced budget. the city council just went through our budget. it is difficult to make those choices. not everybody can get all of what they want. i know that you will do what is in the best interest of the residents. i just wanted to publicly thank you for that. >> he does a wonderful job for the city council. all of us grew up and away you get things done is to work together. i want to work together with city government, a county government, state government, federal government. none of us do it alone. we all have to work together. i want to work with my republican colleagues because dealing with this deficit and this stacked, not -- and this

data, not going to be easy. organizations that represent seniors will have to figure out how we can sense the belt. -- cinch the belt. president obama is right. as we do that, we need to make sure that we will continue to invest in growing our economy and competing globally. investing in education of our kids. if we do not invest in the education of our kids, we will not be competitive. we need to invest in our infrastructure. if we do not, we will not be the kind of competitive economy that we need to be. we need to invest in innovation. are now be innovation development capital of the world. i mentioned the make it in

america agenda. what is happening is we are still be innovative and development capital of the world. we are inventing act and the are innovating and then we are taking it to scale overseas. if we continue to do that, we will how investigators -- innovators go overseas. america will not be the kind of country that all of you help maintain, defense, and create. you have a question? >> [inaudible] that is something that is bothering me. gas prices are still going up.

how long do you think [inaudible] >> i think it will come back. here is the problem. bill law is that if there is -- there is not an increase in the cost of living, then there is not a cost-of-living adjustment made. as you may know, prior to 1983, there was not an automatic cost- of-living adjustment. congress passed it every year and sometimes passed it and sometimes did not. what they did was, we put in a statutory provision that if there was a cost-of-living increase, social security

recipients would get a cost-of- living adjustment great the last two years, it has just -- it has been just that there has not been. prescription drugs cost are going up. gasoline prices are going up. that is of concern. it will come back. did you have a second question? i have to go. >> [inaudible] >> thank you very much. >> [inaudible] i have another engagement. >> thank you. >> i look been working with rent-controlled trying to get

rid control in the state of maryland to break every time i go there, they sent be to somebody else. why is it so difficult? >> when this lady said $500 for housing, do you remember what my answer was? rent-controlled sounds good, and is good for people who have their rent-controlled, the problem with that is that if you have a jurisdiction with current control, people tend not to want to build additional housing. what happens is you deflate the housing market supply. what happens when supply goes down? and demand remains constant? prices go ought and there

becomes the differential. there is no doubt that housing prices are at a real premium. another problem with the rent is that as people have lost their homes, as the sale of homes, construction has gone down, people still need someplace to live. they will increase demand on rental housing. there is a problem, you are right. i am not one that believes that rent-controlled will solve that problem because i think it will have the reverse of fact. -- a fact. -- effect. it will build rental unit someplace else and you will find housing less available. >> [inaudible] is there some way of telling him to build homes that are worth buying?

>> we need more affordable housing. absolutely. one of the things that is happening -- there are a lot of quality housing built. you are right, some of it is not of the quality that it ought to be. one of the things that we need to do -- cost is not just rent. it is maintaining the house. to the extent that we can make homes more energy efficient to save on heating and electricity costs, we will be ahead of the game. we're making requirements for that. the problem is paying the electricity bill and the heating bill and the oil bill. that is a big part of your cost. you get a last question. >> [inaudible]

what about controls on [inaudible] >> doctors as generic is the same thing, right? -- your doctor says generic is the same thing, right? did you ask your doctor about it? >> [inaudible] it had to be renewed. i talk to my insurance company. the price has gone up. i did not understand it. what about the controls? >> price controls, he

specifically asked about energy and drug prices. drug prices, we tried to deal with in terms of bringing the cost down so that there is the ability to make sure that we don't hold -- don't told -- donut hole is reduced. it is about 200 per month. on oil prices, one of the ways we will bring prices down is to expand our energy availability in the united states of america. oil is a world price market.

just having more oil would not necessarily bring the price down. making it more energy independent, that is important. drilling more oil in the united states would not necessarily bring the price down. you were opec say last week that there is a sufficient supply of oil. the price is going up not because of oil supply. or demand. demand is clearly on the upswing, not in the united states. we used 25% of the world's energy. demand for oil is going up in china and india. this was a worldwide commodity. what i am saying is that what we really need to have is an

alternative energy source available to us. natural gas is one of those. solar energy is another. wind energy is another. geothermal said another. i know it is controversial, but ike and i'm a big supporter of nuclear power. -- but i had a big supporter of nuclear power. nuclear power is clean energy. it is not damaging to the environment and i believe that we rely on about 20 or 25% of all electricity in america today is the result of nuclear power. i think the way we can get away from oil prices -- again, it is a worldwide price. you can sell that came in for

$10 -- cane for $10 in france or london or germany, but you can only sell it for $5 year. where will you sell it? you will sell it or you can get $10. even if they produce oil here, they can sell it some place -- it is a world price. speculators are driving the price up. we have to do with that. if we have the ability to rely on alternative sources of energy, we did not have to use as much oil. jacking the price up on us will not give the dollars they want. we can bring demand down. i am a strong believer that global warming is a substantial direct -- threat to this generation and to my

grandchildren and great- grandchildren. we are creating too much co2 gas. it is magnifying the heat. 100 to yesterday, the hottest day -- 102 yesterday, the hottest days since they have been keeping records. we know we got -- we go up, but almost every scientist believes that is a problem. we need to look at alternative energy sources and we need to be more efficient and we need to conserve energy. ladies and gentlemen, i've been so pleased to have this opportunity to visit with you. this is what america is about. i want you to be focused on and talk to your friends and neighbors about what is happening with health care, medicare, medicaid, know the facts. make your own decisions.

make your own judgment. talk to your friends and neighbors. together, we can solve this problem. we can bring a step down and get the deficit under control. we can also make sure that our people have the kind of guaranteed for health care and social security that they need and want to divert part 4. thank you very much. and have worked hard for. thank you very much. [applause] >> tonight at 8:00, remarks from robert gates on nato operations and the future of the transatlantic alliance. he believes that nato faces a dismal future. he points out the weaknesses in the afghanistan operations and libya. that is coming up in about 40 minutes. before that, here is a look at recent supreme court rulings

from today's ""washington journal." host: roy beck, executive director of numbersusa, good morning. just this morning from reuters -- it could cause several states to crack down on immigration. what do you think about this? guest: the states are filled with illegal workers. that means they have thousands, tens of thousands of their own workers that are left unemployed. as far as school, it is for

recorded -- reporting purposes only. they are trying to record the cost of illegal immigration to the school system. they are not going to keep children of illegal aliens from attending schools. they are tracking them for cross purposes. host: the alabama law would require police to detain someone if they cannot produce proper documentation when stopped for any reason. guest: right. and again, this is not something where they are going out and looking for illegal aliens, but in the normal process of their duties, when they ask for identification -- all of us have that where we are stopped for speeding or anything. when you're confronted with a -- you areicer, your last wit asked for identification. this requires the police into check further.

host: what do you think about legal challenges, as resign arizona. -- as we saw in arizona? guest: i'm sure there will be legal challenges. illegal immigration has been wide open for several decades now and now we are seeing several states crack down. people are working hard and will challenge the laws in court. as we have seen recently, the supreme court has handed down two big decisions, and one of them was okaying the arizona law requiring businesses to keep illegal immigrants out of the work force. and just this week, the supreme court sent back a circuit court of appeals ruling that had been against hazleton, pa., same kind of thing. of course, we will see a lot

more, but i think the trend of the supreme court is good toward enforcement. host: should this be done on the state level or the federal level? guest: we have always advocated for a national mandatory e- verify system. but congress has resisted doing that for 15 years. it is great that the states are doing it. for the most part, and immigration is a federal issue. but it does make sense for states and localities to help the federal government. there's a 287 g program, which the federal government has where local governments can train and help immigration agents. we do not need 50 different state immigration enforcement systems. but it does make sense for the states to help the feds. host: howard joined does come i republican caller from richmond, virginia.

good morning. caller: i have a question about -- i'm sorry, barack obama -- host: let's move on to margaret. caller: i am a democrat and the liberal and i have tried to bring it up for 20 years. it is not immigration. it is labor. i am a nurse. there flooding year from places like the philippines and and they stay and have babies and then we're screwed. i cannot reform health care with illegal labor. we cannot reform. this becomes a huge problem for

safety, for a homeland security. we are falling apart. guest: the caller makes a very good point. i would say, is not just illegal labor. she is actually referring to a lot of legal labour as well. this is not about the immigrants, but it is about immigration policy. why is our government bringing in at 1 million new foreign workers a year legally, allowing 7 million illegal aliens to keep their jobs when we have 22 million americans who want a job full time and cannot find one. all of this is about immigration policy. but i do think the caller should not be cynical or give up hope. i think we will see legislation passed this year that will help. i think we will see other legislation that will start to set things up for next year, and perhaps the year after that.

for 15 years, congress has refused to act upon the recommendations of the bipartisan jordan commission. we were founded to carry out the recommendations. and barbara jordan said we must dramatically reduce immigration in order to create fairness for the underclasses of this country. that is what we're starting to see the states are doing and that is what congress, i think, will do something about this year. host: let's look at the total number of illegal immigrants living in the u.s. as of january 2010. let's go to our next caller on the independent line, hermine, joining us from hallberg,

california. joining us from holbrook, california. caller: good morning. your population charts a few years ago it motivated me to join numberusa. the legal immigrants on your charts grieving quite astounding. according to your charts we are. to add another 96 million by the year 2015 -- we are going to add another 96 million by the year 2015. -- 2050. my question deals with the numbers and the cost. illegal immigration has averaged about 1 million people per year.

females having babies out another million. those statistics count for an increase of 3.3 million per year. given the costs, for example, if we admit the majority of the people through the immigration policy are low income, then the tfr, is three children. that is a lot of prenatal care, hospital boards, prenataearly cd care, preschool lunches, social services, foreign language assistance, the government forms, interpreters in the government office and courts, government costs accounting for .ce., and border control.

how are we supposed to account for this? guest: he has laid out a lot of were the costs come from. overall, it does not make sense to be importing large population growth at a time when we as a country are not able to keep up with the infrastructure for our current population. the census bureau suggests that if we can -- continue at the current immigration system, we will go from 300 million today, about 310 million today, to over 400 million by the end of this century. there is no polls that suggest we ought to double the population of this country. 70% of immigrant households with children are on welfare, meaning they are very costly.

we should not be importing poverty. we should not be importing, in a sense, and employment labor -- unemployed labor. the costs are tremendous. we are talking with every part of congress to talk about how to cut spending, cut programs for american citizens. why would we import more people that require those public services themselves? host: in washington yesterday, foreign skill levels are on the rise.

guest: it is a little misleading in the sense of the are talking about high school dropouts. those that are high-school educated -- those that have a degree are obviously high-school educated. the latest that i just get out from the first quarter and shows that -- the latest data just came out from the first quarter and shows that not only have college-educated americans more than doubled in the last few years, but among the young college grads, the 23-29-year- old college grads, it is now 29%, one out of every eight who want a job and cannot find one.

it is interesting that we have a bit higher proportion. on the other hand, do we really need these foreign college grads? i would say no, given the terrible college graduate statistics for our own college graduates. to another call. caller: don't you think there's another way to approach the legal -- illegal immigration problem in the u.s.? employers in other countries recruit people and bring them over here to work for under minimum wage. then others say that illegal immigrants come to america to

work the jobs that americans do not want. i think americans will take those jobs if the employers -- americans will not take those jobs employers do not pay at least minimum wage. guest: we still hear politicians say that immigrants are doing jobs that americans will not do, which is just amazing. 22 million americans want a full-time job and cannot find one. i think they're often talking about agriculture. only about 75% of illegal immigrants work in agriculture. it is probably true that wages have to be quite a bit higher to attract a native labor. however, i have to remind everybody that the government has an unlimited foreign worker,

a guest worker program. but for 95% of foreign workers that work in agriculture in this economy, there is not a job that has opened up by immigration that is not immediately filled by an american worker. not in this economy. you have college grads, soccer moms, all kinds of people that show up to do a dollar per hour, $7.50 for our dishwasher jobs. -- $7.50 per hour dishwasher jobs. the majority of the workers in all but stoop labor and fingernail being, the majority of the workers are american workers. -- fingernail painting, the majority of the workers are american workers. those are the only jobs

currently occupied by illegal avery -- illegally aliens that are non-agriculture. our government is giving out 1 million permanent work permits this year in this economy. they did last year and the year before and they will do it next year until congress cuts the emigration numbers. employersaren't hiring illegal workers rather than undocumented workers? guest: well, of course, they are. by host: you say? -- host: but you say that's americans are one in jobs that they do not have. guest: win a job opens up, the most likely person to fill that job is a cousin or somebody that you know. once you get immigrants working at your workplace, their network tends to work even faster in terms of getting people to apply

for jobs. it is true that foreign workers tend to be more compliant. they're not used to working at american working standards, so they will work up -- put up with the working standards that are not an american levels. not just illegal immigrants, but legal immigrants as well will tend to put up with working in missions that are inferior to what americans are used to. some would say that americans are pampered or whatever. we have a culture in this country and we have certain things that we expect as americans. the real question is, should we be driving jobs into non- american working standards, or should we continue to maintain some of the highest working conditions in the world? host: let's go to the phone. annie, a caller from rhode island. caller: i'm calling because i am terribly thiconcerned.

we hear the advocacy groups talking about not dividing families, not harming families by enforcing our laws, but we never hear anyone address the fact the real harm done to american families by the refusal to enforce our immigration laws. those laws, i might add, were put in place to protect the most vulnerable americans from discrimination. but we never hear anyone advocating because for the most part we do not have a $1 million lobby behind as making our case. we do not see reports on the news about these tent cities. i volunteer and i know about these families that have been displaced by illegal labor, and corrupt employers. and we are subsidizing this with our tax dollars. guest: you said a mouthful. thank you for your concern for the american victims of our immigration system.

i would point out, these are not immigrant -- victims of the immigrants. these are victims of progress. congress is the one that has set the policy and has decided to victimize the american families. having said that, i have some sympathy for the legally million families -- the illegal alien families who were perhaps in a siege which were there was a mass raid. one of their parents gets arrested, separated comedy team, families are not sure where they are. this is pretty scary -- gets arrested, separated, the change, families are not sure where they are. this is pretty scary. frank the, this is what congress is looking at right now, not mass deportations or mass

roundups, but giving jobs to american workers. it accomplishes putting millions of americans back to work and it just says, if we get a mandatory verified bill passed this summer, there will be a bill introduced that will start moving very quickly. i believe that can go through the president's desk this year. if that happens, the jobs dry up at the workplace. no one is arrested in this process. it is just that the illegal alien workers no longer have the work. that is why they came. without the work, they start to go home. if they can put their affairs in order, they have their own timetable and they can put their family in order. it works for the victims get jobs. the families with illegal aliens can put their affairs in order and in an orderly way leave the country. we have seen over 1.5 million illegal aliens leave the country

during this jobs depression. we know they respond to a bad job situation. that is primarily because of the economy. but if congress passes a mandatory e-verify this year, we will see millions more leave. host: let's look at a story from the "the new york times" this week. what do you think? guest: as i said at the beginning, we are on the cusp of a major shift in policy you have a few states that want to be sanctuary states. they want to be welcoming to

illegal immigration. they want to work against the unemployed in their state. you have a classic battle going on. we do praise president obama for a number of things that he has done. he has resisted efforts to totally dismantle immigration enforcement. he has insisted his agencies -- they have insisted on moving forward on this. when someone is arrested and put into jail, you run them through a system to see if they are wanted in other states, are they deadbeat dads, do they owe child support -- that is what they do. homeland security also find out. if they have fingerprints, is this person wanted as an abscond that has already been deported? the catch a lot of violent criminals kamal lot of non-arlin criminals, and maybe it -- a lot

of violent criminals, a lot of non-ryland criminals, and maybe others that have no record before. -- non-violent criminals, and maybe others that have no record before. it makes sense to be catching people that are breaking the laws. i know some people say, well, these are non-violent criminals. they're not breaking big loss. that is a debate people can have. host: let me read this article, if i may. guest: that is always the canard that people throw out there.

they are not reporting people to the system to have reported crimes. they are reporting people in the system that have been jailed. and they are totally wrong about it not doing what it is intended to do. violent criminals in the system are being deported. i think what they mean is that it is doing more than what they think it is intended to do because they think it should only be deporting violent criminals, and not just people more burglarizing your home. -- who are burglarizing your home. that is a classic debate. the news media will be very interested in it because it's a battle within the democratic party. it is the democratic administration basically fighting democratic governors. by the way, there are states -- new york, massachusetts, illinois, california -- these

are essentially sanctuary states. as others get tougher on illegal immigration many of them will go back home and others will flee to the states. we will see how states like do with bearingan the cost of illegal immigrants fleeing from other states. host: here is a chart showing the growth through 2010. guest: that would suggest why they just passed such a tough law, wouldn't it? host: and in alabama, 2.5% of its population is illegal immigrants. the highest state -- the highest population was in nevada with

2.7%. let's go to maryland. caller: i just want to bring up two points. when they talk about amnesty, they never bring up the fact that usually they will allow them to bring in immediate family, which also increases the population. the second thing is, they talk about the latino minority being the largest by something like 2020 or something. but if you look at the pie chart, 65% of that is classified immigrant, which to me means, that is the their amnesty where the borders are broken and they are flooding in. -- that is an amnesty for the borders are broken and they are flooding in. guest: is a huge question in any

kind of amnesty discussion. and by the way, there is not really any kind of amnesty discussion going on right now. there will not be an amnesty bill in the next two years. but even if you're going to have a small amnesty, we should at least do it by way of chain migration. it is our top priority to do away with chain migration. families should not bring in extended families traditionally bring in -- extended families. they should only bring in small children and the immediate family. our feeling is, and certainly the jordan commission cozy feeling is that concerns about race and ethnicity and -- the jordan commissions feeling is that concerns race and

ethnicity, we do not think that should be in policy. there are people on both sides of this debate that think it should be. we do not think so. that is a result that happens, but basically, we should have a color blind and national-origin blind system, we think. host: if we cut the population of the u.s. in half, one person tweeds, -- guest: first of all, there are 7 million illegal aliens holding construction and transportation jobs. this is not agriculture. we have 22 million americans who want a full-time job and cannot find one. most of them are less educated, that is, they do not have a college degree. their high school graduates or high school dropouts. they have the same education level as the legal limit -- illegal immigrants.

because they might not all be in the exact right places it might take three or four years to sort out. that is why the e-this space verify system is great. we would like to -- the e- verify system is great. we would like to see a moratorium. it would cut out about 600,000 illegal immigrants per year. do we have 600,000 americans ready to take those jobs this next year? absolutely. 22 million are sitting there. if miraculously in this country we stop dolly illegal immigration and all illegals left today -- stopped all illegal immigration and all illegals left today, we have plenty of americans who want those jobs. we would have been amazing transmit -- transition with our society and our economy.

we would go back to the and of a level that we have in the 1950's and 1960's. host: there is a comment on twitter about cutting in half the population of the u.s. views see any difference there? -- do you see any difference there? guest: is is a hypothetical. we would go from 310 million to 303 million. it is not half. there is no way to do that. there is a possibility that in about 50 years we might get to a point where we have a slowly declining size of population and could we handle that? yes, of course. europe is doing that.

even if we put immigration 20, the census bureau says the u.s. would still be growing at the end of this -- even if we took immigration to zero, the census bureau says the u.s. would still be growing. why? fertility level. 100% of long-term population growth in this country is due to federal immigration policy. from scott,hear democratic caller in plantation, fla., welcome. caller: good morning. i have a couple of questions. really, it is a bigger question than just physically immigration policy in individual states. if we do not start treating the

problem other than the symptoms we will have a terminal illness. in other words, corporations who believe that the world is their worst year and they can farm out as many as american jobs as they care to to other countries, and then you have other countries who, due to lack of jobs are coming over the border as immigrants, and rightfully so. when are we going to start looking at because factors in our disease? corporations are determining where immigrants coming to the country and where they are giving these jobs away, getting pennies on the dollar to u.s. citizens because they -- giving pennies on the dollar to u.s. citizens because they can do that. any regards to -- and in regards to your corporation, do you ever crunch any of those type of numbers?

guest: it is a very good point. what drives this? why would we do this? in most any country in the world, the citizens of the country think they have a government that is by the people, of the people, for the people. you would think there would be an immigration policy that serves the interests of the people of that country. why would we be importing 1 million new permanent workers every year? i think the caller is correct that one of the main reasons is that there are corporate lobbies who do believe in a global list, which means a non- democratic, view of labour. in the radical libertarian view, every person, every corporation should have the right to hire anybody in the world. and if you can undercut your competitor by bringing somebody in from another country, you should. obviously, that is not

happening. even with our huge borders that we have now, they are not truly open. the we still have some limits. but that does create the desire to flood the market, which does not create cheaper labor. a drive which is down for all americans. we have had stagnant and declining real wages for most american workers. immigration has always been a policy fight about tight verses loose labor markets. our corporation has to start within a tight labor markets. we think we have a better solution with tight labor markets. they're the best friend of workers of any that they have ever had. corporations do capital investment, innovations, technical achievements in order to get more work out of each person because you have to pay more for each worker when they

are hiring americans. that is the virtuous circle. but in this labor markets, as you are talking about, we have seen the vicious cycle. it is truly one of the big causes behind this symptom of high immigration policies you talk about. host: a comment on twitter -- what is our responsibility? guest: first, we have a refugee program and an asylum program. it is about 13% of our legal immigrants per year. 87% of our immigrants are not people who could claim that they are being fed back -- sent back to a situation where they would

be persecuted or face harm. perhaps this person is thinking about mexico. there's no question. i think our hearts just go out to the people on the mexican/u.s. border with mexico has lost control of the drug cartel. it would be better if there was one drug cartel that actually controlled it, but you have these warring cartels. it is a very sad situation. but for most of mexico, is helpful to keep in mind that the institute's a run the world that study acting as, these are big academic institutes, amazingly, denmark shows up as the number- one happiest people in the world. the u.s. is the 20th. and mexico shows up as the second happiest people in the world. despite rampant government corruption, despite drug violence, in all areas of looking at what makes people

happy, the mexican people because of their families, their religion, their cultural institutions, they report being the obvious in the world. the majority -- the happiest in the world. the majority of the people that we do send back, they go to the second half but it -- happiest place in the world. when i read that book, it is thrive," when we send them back to mexico, we're not sending them back to a terrible place. there is a culture in mexico in which communities take care of their own. the rich do not, but in this country, that is what we're talking about with immigration. we need to take care of our own. the black and hispanic and lower losses are the ones that are being hurt worst by this. -- class's are the ones that are

being hurt by this the worst. one out of every five black college graduates under the age of 30 that once a full-time job cannot find one. that is what we're talking about. -- that want a full-time job cannot find one. that is what we're talking about. terry,et's go to republican caller in frederick, maryland. good morning. caller: i would like to thank you for having roy beck on the "washington journal" and i know you'll have him back soon. i have three questions and comments. i was hoping that mr. beck would discuss the green card work visas. because whenever the pro- democrats talk about comprehensive immigration reform an amnesty, they act like we do

not allow people in this country. the u.s. is the most diverse country in the world, i believe. if we are very open and allow a lot of people to come in -- we are very open and allow a lot of people to come in. the second issue, the 287 g, and how the state working with the federal government is important. and finally, the violence on our southern border, and possibly other people from other countries, not just mexico -- i have heard stories about people from the middle east coming through mexico across our borders with the goal of harming us. thank you. guest: it is the federal government program whereby the feds train local and stage law- enforcement people to help the feds enforce immigration laws.

and the local jurisdiction that wants to help the fed's can apply for this. there is a huge backlog of cities and states that want to participate. congress for years has scarred this program for money. there was an amendment to increase by about 20% of the funding for that training. that amendment passed the house. there was an attempt by a congressman from colorado to kill the program altogether. the immigration of lobbies hate this program. they have been pushing president obama to get rid of its. he has refused to stop the program. that amendment to try to kill the program was defeated by -- i

think there were 304 votes against it. a 43% of the democrats and voted to save the program, 81 of the democrats. i think there is a feeling in congress to not step back from its enforcement. very quickly on the green card, we are giving out 1 million -- more than 1 million per minute of green cards every year. that is the most generous in the country. i do not think we should do it. i would like to see it brought back down to 400,000. i would like to see it down eventually to a quarter of a million. i know of nobody who wants to take that right

>> robert gates on the future of nato. that is followed with a discussion on the best ways to create new jobs. in his last policy speech as defense secretary, robert gates warned of a dim future for the transatlantic alliance. if nato members fail to increase defense spending. he stressed that the u.s. is shouldering most of the cost of nato missions in afghanistan and libya and says it would be increasingly difficult to convince the american public to support the transatlantic alliance without a greater contribution from the european allies. this event is about 20 minutes.

thank you, mr. secretary general, jaap, for that kind introduction. and my thanks to giles merritt and the security and defense agenda for the opportunity to speak here today. this is day 11 of an 11-day international trip so you can understand why i am very much looking forward to getting home. but i am glad - at this time, in this venue - to share some thoughts with you this morning about the transatlantic security relationship in what will be my last policy speech as u.s. defense secretary. the security of this continent - with nato as the main instrument for protecting that security - has been the consuming interest of much of my professional life. in many ways, today's event brings me full circle. the first major speech i delivered after taking this post nearly four-and-a-half years ago was also on the continent, at the munich security conference.

the subject was the state of the atlantic alliance, which was then being tested with the resurgence of the taliban in afghanistan. today, i would like to share some parting thoughts about the state of the now 60-plus year old transatlantic security project, to include -- where the alliance mission stands in afghanistan as we enter a critical transition phase, nato's serious capability gaps and other institutional shortcomings laid bare by the libya operation, the military and political necessity of fixing these shortcomings if the transatlantic security alliance is going to be viable going forward, and more broadly, the growing difficulty for the u.s. to sustain current support for nato if the american taxpayer continues to carry most of the burden in the alliance. i share these views in the spirit of solidarity and

friendship, with the understanding that true friends occasionally must speak bluntly with one another for the sake of those greater interests and values that bind us together. first, a few words on afghanistan. i have just returned from three days of visits and meetings with our troops and commanders there, and come away impressed and inspired by the changes that have taken place on the ground in recent months. it is no secret that for too long, the international military effort in afghanistan suffered from a lack of focus, resources, and attention, a situation exacerbated by america's primary focus on iraq for most of the past decade. when nato agreed at riga in 2006 to take the lead for security across the country, i suspect many allies assumed that the mission would be primarily peacekeeping, reconstruction, and development assistance more akin to the balkans. instead, nato found itself in a

tough fight against a determined and resurgent taliban returning in force from its sanctuaries in pakistan. soon, the challenges inherent to any coalition operation came to the surface - national caveats that tied the hands of allied commanders in sometimes infuriating ways, the inability of many allies to meet agreed upon commitments and, in some cases, wildly disparate contributions from different member states. frustrations with these obstacles sometimes boiled into public view. i had some choice words to say on this topic during my first year in office, unfavorably characterized at the time by one of my nato ministerial colleagues as "megaphone diplomacy." yet, through it all, nato - as an alliance collectively - has for the most part come through for the mission in afghanistan. consider that when i became secretary of defense in 2006 there were about 20,000 non-u.s. troops from nato nations in

afghanistan. today, that figure is approximately 40,000. more than 850 troops from non- u.s. nato members have made the ultimate sacrifice in afghanistan. for many allied nations these were the first military casualties they have taken since the end of the second world war. frankly, four years ago i never would have expected the alliance to sustain this operation at this level for so long, much less add significantly more forces in 2010. it is a credit to the brave isaf troops on the ground, as well as to the allied governments who have made the case for the afghanistan mission under difficult political circumstances at home. over the past two years, the u.s. has completed the dramatic shift in military priorities away from iraq and towards afghanistan, providing reinforcements to allies who courageously had been holding

the line in the south. these new resources - combined with a new strategy - have decisively changed the military momentum on the ground, with the taliban ejected from their former strongholds. while president obama is still considering the size and pacing of the troop drawdown beginning in july, i can tell you there will be no rush to the exits. the vast majority of the surge forces that arrived over the past two years will remain through the summer fighting season. we will also reassign many troops from areas transferred to afghan control into less-secure provinces and districts. as the taliban attempt their inevitable counterattack designed to increase isaf casualties and sap international will, now is the time to capitalize on the gains of the past 15 to 18 months - by keeping the pressure on the taliban and reinforcing military success with improved governance, reintegration, and ultimately political reconciliation.

given what i have heard and seen - not just in my recent visit to afghanistan, but over the past two years - i believe these gains can take root and be sustained over time with proper allied support. far too much has been accomplished, at far too great a cost, to let the momentum slip away just as the enemy is on its back foot. to that end, we cannot afford to have some troop contributing nations to pull out their forces on their own timeline in a way that undermines the mission and increases risks to other allies. the way ahead in afghanistan is "in together, out together." then our troops can come home to the honor and appreciation they so richly deserve, and the transatlantic alliance will have passed its first major test of the 21st century -- inflicting a strategic and ideological defeat on terrorist groups that threaten our homelands, giving

a long-suffering people hope for a future, providing a path to stability for a critically important part of the world. though we can take pride in what has been accomplished and sustained in afghanistan, the isaf mission has exposed significant shortcomings in nato - in military capabilities, and in political will. despite more than 2 million troops in uniform - not counting the u.s. military - nato has struggled, at times desperately, to sustain a deployment of 25,000 to 40,000 troops, not just in boots on the ground, but in crucial support assets such as helicopters, transport aircraft, maintenance, intelligence, surveillance and reconnaissance, and much more. turning to the nato operation over libya, it has become painfully clear that similar shortcomings - in capability and will have the potential to jeopardize the alliance's ability to conduct an integrated, effective and sustained air-sea campaign.

consider that operation unified protector is -- a mission with widespread political support, a mission that does not involve ground troops under fire, and indeed, is a mission in europe's neighborhood deemed to be in europe's vital interest. to be sure, at the outset, the nato libya mission did meet its initial military objectives - grounding qaddafi's air force and degrading his ability to wage offensive war against his own citizens. and while the operation has exposed some shortcomings caused by underfunding, it has also shown the potential of nato, with an operation where europeans are taking the lead with american support. however, while every alliance member voted for libya mission, less than half have participated at all, and fewer than a third have been willing to participate in the strike mission. frankly, many of those allies sitting on the sidelines do so not because they do not want to participate, but simply because

they can't. the military capabilities simply aren't there. in particular, intelligence, surveillance, and reconnaissance assets are lacking that would allow more allies to be involved and make an impact. the most advanced fighter aircraft are little use if allies do not have the means to identify, process, and strike targets as part of an integrated campaign. to run the air campaign, the nato air operations center in italy required a major augmentation of targeting specialists, mainly from the u.s., to do the job - a "just in time" infusion of personnel that may not always be available in future contingencies. we have the spectacle of an air operations center designed to handle more than 300 sorties a

day struggling to launch about 150. furthermore, the mightiest military alliance in history is only 11 weeks into an operation against a poorly armed regime in a sparsely populated country yet many allies are beginning to run short of munitions, requiring the u.s., once more, to make up the difference. in the past, i've worried openly about nato turning into a two- tiered alliance -- between members who specialize in "soft' humanitarian, development, peacekeeping, and talking tasks, and those conducting the "hard" combat missions. between those willing and able to pay the price and bear the burdens of alliance commitments, and those who enjoy the benefits of nato membership - be they security guarantees or headquarters billets - but don't want to share the risks and the costs. this is no longer a hypothetical worry. we are there today. and it is unacceptable. part of this predicament stems from a lack of will, much of it from a lack of resources in an era of austerity.

for all but a handful of allies, defense budgets - in absolute terms, as a share of economic output - have been chronically starved for adequate funding for a long time, with the shortfalls compounding on themselves each year. despite the demands of mission in afghanistan - the first 'hot' ground war fought in nato history - total european defense spending declined, by one estimate, by nearly 15 percent in the decade following 9/11. furthermore, rising personnel costs combined with the demands of training and equipping for afghan deployments has consumed an ever growing share of already meager defense budgets. the result is that investment accounts for future modernization and other capabilities not directly related to afghanistan are being squeezed out - as we are seeing today over libya. i am the latest in a string of u.s. defense secretaries who have urged allies privately and publicly, often with exasperation, to meet agreed- upon nato benchmarks for defense

spending. however, fiscal, political and demographic realities make this unlikely to happen anytime soon, as even military stalwarts like the u.k have been forced to ratchet back with major cuts to force structure. today, just five of 28 allies - the u.s., u.k., france, greece, along with albania - exceed the agreed 2% of gdp spending on defense. regrettably, but realistically, this situation is highly unlikely to change. the relevant challenge for us today, therefore, is no longer the total level of defense spending by allies, but how these limited -- and dwindling -- resources are allocated and for what priorities. for example, though some smaller nato members have modestly sized and funded militaries that do not meet the 2 percent threshold, several of these allies have managed to punch well above their weight because

of the way they use the resources they have. in the libya operation, norway and denmark, have provided 12 percent of allied strike aircraft yet have struck about one third of the targets. belgium and canada are also making major contributions to the strike mission. these countries have, with their constrained resources, found ways to do the training, buy the equipment, and field the platforms necessary to make a credible military contribution. these examples are the exceptions. despite the pressing need to spend more on vital equipment and the right personnel to support ongoing missions - needs that have been evident for the past two decades - too many allies been unwilling to fundamentally change how they set priorities and allocate resources. the non-u.s. nato members collectively spend more than $300 billion u.s. dollars on defense annually which, if allocated wisely and strategically, could buy a

significant amount of usable military capability. instead, the results are significantly less than the sum of the parts. this has both shortchanged current operations but also bodes ill for ensuring nato has the key common alliance capabilities of the future. looking ahead, to avoid the very real possibility of collective military irrelevance, member nations must examine new approaches to boosting combat capabilities - in procurement, in training, in logistics, in sustainment. while it is clear nato members should do more to pool military assets, such "smart defense" initiatives are not a panacea. in the final analysis, there is no substitute for nations providing the resources necessary to have the military capability the alliance needs when faced with a security challenge.

ultimately, nations must be responsible for their fair share of the common defense. let me conclude with some thoughts about the political context in which all of us must operate. as you all know, america's serious fiscal situation is now putting pressure on our defense budget, and we are in a process of assessing where the u.s. can or cannot accept more risk as a result of reducing the size of our military. tough choices lie ahead affecting every part of our government, and during such times, scrutiny inevitably falls on the cost of overseas commitments - from foreign assistance to military basing, support, and guarantees. president obama and i believe that despite the budget pressures, it would be a grave mistake for the u.s. to withdraw from its global responsibilities. and in singapore last week, i outlined the many areas where

u.s. defense engagement and investment in asia was slated to grow further in coming years, even as america's traditional allies in that region rightfully take on the role of full partners in their own defense. with respect to europe, for the better part of six decades there has been relatively little doubt or debate in the united states about the value and necessity of the transatlantic alliance. the benefits of a europe whole, prosperous and free after being twice devastated by wars requiring american intervention was self evident. thus, for most of the cold war u.s. governments could justify defense investments and costly forward bases that made up roughly 50 percent of all nato military spending. but some two decades after the collapse of the berlin wall, the u.s. share of nato defense spending has now risen to more than 75% - at a time when politically painful budget and benefit cuts are being considered at home.

the blunt reality is that there will be dwindling appetite and patience in the u.s. congress - and in the american body politic writ large - to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense. nations apparently willing and eager for american taxpayers to assume the growing security burden left by reductions in european defense budgets. indeed, if current trends in the decline of european defense capabilities are not halted and reversed, future u.s. political leaders, those for whom the cold war was not the formative experience that it was for me, may not consider the return on america's investment in nato worth the cost.

what i've sketched out is the real possibility for a dim, if not dismal future for the transatlantic alliance. such a future is possible, but not inevitable. the good news is that the members of nato, individually, and collectively, have it well within their means to halt and reverse these trends, and instead produce a very different future -- by making a serious effort to protect defense budgets from being further gutted in the next round of austerity measures, by better allocating and coordinating the resources we do have, and by following through on commitments to the alliance and to each other. it is not too late for europe to get its defense institutions and security relationships on track. but it will take leadership from political leaders and policy makers on this continent. it cannot be coaxed, demanded or imposed from across the atlantic.

over the life of the transatlantic alliance there has been no shortage of squabbles and setbacks. but through it all, we managed to get the big things right over time. we came together to make the tough decisions in the face of dissension at home and threats abroad. and i take heart in the knowledge that we can do so again. >> outgoing white house economic adviser takes part in a forum on job creation. followed by a discussion on the best ways to create new jobs. after that, the european commission president takes members -- his questions from members of parliament. tomorrow on "washington journal ," proposed regulations to limit debt restrictions on mortgages.

wall street journal reporter looks at the euro of alcohol and firearms to stop u.s. guns from getting into the hands of mexican drug cartels. "washington journal" is live at 7:00 on c-span. >> connect would c-span on line -- with c-span on line. programming highlights on our youtube channel. c-span and social media, connect today. >> the u.s. economy would have to create 21 million jobs by 2020 in order to get back to pre-recession employment levels. that is according to the new study. the outgoing white house economic adviser and others discussed the report and the prospect for job creation, and event hosted by the committee

for economic development read this is just over two hours. >> ladies and gentlemen, could i please ask for you to take a seat. we are going to begin our program in just a minute. could i please ask for your attention and ask for you to take a seat so that we can begin our program? i know there'll be people joining us, but we want to begin promptly since our keynote speaker is here. good afternoon. i am the president of the committee for economic development and on behalf of our trusties and our staff, i want to thank you for coming this afternoon.

welcome to our lunch forum on an economy that works, job creation and america's future. this is a perilous moment for our country and for our economy. job creation is sluggish and unemployment remains high at 9.1%. the housing market is still unsettled. the traditional levers of federal policy are in essence tapped out. after inflation, the overnight federal funds rate is negative. at the same time, bank lending and consumer spending have not yet rebounded. fiscal policy is now constrained by the unresolved partisan and ideological wranglings over spending, revenue, and the conditions for raising the nation's debt ceiling. as our leaders dither, and there are only 13 legislative work days remaining in the house of representatives between today

and august 2, we are beginning to see unmistakable evidence of a gathering storm. on april 18, it was the warning by standard and poor's. second, moody's expressed concerned on june 2. just two days ago, an adviser to be its tiny central bank warned us that even a brief -- chinese central bank that even a default would be playing with fire. the cost of buying credit default swaps recently has been at its highest level since march. concern over euro zone cohesiveness, sovereign debt, and the ongoing role of the euro may be masking the future inflation possibilities associated with our annual $1.40 trillion budget deficits and are $14.30 trillion national debt. set to grow even higher.

he is often quoted for having said that if something is unsustainable, it must doctorate the committee for economic development is working to address these concerns into ways. you'll find a copy of our report. please read it. it is not the typical policy steady. what you will find are several to realistic scenarios of what the coming crisis could look like great -- look like. it will persuaded that right now, you may be living through a period similar to august 1914. blissful 10 miles into be followed by an unexpected shock -- denial followed by an unexpected shock. who will speak to our political leaders and the public about the

urgency of ensuring fiscal stability. we have been carrying bad message to senior leaders in the house, the senate, and the white house and also to our fellow citizens. with all of this gloom, is there any hope? today's presentation by mckinsey and company on an economy that works, job creation and america's future comes on the eve of next week's meeting in north carolina, president obama council on jobs and competitiveness. today's reports identifies it the need for business creation, it indicates those sectors that are likely to generate these jobs, and lays out what we need to do to ensure that these jobs materialize. it is an honor for us to share the podium with our colleagues. they are bright, focused, profound, and relentlessly optimistic. thank you very much for your

work today and for being with us today. enjoy your lines. i will now turn the podium over to our trusty and mckinsey director. he will introduce our keynote speaker. [applause] >> thank you, charlie. thank you for collaborating with us on this event. we look forward to an interesting dialogue with you over the course of the afternoon. i would also like to acknowledge our trusty bill lewis, was the founding director of mckinsey global institute 20 years ago. it is good to see you here. [applause] before i introduce our honored guest speaker, i want to take a few minutes about what motivated the institute to

publish today's report. one of the most troubling issues on the minds of business and policy leaders in the united states is how we will drive growth in the united states after the the recession that we are encouraged we have been thinking a lot about this challenge and have embarked on a multifaceted exploration of the topic. we have released two reports so far, one on the role of multinationals and one on the necessity for productivity and innovation in today's economy. we'll be following up today's report with one on the importance of solving the deck and overhang issues in the u.s. and the one on public sector productivity. we want to talk about jobs. we do not have all the answers to this or the other challenges that we are exploring, but we do think we can build -- a prank a fact -- we can bring a fact

based to this. let me introduce our honored guest. he is going to give us an outlook on the economy, the recent job numbers, and some commentary on the report that our colleagues and i will be presenting. i think you all know the chairman of the council of economic advisers and a member of the cabinet for the president. he is on leave for a little bit longer brown did university of chicago, where he researched tax policy, american industry, technology and innovation. a lot of other topics that are crucial to today's economic challenges. he was an economic adviser to president obama and is a senior economic advisor to the president during his 20 08 president to campaign. prior to joining the administration, he was a member

of the panel of economic advisers to the congressional budget office. research association at eton -- research fellow at the american bar association. he is also a member of the u.s. census advisory committee. he was selected as one of the financial times 6 gurus of the future unnamed aide john the global leader of the economic forum. he is a frequent columnist @ "the new york times." he is a winner of the d.c. with that, it is my pleasure to introduce austan goolsbee. [applause] >> thanks, everyone. i am just going to speak for a little bit. you have quite a program line

up -- lined up. charlie, you kicked us off with a note of optimism. i do not know if that was "we started from crisis and ended and the lights went out and no one was heard from again." [laughter] i would suggest in my reading of the report, that was not the main message i took from the report. i would say that is not the main message of the administration, either. charlie, you were speaking for yourself only on that one. i thought i would just talk about three general points and why i like the report. analytically, there are certain parts of it that i have quibbles with, but i think the effort is exactly what we should be doing because my first point is the nature of the recovery, where we are in crisis/recovery has changed quite a lot.

we go through the first year and a half, really. we are in outright rescue mode. the private sector is in freefall. in my view, anyone saying that what we should have done at that time is just get out of the way and let the private sector solve the problems itself i think was not really paying attention. because that was not in the cards. we are losing 750,000 jobs per month. the gdp is shrinking at a 6% annual rate. we are in the steepest decline, really, of most of our lifetimes. i will not say anything about anyone's age in this audience, but back to the depression days before we saw anything like that. we have now over the last six to

12 months shifted out of rescue mode into something like a transition. we are trying to transition back to a growth mode where private sector companies start getting money on their balance sheet. they return to profitability. output growth exceeds productivity. so they actually start hiring. the last 15 months, the private sector adds more than 2 million jobs. the last six months, more than 1 million of those jobs in the last six months. we do have a negative jobs report this past month, no question. it follows three quite excellent jobs reports in the months previous to that. i do not think just in terms of what are the economic prospects -- i do not think it is a secret to anybody that you have a series of tragic disasters, both natural and man-made in japan, which have a clear negative impact on the supply chain of manufacturing, really, around the world, not just in the u.s.. you have the event of the

middle east, the gas price shocks. some of these european financial issues. those headwinds waiting us down, slowing the growth at the beginning of the year. i learned for many years in academics that economists have very vehement arguments about predicting the past, so stay out of the business of predicting the future. i will simply note that the private sector forecasters and the fed are saying they expect that many of those forces were temporary/partial and expect a rebound in the second half of the year and going into 2012. the labor market remains heavily damaged. but it is on a trajectory of improvement. my point, one, is the nature of

where we are in the business cycle is shifting. my second point is where the focus of policy should be anywhere to expect recovery to come is also changing. so the correct policy, when you are in the debt of rescue mode is all about government-directed stimulus. it is not sustainable. that is not a creep -- critique for people to say this -- it was never meant to be sustained. the government involvement when we're teetering on the edge of the great depression is an advanced -- the government is the primary and in many cases only engine of recovery, but as you shift to better conditions, that is no longer true. it starts to become things that the government can do to facilitate the standing up of the private sector as the nature of where you would see that growth. before people become too directed to "if we cannot get

back to the housing growth we had in the 2000's, if we cannot get back to the consumption spending we have in the 2000's, we cannot recover -- that is the underlying premise of a lot of what you hear in the media -- think for a moment about the 2000's, compared to all previous expansions in the united states, and compared to international expansions in the 2000. looks extremely different. because it is heavily weighted to consumer spending faster than income growth, and to residential construction in the housing market. neither of which is sustainable. both of which were fueled by a bottle and are not, i would argue, a healthy model of what we want to return to. the healthy model that the president has outlined repeatedly that underlies --

when i was on jon stewart, i was talking about the future, and he said to stop saying that. the basis of that is we need a broad based growth that is not just concentrated in excess of consumer spending and residential construction. we need export expansion. we need business investment to be a driver. we need research and development and innovation and small business to be the drivers of growth. we want it to be spread across a lot of industries, not just in the few that are the direct spillovers of bubble-field recovery -- bubble-fueled recovery. what i like a lot about the report is that it is engaged in the effort of the private sector thinking about where do we view the opportunities for growth going forward.

let us not forget that the united states remains the richest country in the world with the most productive workers in the world. my cea people, being who they are, say i need to stop telling the president that because he needs to stop saying that. they say on the purchasing power adjusted basis, the nation of luxembourg is higher than the united states. and except for 300,000 people in luxembourg, we remain the most productive in the world. for all the talk about china, let's not forget, we are some seven times to 11 times richer than them. in the same way that in my household, our three kids share a lot of growth in height is 100%, but that does not make them taller than us, and we should not forget that as an important component. we have extremely productive industries. we have gotten substantially

more competitive relative to other countries of the world over the last two years, while going through this wrenching downturn. one critique, i guess i would have, of the analysis, however, in the mackenzie report -- in the mckinsey report is the notion of jobs growth -- it makes the argument that there has been a section -- secular change in business cycles. 2001, there is no question that is true. it is almost two full years from the end of the recession before we generate any jobs in 2001. that is, in my mind, totally different from the business cycle we have just gone through. if you say, "how long does it take to get back to where you started?" yes, by that measure, it looks like it is a long time, but there is a major difference

between down somewhat and remaining stagnant and plunging the most you have ever plunged in 75 years and then working your way out of it, adding 2 million jobs over 15 months. that is not jobless recovery. that is, in my view, and incorrect definition of what jobless recovery is. remember that in 1991 and 2001, those are mild recessions. the 2007 recession, which begins at the end of 2007, is intensively deep. let us not confuse the rebuilding with what is stagnant. in the rebuilding, my fourth point -- the mckinsey report, and i would commend everybody to look at the jobs council meeting that is coming on monday -- they are thinking about a lot of these similar issues. they have been working on the factual basis, but the effort that the private sector that we

identify what parts of the private sector will there be opportunities and make sure that we get our workers trained today to be filling the jobs that we are expecting in the year, five years, 10 years down the road is critically important. the jobs council probably has some slightly different views of what are areas of expansion. in the mckinsey report, it foresees broad-based growth but a somewhat negative on the growth of manufacturing over the long term. ministration a jobs counsel are more positive on the prospects for manufacturing job growth -- the administration and jobs council. i think we anticipate quite a significant expansion of exports that we have been through because of some national and

international imbalances that will have a tendency to close, i think the prospects for manufacturing growth are fairly decent. in this part, we go way down. we have started coming back out of the whole -- hole. in this part of our coming back, we are still at a trouble spot and have a long way to go, but out of the 15% that has recovered, let's call it, that looks pretty good. it has been quite broad-base. manufacturing is had the fastest employment growth in almost 15 years. you have seen the health care sector, leisure, entertainment, media growing. you have seen services growing. you have seen retail trade growing. it has been far more broadbased than anything we saw in the 2000's, and the effort is we have to get the growth up, and it has to be powered by the private sector, so things like investment incentives through the tax code for business to build factories in the united states -- that was an

inconceivable policy. that would not have worked -- excuse me, we could conceive of the policy, but it would not have worked at a moment when the private sector is in freefall. we could have passed and investments of city in march of 2009. who in the private sector would have said it is a great time to go build a factory and by a lot of equipment in the united states when the gdp is shrinking 6.5% at an annual rate and people are seriously contemplating whether we are about to go into a depression? now, i feel like we are in a different spot, unless they listened to much to charlie -- too much to charlie. broad-based growth driven by the private sector, analyzed by the private sector, whether from mckinsey, the jobs council, or others, let us think about the areas where we have the opportunity. the last point i will say is we have to live within our means

as a government and as a private sector. on the budget, we have known about the long run fiscal challenge facing the country for 40-plus years, and that problem has not gotten materially worse in the last two years. the problem is rooted in the aging of the population, the acceleration of health care costs, and, i would argue, some of the tax policy choices made in the 2000's. we should and must address that, but let us not forget that that is not the number one issue facing the country. we must deal with that issue and live within our means, but the number one issue facing this country is that we grow, that we remain the richest, second only to 300,000 workers in luxembourg, most productive workers in the world going out now, five years from now, and 25 years from now.

that means as we think about what must be cut, the what in many ways becomes more important than the how big. it is not an argument like in 2009 of how big the stimulus is, how big the contraction is. it is -- does it really makes sense to go cut education and training spending at a moment when we know that over the next six to 18 months, there is every possibility that companies will say, "look, we want to hire, but we need people with the following skill sets, and we cannot find people that have those skills sets. we have training programs that can have them ready to fill those jobs as we come out of the downturn, and it is important that we not skimp on the main drivers that have made us the richest country in the world. the skill of our work force, the investment in innovation and r&d, the kind of public and private investment in

infrastructure and capital that have kept us in those situations. so i thank you for your time, and i envy you the panels and research that you are all about to hear. thank you. [applause] >> austan, thank you very much. just two points i would like to make. first, thank you for being with us this afternoon. second, thank you very much for your public service to the country. you have a very important job, and you have held it extremely well. most of the trustees who know me would tell me that i am an optimist, for the most part. we're trying to galvanize the business community to get on board in helping to deal with some of these issues around the country's fiscal health and also the priority of economic growth.

if i could just reverse the normal phrase that you here in washington, we are from the private sector, and we are here to help. [laughter] i would now like to introduce james and susan from mckinsey, who are going to present the findings and recommendations of the report on job creation. james is a senior partner and is one of the leaders of mckinsey's global high-tech media and telecommunications practice. he has a distinguished academic background as well. having a bsc in electrical engineering, first-class degree from the university of zimbabwe. he then went on to be a rhodes scholar at oxford and holds a bachelor's, master's, and another master's degree in electrical engineering,

mathematics, and computer science. he has been a fellow at mit and also at oxford. we are honored to have you with us to present the mackenzie report -- mckinssey rep -- mckinsey report. susan is based here in washington. she has done an enormously wide-ranging amount of research on general issues relating to global financial markets, economic growth, global investments, saving trends, deleveraging, which we hope will soon be over, long-term growth prospects, and a number of very important topics for the economy and the country. she has been at mckinsey since 1996. she has a ph.d. in applied economics from stanford and also an undergraduate degree with class distinction from

northwestern university. james and susan, please come up, and the floor is yours. thank you. [applause] >> good afternoon. i would like to thank the national press club for hosting us today, and i would also like to thank the ced for convening this event, this wonderful event, and i would like to thank all of you for taking time out of your busy days to come and hear what we have to say and discussed what i think is the most important issue in the american economy at the moment, which is the issue of jobs. the issue is, to put it simply, that there are not enough of them, and if trends continue as they are, there will not be enough of them in the future. i think this is a pretty fundamental issue. we are all aware of the specifics -- statistics the

department of labour put out in the last couple of weeks. we could debate whether that is a blip or a trend, but what is largely up for debate at this stage is the fact that there are 7 million-plus americans who are unemployed. 4.3 million of them have been out of work for more than a year. unemployment rates are, depending on how you want to count it, 9.1%. those are pretty substantial fact that represent essentially a crisis. partly because this is a crisis for families and a crisis for america as a whole, and also from economic standpoint. especially at this time, the long-term effects of unemployment really make a fundamental impact on people's lives, and at the same time, for the economy to actually carry and manage and provide services for the large, unemployment public -- unemployed population is a

substantial undertaking. these are substantial issues, and with all due respect to the comments that i think austan made, the prevailing view has been that the economy expands, the right things will happen and jobs will follow. i think that presumption is a belief in question. i think it is a worthwhile debate and discussion to have, to actually examine the facts about that, and that is a lot of what we would like to discuss today. what we have done as part of this report we're going to talk about is we did the usual thing we do, which is to look at the macro economic data, the public data and private data we have access to, so we delve through a lot of that. we spent time with a lot of companies, both large and small, actually talking to them, trying to understand what they were doing, what was happening with jobs, and in addition, we did a pretty substantial survey of business leaders -- about two dozen companies participated -- as we tried to get to the groups of these questions.

i also want to make sure as a we're very grateful for the help we got. we could not have done this war without -- we could not have done this work without them, so we are very appreciative of that. with that, let me get into this. i am going to say some remarks and described the situation as we see it. my colleague will also take us through some of the explanations for why we think all that is happening. i would like to point out four interesting characteristics, just from what the facts seem to suggest. let me start with this -- it is quite striking if you look at the countries that we often compare ourselves to -- the u.k. and germany -- we obviously had a substantial decline in gdp growth. germany and the u.k. actually had an even deeper decline.

yet, when you look at the outcomes from a job standpoint over to the right, you can certainly see that our decline in employment is certainly the deepest. contrast that with germany. i think it raises some interesting questions about the kinds of choices and how we want to think about the choices we make as a society and how we deal with how the economy handle jobs growth and performance over time. as you will see in the report, there are some interesting striking things, for example in the case of germany, that germany did that are certainly worth looking at. not with an eye to replicating them because that is a different culture, but i think there are some instructive things to learn. let me point out to an interesting observation. two things are quite striking. if you take your eye from left to right, the least skilled

workers were affected the deepest. with the colors represent here, the green of the color -- if the color is very green, it means that jobs actually grew for that particular group. it is red, it gives you a sense of the deaths of the decline. as you go left to right, you will see that the least skilled workers in the u.s. economy suffered the most, but if you go to the far right, which probably represents most everybody in this room, you could argue there was not that much of a recession from a jobs standpoint, actually. maybe with the exception of financial services. in those sectors, as you go to the far right, most jobs actually grew. so that is the first observation. the second observation you can make is if you look at the rose by sector, the sectors at the bottom -- educational services, government, and health care -- effectively had no recession at all from a job standpoint. you could argue those are the

sectors that have some natural demand. but it is actually quite striking. the sectors that were hit the hardest -- no surprise, given the secular trend we have seen over the last few decades -- manufacturing is right up there at the top. these are some of the features of the character of the jobs decline we have seen in this particular recession. there is a lot of observation to be made. it is quite striking, but if you put the recession aside, it may well be that our jobs engine was already in trouble even before the recession. if you look at the net change of employment through these different periods, look at 2000- 2007. that was before the recession. job growth even then was not all that spectacular. in fact, you could argue, even

though jobs were growing in 2000-2007, it was probably of the kind you did not want. back to the commons that -- coments that austan made, much of that was linked to what you might call the bubble sectors. much of that was construction work. a lot of these were jobs that always go anyway -- education, health care, government. even that is still a troubling number, even though it is still a positive number. there is a question on the table about was the jobs engine already in trouble even before the recession? the recession just put a sharp light on the problem. then, because of the debate that austan teed up about, whether you call it a jobless recovery or not -- the point is the data is quite striking. it is the case that you go back

all the way to 1948, it used to be that what the chart basically shows is the lag between when gdp bounces back to pre-recession levels and how quickly jobs bounce back to pre-recession levels, so you can see from about 1948 to 1981, it happen more or less like clockwork every six months or so. gdp and jobs bounce back. clearly, something different seems to be happening. to be fair, in 2008, obviously, this was the deepest recession for a very long time, but from the point of view of work, if you are a worker, you still feel this because it still feels as if it is going to take a very long time. the? that is on top of 2008, if we keep creating jobs at the

current rate at which we're doing it, the number will end up looking like 60-something months. if nothing changes from the current trajectory. that is how long it will take to get back to pre-recession levels. this poses an important question about is there something fundamental that has changed quite apart from the fact that this was a particularly deep recession, yes, but has something else changed that causes us to rethink this presumption that as long as gdp comes back, jobs will follow? with that, let me hand over to my colleague, susan, who will take up the next piece of this. >> ok, thank you, james. this picture is troubling, and our research suggests that there are least three things that are different in the way the economy works that is producing these increasingly lengthy periods before we get employment back. unless we address these causes, is unlikely that we will, in fact, get the pre-recession

level of jobs for another five years. the first factor is simply that the competitive dynamics of the economy are different than they used to be. in recessions of the past, workers and companies with both share in the pain of the downturn. if you go back to the 1973 recession, you will see that for every percentage point decline in gdp, employment accounted for about 1/3 of that decline, but the productivity on the part of companies accounted for the other 2/3. fast forward to the 2000's. you see that the decline in employment makes up almost all of the decline in gdp. over time, companies have gotten better at restructuring and bringing efficiency out of processes, so this means that when workers are laid off, is more likely to be a permanently off than a temporary layoff, and rather than going home and wait a few months or quarters until they get the call back to work, workers are now permanently out of a job.

this means they have to find a job, at the very least, in a different company and likely in a different sector and maybe a different location, and all of this takes time. that brings me to the second cause of this increasingly link period it takes to regain employment -- lengthy period. that brings me to where the workers are and where the jobs are and the mismatch that austan talked about between the skills that workers have any skills that employers are look at -- looking for pure looking at the unemployment rate, you will see that the 9% unemployment rate hyde's wide disparity across states and counties. the states with the highest unemployment rate, nevada, is 14%. that is 10 percentage points higher than the state with the least unemployment, which is north dakota. we find that during this session, just three states accounted for 1/3 of all job losses, and that is california, florida, and michigan. the states, while they are

large, account for only 20% of the work force. at a time when many americans to be as mobile as possible, to go to the places where jobs are being created, we find that just the opposite is happening. back in the 1950's and 1960's, you found that one in five americans moved every year. that started to change in the late 1980's. today, with the housing crisis and people unable to sell their houses, you see it is down to one in 10. there are several different reasons for this decline in mobility. part of it is the aging in population. as people get older, they are less mobile. part of it is the rise in home ownership. we find a strong correlation between mobility and whether you are a lender or an owner. sort of unintended consequence of the rise in ownership. finally, you have the will income families. we hear from many interviews with companies that people are not as willing to pick up and move as they used to be.

at a time when unemployment is differ across the country, you have people less able or willing to pick up and move for their jobs. the second half of mismatch is about skills. it is a cruel irony that today, with 9% unemployment and the survey we did of 2000 companies, we found that 40% of companies who say that they want to hire in the next 12 months have had positions open for six months or longer already. this means they cannot find the workers they need. there are shortages in engineering and computer science, and we have heard about this for a long time, but we have heard about skill shortages across a right range of industries, occupations, and different levels -- across a wide range of industries, occupations, and different levels. an executive at one oil services company said it is so hard to find a welder who can work on an oil rig that they are offering salaries of more than $100,000 to get those people.

there is a clear mismatch somehow between what students are studying and what they are learning about versus what employers are actually demanding. a final reason for this jobless recovery is is the sharp decline in the rate of new business creation we have seen over the last three years. this chart shows you the number of new businesses created each year. you see that in the 2001 recession, the rate of new business creation fell slightly, about 5%. the same would be true if we had extended the start back to the 1990's and 1980's. but in this recession, you see that the rate of new business formation has fallen by 23%. that is quite a lot. we calculate that had we not seen that drop off, despite the fact that some of those new start-ups would have already failed and gone out of business, you would have had 1.8 million more jobs in the u.s. today. addressing this -- reviving the

new business start up engine will be quite important. these challenges are important because as we look ahead over the next 10 years, we find that the u.s. needs to create 21 million jobs. this is 7 million jobs to replace the ones still lost from the recession and another 14 million jobs because our work force is still expanding. to create employment and get back to a 5% unemployment rate by 2020, the size of the challenge is 21 million jobs. we can argue, an economist will, about what a 5% unemployment rate is the natural rate or whether it should be higher or lower, but we did not take a stake in that debate and said if you take that as a ballpark, you look at needed to create roughly 21 million jobs. can we do it? where will those come from? we decided to take an approach that mgi has used in the past, very successfully, which is to

take a look at sectors of the economy. we did not build a macro economic forecast of where job growth is going to come from. the bureau of labor statistics has won out there. instead, we look at the big sectors of the economy -- six in particular -- that account for about 2/3 of employment today, and we calculate will likely account for 70% to 85% of future job growth. what we looked at was both the macro economic forecasts for demand in the sectors. we look at productivity trends and did a lot of interviews, as james manchin, with people in the sector to identify business models that could push job creation of or down -- as james mentioned. for each sector, we created a low, middle, and high scenario. only in the high scenario does the u.s. actually get back to 5% unemployment by 2020.

on one hand, that is quite a sobering result, and it illustrates the magnitude of the challenge before the country today. on the other hand, we think this is doable. if you remember the chart james showed you about the previous decade, this is the latest job creation you saw in every decade except the last one. we can get back to an economy that even resembles what we had in the 1990's, this is achievable. that means sparking innovation and having topline, sustainable demand growth that creates jobs rather than productivity gains that are driven more by labor- replacing efficiency gains. to get behind these scenarios, i will show you a bit about our sector projections. you see these six sectors at the top are the ones that we did what we call a deep dive. you will see that the big job creators over the next 10 years are likely to be health care, business services, and leisure and hospitality. i could talk to all the

different assumptions in each of them, but to give you an illustration of what this high job growth scenario looks like, let's consider health care. the demand is growing very rapidly for health care services. this is due to the aging of the population. people over the age of 65 spend five times as much on health care services as people under age 18, not surprisingly. at the same time, we had the potential expansion of insurance coverage to many americans who did not have insurance before. this could also drive expansion of demand. many people may ask if we are trying to control health care spending costs, and indeed, the nation is. that can be done in different ways, though. when we talk to professionals and experts in the sector, they say it is possible to control spending costs and not kill the job engine in this sector if we redesign how health care services are delivered and by whom. this will take some regulatory change in terms of the scope of practice laws, but if you look

across the u.s. today, you see some states have different laws regarding who can provide what services to home -- whom, but many models use lower skilled health care professionals to do many of their routine things like administer a strep test or get a flu vaccine. if we can develop a health-care models that equalize across the united states, you could see both job growth and a slower trajectory in health-care spending. manufacturing is another sector that folks look at what at. i will not say that our manufacturing forecast is not optimistic. remember, this is looking over 10 years. the manufacturing sector in the u.s. and every other advanced economy, including japan, south korea, the nation's you think of as big manufacturing countries, have seen manufacturing

employment shrank over time, and that is simply due to technological change. if we have 10 years where we actually hold manufacturing employment flat, that implies we are gaining share. rather than saying there is no potential year, that is quite an outside. indeed, it could be quite difficult to achieve the high job growth scenario if you have manufacturing continuing to shed millions of jobs, as it has in the last decade. even if we get to the high jobs growth scenario, the next challenge is will we have the people we need to fill those jobs? when we overlay the demand on the high job growth scenario, compared to the supply of labor or the future labor force projections, you see that at current trends, we are likely to have not quite enough college graduates. we see a gap of about 1.5 million. at the other end of the spectrum, we see nearly 6 million high school dropouts that are unlikely to have worked for them. there is definitely a challenge

in increasing the trend towards more education. potentially, as troubling or even more troubling is the fact that when students do get post- secondary education, they are often studying things that simply not in demand. at current projections, you see that in 2020, the u.s. will have somewhere in the neighborhood of 55 million college graduates, but you see it will have twice as many people with business and social science backgrounds like my own, than science, technology, engineering, and math. many of the people would go into science, technology, engineering, and math, like james, end up in business. there is sent that -- certainly something to be down around increasing the number of what we call the stem graduates. this is not just about college graduates. you see it at the vocational levels and the associate degree level as well. simply put, either, workers or students do not have enough information about where job

demand is coming from. as charlie pointed out, we do tend to be an optimistic bunch. despite the magnitude of the challenge, we also look at the ways in which technology is changing what we call the nature of work. many of the ways in which work is changing to pose potential challenges for workers, but it also opens up new opportunities for how and where jobs could be created. when we look across the united states at the spread of broadband and the spread of new employment scheduling software, you see that companies are able to deploy workers in a much more flexible manner than they were in the past. partly, this means what we call the virtualization of work. people can work miles apart on different coasts. they can work from centers in different parts of the country. they can even work from home very well with colleagues miles and miles apart. this is opening up new opportunities. consider business services.

you find that the economics of a company in many different types of business services in low cost parts of the u.s. compared to abroad have shifted. very different picture than it was, like, 10 years ago. what we are finding it increasingly is companies who are setting up either remote service centers in places like nebraska or parts of florida, or even workers to work from their homes, there are now new companies springing up. it is called home sourcing. they manage scores of workers who are working out of their houses. so we have the one insurance company that has thousands of claims processors working out of their houses all over the united states. it could look at jetblue air lines for three-quarters of its reservation agents actually work out of their homes in the salt lake city area. this is opening up new opportunities, and in an era

where americans are increasingly less mobile, this could be an important part of the solution. at the same time we see that businesses are planning to employ people more flexibly. in our survey we found that over a third say over the next five years they think they are going to hire more part-time workers, a trend you already see in the data over the last few years. were temporary or contract workers, and more telecommuting or working from home. all of these opportunities mean that companies can be creative about how they employee u.s. labor, and it might mean you areas of jobs open up. when we think about that high job growth scenario, achieving a high jump rope business services will require using many of these more flexible ways of how and where you employ people. as we think about the solutions, james is going to take you through a framework we have developed to think about the

solution space. >> i think that if america is in the job crisis, what do we do about it? we are not policy specialists and we don't claim to have the best ideas are the answers on this. we like to identify the issues and try to provide a fact base to it. when you look all these questions, and what we uncovered in our work, there seems to be four areas where if we can get real solutions from business, from the public and private sector and on to printers, it would actually make really big difference to the problem. so we identify these four areas. the first area is the idea of high skill. this goes to the core of what susan was describing. we do have a fundamental jobs mismatch here, what the educational system is creating in terms of the quality and quantity, just is not up to the

task. this is quite a big disconnect. it is also important to think about how to expand the question of skills. there are different ways to think about that. that gets into considerations about is there some help you can get from immigration in the short term what you think about what the educational system can do? this question is at the core of the biggest challenges, the jobs issue. as susan pointed out, we are not just talking about the most educated people. in quite a few of the examples in the report, there are many instances of what skills that are not necessarily the most highly educated skills, but just different kinds of skills. we think this is a very important issue.

the second issue would point to is what we call high share. it is quite striking that when you think about everything going on with globalization, it is clear to us that the u.s. has benefited as much from an employment standpoint from that. we are not suggesting protectionism or tariffs, but rather how does the u.s. take more advantage of the kinds of opportunities that globalization offers to create employment here? some of that might include being opened to other companies investing in this country. some of that might include thinking about the kinds of opportunities and other ways of taking it vantage of different low-cost locations within the u.s.. even though the u.s. may be a high cost location, that is not true when you go to the local level in many instances. are there ways to take advantage of the fact that many of the new

entrepreneurs in the world -- a lot of that is outside of the u.s.. there is a lot that can be done around this question of addressing the issues of getting a fair share. a big part of it has to do with encouraging innovation broadly in the economy. in aggregate, there is actually less innovation going on in the u.s. economy in the last decade than the previous decade. as susan pointed out, we have had more productivity growth come from efficiency driven mechanisms as opposed to

improving output from the economy. the way you do that mostly comes from innovation. the broad point of how you recognize innovation more broadly in companies both lots and small -- of large and small. the rate at which new companies are being formed has slowed down. we know that part of that has to do with the credit and the liquidity situation because many small businesses get formed through people borrowing from their banks and credit cards and so forth. as that improves, that will improve the rate at which new companies are created. there is more there to be done in just to accelerate the rate in which new businesses are being created. also the issue of how to scale of new industries. there is a lot of discussion about the new technologies which are very exciting and good for growth in the long run. yet the rate at which those are

coming through the economy is actually rather slow. there may be some constructive lessons to learn from what happened in the early days of the semiconductor industry. if you remember, in the 1950's, one of the key things that made a big difference in how quickly that industry group is because the governor -- the government increased the the market. you have to wonder, is there some way to accelerate how quickly these markets come to fruition? there are some policy choices that have to be made that can accelerate how quickly these new technologies spread through the economy and also help drive growth. these are some of the questions we think are important to think about as we think about policy and actions that the private sector and government can do. let me point to the last one, which is high speed. what we are really talking about

here is removing the impediments that are in the way of creating jobs. this is not about taking away regulations as much as there just seems to be so much that takes too long for businesses that are trying to create jobs. we heard over and over again in our surveys about how long it took to process legislation, whether getting through zoning laws are getting permits for this, that, and the other, in comparison to what it now takes to do those things in other countries. other countries have become so much more adept at making it easy for companies to go through those things and invest and create jobs. this is an important area to address, to take away many of the impediments that are in the way of creating jobs very quickly. with that, let me stop. we want to make sure we give enough time for our panel.

we are also optimistic, because we think there is enough flexibility and innovation that happens and that should and can happen in this economy that should lead to job growth. this should not be daunting for a country like the united states. thank you. [applause] >> thank you, james and susan. we now have a chance to be joined by a distinguished panel to engage in a conversation about what this all means before opening it up to the audience for questions and answers. i would like to briefly introduce the panel, starting with our distinguished moderator. he is the economics editor based in washington d.c..

she oversees global economics coverage, managing a team of writers around the world. before she moved to washington, she was the emerging market correspondent based in london, traveling in latin america and eastern europe. she spent two years at the imf, where she worked on macroeconomic adjustment programs in africa and transitional economies of eastern europe. she was an adviser to the ministry of finance and poland, working with a small group. now let me introduce the remainder of the panel, going alphabetically from mike left to right. byron is a senior partner partnermckinsey where he works in economic development. he also serves as a director of the social sector office and works with institutions and

projects to help improve education, economic growth, and prosperity. he has been in washington since 2007. he is the co-founder and board chairman of the hope st. group, a national volunteer organization of executives, professionals, an entrepreneur, working on developing public policies to expand economic opportunity. he is on a number of not-for- profit boards including yale, the center for american progress, and is a member of the council of foreign relations. he is also the co-author of the report you are seeing today. to his left is martin bailey. he rejoined brookings in september 2007 to develop a program of research on business and the economy. he is studying the financial crisis as well as productivity and technology. he is also a senior adviser to

mckinsey. he is an economic adviser to the congressional budget office and a director of the phoenix companies of hartford, connecticut. he is co-chair of the financial reform task force and a member of the swan lake group of academics working on financial reform issues. previously, martin was the chairman of the council of economic advisers under president clinton. to his left as carl camden, president and ceo of caylee services. he is also on that companies board. kelly is of fortune five company -- fortune 500 company headquartered in troy, michigan. he has an undergraduate degree in psychology and speech, a graduate degree and a doctorate from ohio state in communications. he also was an associate professor in the communications

department at cleveland state university. in 2007 he joined prominent business, labor, and public policy leaders as a founding member of the better health care together a coalition which urges fundamental reform of the american health-care system. he is on the board of directors of the detroit regional chamber, detroit medical center, the committee for economic development, and the university of detroit. he also serves on the detroit board of directors for the federal reserve bank of chicago. to his left is anti stern, former president of the 2.2 million member service employees international union of the fgcu. it is the fastest-growing union in north america. they have but the trend and through a national campaign, grew by more than 1.2 million

workers, turning traditionally underpaid service work into jobs that can help support a family and lived up a community. as a labor leader, he is a leading voice on major issues new facing in confronting american workers. he was named in 2010 as the presidential appointee for the national commission on fiscal responsibility and reform. last but not least is laura tyson. she is a professor of global management at the university of california berkeley. prior to that she was the dean at the london business school from 2002 to 2006 and dean from 1998 to 2001. she is a member of the president's council on jobs and competitiveness and a member of the president's economic recovery advisory board. she served in the clinton in ministration and was chair of the council of economic advisers from 1993 to 1995, and the

president's national economic adviser from 1995 to 1996. she is senior writer at mckinsey institute. >> it is a pleasure to be here and to moderate such a distinguished panel. you have an unfailing ability to come up with catchy phrases. the u.s. needs high skill, high sure, high speed. we have a lot to cover and not very much time. there's so much to talk about. i am going to start with andy. from your perspective, how you react to this report? does it accurately depict the

challenge facing american workers? >> this report is an important road map and it comes at a pretty important historical moment. i like to say this is not our fathers or grandfathers economy. i think something revolutionary is happening differently. i believe history will say this is the third economic revolution in world history. we are having a 30-year massive transformation with an enormous amount of creative destruction. what we now know is the economy works differently. the markets work differently. business cycles work differently. we are not going into the future looking in the rearview mirror. it is a unique moment in history and we need to think about this fundamental point. market fundamentalism is no longer a way forward.

strict government intervention is not a way forward. the third economic revolution, teams have plans. germany has a plan. china has a plan. singapore has a plan. the usa has no plan. the road map is an attempt to try to make a plan at a unique moment in history. if we love this country like i do, we need leadership and the plan, and this is a good place to start. >> i was struck with the did difference between what austan was saying earlier in the discussion and the tone of this report. the conventional wisdom is that when the growth comes, the jobs will come. has something fundamental

changed? >> i think there is not the inconsistency that there appears at first sight. if you look at the report, it lays out three scenarios. high-growth, low growth, medium growth. those are assumptions about the growth of demand, the growth of household income, the growth of consumption. i do not think it is either-or. we can see jobs of these numbers in these sectors. what does that require from the skill base? i see it as the supply and demand working together. he talked about the fact that this is a time where we are

switching from government support, we are handing off back to the private sector. the discussion is about what can the private sector do to stimulate demand. the second -- we have to think about we can see certain ways that the government can be extremely helpful here. helping to provide the skills the work force indeed can be a positive thing. building is supported and the structure is another supportive bank. the notion that we will have to change from the public to the private, not the dependent on consumption, more on investment, a change what government policy can do to help the private sector, that brings it all together.

on one of the areas where the report put the lot of emphasis, the question of whether the work force has the skills to fill the kinds of jobs. you are a fortune 500 cc. do you see the skill mismatch in your day to day activities? do you think that is a big problem? >> [inaudible] as an employer, skills mismatch is extensive and more widespread than fits the popular literature. we think of it in terms of engineering, as an example. we only generally have one candidate for about every three jobs that we have available and the engineering space. but that story hides the fact that in the skills trade area and the technicians of all sorts

and everything from electricians to plumbers, x-ray technicians, bit the area, there is a tremendous shortage. we have tens of thousands of open orders that are available in those zones. the skills mismatch is huge and we are doing very little in terms of national education policy or policies and state levels to guide individuals into the areas where jobs are currently available or are going to be available. the amount of times it takes to retrain people, it is way too long. we have got to get much better at a faster retooling, if someone has been unemployed for two years, we cannot expect them to go back to college for two years. that is bad social policy. >> what are the shortcomings for

retraining? before we do that, there is a second component of thinking how he match demand and supply. where is that demand. one of the interesting points that this report makes, some are skeptical that jobs will be manufactured. austin seem to think much more optimistically about it. what is your take on this? what are the prospects of manufacturing job growth? >> the report is right. austin is wrong, unfortunately. it never was that bad.

there are a lot of a strong manufacturing companies, a lot of innovation going on in the united states. on the output side, that there will likely be a manufacturing renaissance. there is also the case that some of the economics, the slide that was done was the one for call centers. it is also true for some manufacturing industries, too. maybe this savings they're getting from doing that are not as great. there are signs, i think this skills issue is important. we will talk more about the numbers of jobs does depend on how successful we are in creating people with the skills

that are attractive to employers to go and provide more skills. a lot of companies will do their own training, but they want to have workers that they can train. one of the other reasons we can be somewhat optimistic is the value of the dollar. that is really the main thing that drives whether we have a big trade deficit. i do not want to get into the macroeconomics of it, are we going to balance the budget, but on the assumption that the economy recovers and we get back towards employment, are we going to have an unbalanced economy with a lot of trade deficit or are we going to have a more balanced growth? a lot depends on the policies we follow. whether the value of the dollar is at a point that makes u.s. competitive. why don't we get the jobs?

the numbers just do not add up. i thought they were going to. if you look at what is likely to be the growth of output, looked at -- we have not stopped buying things. we think that exports may do better going forward, so if we did something closer to trade balance 10 years from now, that will add to our report. you put the all but crushed together and you say, how much is productivity going to rise? you do not know, obviously. we could get a surprise, but if you looked at historical what productivity has been any matched that what is likely to be all but growth and you do not get that there will be net job creation, it is hard to make those numbers come out. the adverse scenarios, we do not deal with the saving imbalance,

we end up with having a big trade deficit, productivity turns out to be a little faster than what we thought, you would continue to lose jobs in manufacturing. much as i would like to agree with austin, i think it's hard to get the numbers to come out that way. >> now we are even more depressed. >> this is a 10-year view, and there is a short-term view. they could very well continue to add jobs for the next few months. there is an immediate potential for job creation that does seem quite promising. martin is talking more about the fundamental productivity. that is part of the tension. >> bat is a very fair point. let's stick -- the back is a very fair point.

let's stick with the 10-year horizon. we had a sobering presentation from the two of you. we had a revolutionary moment. we had carl tells us that he finds already there are not enough people to fill the kind of the positions that he wants. can we move to some solutions, something positive? what can we do to change? maybe we will start with you, byron, since you were involved and the report. can we actually turned this around? build on that a little bit more and built on the skill mismatch because that is what i am going to come back to. that is a fundamental issue. >> i do think we can accomplish

the scenario, i think we can get back to success. i agree with what in the said that there are some fundamental differences and the way that we need to do it. i think that we need revolutionary innovation in skill development and education itself. i think that is absolutely possible. there are tremendous advances in adaptive learning in the defense department, they have an adaptive learning program that can train it support people in a matter of weeks. it does it extremely effectively. the education sector caused the least research and development of any sector of the economy at a time when we need the most innovation in that sector.

that is a tremendously important factor for the economy. what would you do differently? the wealthy education system, which matt -- we measure progress through seat time a trade we should be measuring it by competencies'. we should say, what have you actually learned? what can you do? we create incentives for people to learn faster, to learn better. if you create that policy structure and let's innovators go after it, there can be a revolution in learning. there it is -- there are ways. one really interesting

development and the last week, i do not know if he's all this, manufacturing institute teamed up with skills for america's future, this is a business and government and educational partnership to aim to trade 500,000 people in those skills gaps in manufacturing. what's the most interesting thing about it, what they did is that they defined these skill ladders so that all manufacturers could agree on it. they create this mobility. you can go through colleges, learn on the job, you can build those skills that you need. there are a lot of solutions there and across skills -- there are a number of powerful solutions that can get as to the results will want. >> let's meet throw a bit of cold water on that.

i spent some time looking at the history of u.s. training programs. it is a rather grim reading over all. they have not broadly been that successful. the u.s. spends weigh less on training, that which it does spent is not enormously well organized. that is my journalistic cursory reading of it. one key part of getting to this much better outcome is to improve training to improve retraining and did do so in an environment of fiscal retrenchment, and environment where there are not a huge amount of resources on the table. how do we go about doing that? >> that is a tough one. in principle, we can. let me just expand for a second on what's byron said.

the armed forces cannot outsource their job. it has to be done -- this is an american activity. they cannot pay huge salaries to people to do the job. they are forced, they have to take the recruit and train them to give them the skills that they need to operate a high-tech system. they found ways to do that. this necessity has been the mother of invention. they have found ways to go about it. somehow we have to change the incentives would then the private sector here in the u.s. said that there is more willingness for business and the public sector to figure out how to provide the skills that

businesses need said that they can take those people and give them additional skills of what that particular company wants. this is certainly not going to be easy. there are some -- you can look at the records and find some signs of hope. there are some community colleges that are really good at what they do. delta air lines and other companies have partnered with community colleges to create training programs that their students can come out and work for the company. that is the kind of model that we need to -- how do we do it? here we are at ced. this is a group that we need to create a sound track for improving education to get a better handle on what it is

that stood in, what skills they really need to have. how can this be done cheaply, fairly quick programs? can the work with community colleges, not letting the bad ones did and the way, trying to find those common ground so that the education side and the private sector side, we can create its short-term skill enhancement programs that make people better able to fit into these jobs. i did not pretended that is an easy task. if we really are in this economic crisis and it is really true that we have these skills shortages, should that gives them the urgency around doing something like this? >> what is your take on it, carl?

when you face this situation where you do not have the people to fill the kinds of positions that you need, what would be helpful? do you think that market now -- the think that martin is on the right track? >> we have a very schizophrenic sets of policies. we do not have an immigration policy that lets us bring them in. we chew on the companies that outsource the work to other countries where the workers are. we do not have a lot of effort behind outcomes based organizations of education. we organize against what is convenient for those to -- we organized by a method of education. we do not organize against an outcome. when we approached community colleges -- i have had some bad experiences where we were working with an automotive manufacturer.

they would be ready to go to work as soon as they graduated. we were told that will take two years to get state approval for the new curriculum to be put in place. find the right time of and structures -- the right type of instructors. there is no guarantee those jobs will still exist. by the time you finish the program. speed to action is missing very much in a lot of the taxpayer supported education system. i also -- we're not talking about high schools. high schools used to be a place to develop a tremendous member or vocationally traded -- trained workers. there is a tremendous amount of skills that could be provided if we return to vocational education tracks back into the high school system. i think there is much that could be done, but i argue strongly

that a rolled up the business community could play it is not only to say where the skills are, but how do we go about restructuring aspects of the educational distribution system? >> andy, what is your perspective on this? how satisfied are you with the current panoply of training and advancement opportunities? where would you put the focus for going forward? >> i think we should appreciate that this is the easy place the all like to talk about. but is on a small number of high skilled jobs where we might be able to solve the problem that we have not been able to do. i will give you six things we need to do. one is american workers need a raise. we had a maldistribution of the incomes. work has to pay, that is the nature of the american story.

people are not done a base for 30 years. they cope with it through home- equity, they need a raise. i would argue the reason there is less innovation is the have monopolies coming back into our economy. this is the most concentrated business society that we have had since break-in lot list on a lot of the antitrust grade we do not have -- since reagan let loose on the antitrust break we need a new trade policy. china has a pro-china trade policy. we have a very idealistic trade policy that is not pro-american. we have an employer based health-care system that is

ridiculous. pixel of dillon, pick taiwan, pig germany. -- pick switzerland, pick taiwan, pick germany. penalize imports. we had a plan that guarantees that we will not succeed and we do not want to talk about a lot of these things so we talk about education. [applause] >> that was a challenging set of comments. at the risk of failing to answer your question, might i suggest that we convene a glut of other panels to discuss the issues that you raised?

clearly, one cannot look at all the things that we are discussing today in isolation. that is a very valid point. laura, former dean of uc- berkeley business will, -- business school, it is the educational system failing american workers? >> i want to start a note of sympathy for what andy just said. i have been involved in the discussion of u.s. competitiveness sense the term was first introduced. back in 1983, it was president reagan's council on competitiveness headed by john beyond. -- john young. at the top of every competitive list since that time has

appeared macroeconomic conditions and the education of the u.s. work force. by many measures, the education of american work force has not improved. i really think it is important that if we agreed that this is a key issue, we really have to change the game. the models have to change. i also agree with something that you said that we spend much less of a shared gdp on any training than any country is and we should recognize that. one of the things i will say, as we are cutting the size of government, and cutting government spending, we better be really careful of those areas where we believe the government actually enhances competitiveness and job performance.

infrastructure spending, research and development spending, and education spending. in education spending, training is there. those are all parts of the discretionary budget. the focus of the biggest spending cuts, because it is politically easy to do. i want to get that out there because we will not solve any of these problems without revolutionary changes. if the look at those in education going forward, i know what is happening in the state of california. those employment numbers are declining now. having said that, we have to be serious here. i remember of the president's council on jobs independence, and i want to throw back my optimism.

the season at -- the species in hat group are -- the ceo's in that group are trying to think of things they can do it in -- on their own. i am very hard to see you're about the bad experience. in partnerships with state and local governments to really grab the skill issue. we cannot wait any longer, we have to do this. you set up a plan, and the council is very plan oriented. what can we do in the first one to two years to help catalyze job creation? very focused on training and retraining. very focussed on figuring out ways to increase the retention rate of students who start out in engineering degrees and dropped out. you could do something in a few years. take this pull potential

engineers and keep them there. that would be fantastic. you have to get a plan and a time frame. on the revolutionary side of change, idea think that institutions of higher education are going to have to think about this great when i was involved, i was thinking about business schools. the majors -- business schools can do more in undergraduate training with requiring students to do more math and science, more quantitative methods. but minor-major degree programs. it gives the kind of skills that people need. that is an idea that came to mind. the other charts that i saw was really sobering. the excess supply of high school

and high-school dropouts. the charts are showing that over -- between now and 2020, the u.s. is stopped dead in terms of improving educational attainment levels. we were building up the shares a population with college education year after year after year. the numbers right now, nothing. if you look at what happens with high school and high-school dropouts, part of the problem here is that is where -- there is no wage growth. we have to do much more with bridging high schools and technical training. i really think -- that can be done faster than changing the way college majors are organized in traditional universities. we should focus on that. >> as a source of optimism, it is important -- we have not made

progress in education since the 1980's, there are 20 countries in the world that have passed us in that time. it about that as negative for the united states, but it can be done. this is not some law of physics. there are many countries that have done it. there are many countries that treat vocational education with a social status that is very different than our country. they're much more successful. there are countries that have changed their system. germany had its own unemployment crisis in the late 1980's, and systematically changed into an employment system. the integrated the unemployment insurance system with the work

force training system would be job placement system so that from the moment you lost your job in germany, you have the system working to diagnose and to help you figure out how to get back into long-term employment. that is a doable thing. we have seen how it can be done. there is got to be an american version of that working between federal, state governments and you see other countries -- australia has changed its system quite dramatically. instead of paying to train people, you pay for job placement and training is integrated. the providers can be state governments, nonprofit, for profits, there is an outcome is based. a lot of countries in europe have gone to very mixed systems. the common element is that they are both willing to spend on this employment system and they

are willing to do what ever it takes. we have not made that moved in the united states gets. >> one of the the -- i read a big piece on the u.s. labor market problem. the u.s. could learn from europe was the subtitle. i have a lot were questions i would love to ask, but i want to open the floor to questions from the audience. there are two microphones. >> [inaudible] confused me. it seems from the report that the labor markets don't work. i would be interested in getting

their appraisals as to why this is the case. when i say do not work, the supply and what is being demanded has not materialized. this is a very decentralized market, although there are regulations. i want to ask one specific question. is it possible that part of the problem is that the corporate and company level. 20 or 30 years ago, companies are more willing to invest in training and skills because they had a normal. these would be career employees and by trading them when they were 20 or 25 or 30, and they would reap the benefits of that training over 30, 40, 50, whatever. that concept has changed and as workers become more disposable,

companies are less willing to invest in them. fundamentally, work itself is changing. i look at job life cycles. the average amount of time you can expect ahmadinejad to resist -- you can expect a job to persist, it has just struck. look at bank tellers, a common example. what has happened is that with the shrinking job life cycles, companies are unable to continually retrain workers and move them from job to job. within geographic mobility of jobs, you are not able to engage in that retraining. it is somewhat naive of a

perspective to say that companies have walked away from the training. it is a false assumption. it was true in the very short period in american history. from world war ii and falling apart with the new rise of the information age and ability of work -- mobility of work. we are in an era where nobody is viewed as having responsibility for employability. companies do not have that view that they are responsible for the employability of workers because jobs move, workers moved, jobs and. educational institutions are doing what they can to cope, but they have not adjusted to the whole idea of nonpermanent of

work. government policy is nonexistent in this area. we have a society where individuals have not yet taken on the notion that they are responsible for their own employability. the markets are not working because they are disorganized and confused. >> i really think it is unfair to the american worker and the american young person that they are not making investments. i think that one of the things that we have not talked about is the dramatic escalation in the cost of education. the states are having to triple the tuition overnight. the amounts -- when somebody

looks at you and says, should i take on $100,000 of debt this agreed? -- support this degree? i cannot say absolutely, yes. i need to know more. this goes to the issue of what is the degree for? did a degree in? and 10 years from now, x is not going to be the thing that you need. i really do not agree that a large number of americans are not worried sick about this. we are not giving them enough retraining possibilities to make those decisions turned into --

>> i absolutely agree. when you get a degree or you come out with a high-school degree, know where along the way did we teach you about how you go about -- >> i completely agree. >> how to go about what? >> how do you go about achieving basic employability? with their methods of teaching, we almost communicates an idea that once you have achieved these goals and you have your piece of paper, life is good. rather than light has just barely begun and here are the set of skills that you will need. >> one second. >> can i say that i do not think you could conclude that the labor market does not worked there are some issues that have developed in the last

10 years from the distribution of skilled and given, -- of skills and dove in comp. education and training are not market sectors that innovate and improve of efficiency. that is why -- that is why it is so costly. if you are an employer, do you want to provide a lot of expensive training to your work force? the person will take the train and then go work for someone else. >> its the market isn't working, why not? the job market is the physical market, you need to be where the job is not go the other problem is information on " it is that all levels. how did they know what they have

been trained for? what training is needed? you pick a major it and do four years of work and then you go to the job placement office and to figure out if there will be a job for you coming out of the other end. there is a real information problem. >> thank you. >> thank you very much. i am a member of the ced. i am so glad we're talking about skills mismatch. i wanted to point out that there is now a map that we have put on which bysite congressional districts, we have mapped what the kids are

doing starting in high school through associate degrees, community colleges, colleges, in information technology, computer science, computing. we connected it would be job openings that are available in those congressional districts. it is a tour de force of data. it should challenge each congressional district. education is about locals in this state, not the federal government. it has got to be done at these low levels. the superintendent, the

gentleman in your own area can work with the community colleges. cyber security, the defense department and the fact that we are going to have such a demand continually and that maybe this is the area where we will get the kind of national foreign- language defense fellowships that we use to get when we were and the cold war great now that we have this cyber security challenge that will be with us forever, and the defense department -- can the defense can they be a place to take that information? they have been the change agents. they were the ones that brought women into the military force because they did not have enough

people. it is the same thing now, we do not have enough skilled people. there has to be a use of that institution called the u.s. military that may help accelerate the changes that we all seem to agree we need. >> thank you very much i want to collect a couple more questions. >> my name is charles and diamond independent management consultant. i really like the four pieces that you laid out. my question is about tax policy. typically, the idea of creating jobs quickly is a stimulatory one of more capital gains rates. putting end investment tax credits increases.

i was is wondering if the reason why that was submitted -- omitted. >> thank you. i see that we are running out of time. >> i am a student at the indiana univ. at pennsylvania. the governor of our state has proposed eight budget cut for higher education of over 30%. -- 50%. how is it possible for a student to be able to get the training that i need to enter the workforce? the state of pennsylvania has more universities than any state in the country. >> thank you very much. >> i am with the center of

american progress. we have a disparity in the u.s. and i think is global between how much we pay in tax subsidy for the four-year schools versus two-year schools. it always strikes me that as we have expanded higher education access, what we had done is put a bunch of new students into the higher education system that the higher education system was never designed to educate.

most of those students are non- traditional students and they do not form an organized political constituency. they did very little attention. traditional young college students get most of the money. business and labor unions either employed or represent many of those students. how can we find common ground on that issue to drive an agenda? >> that is a terrific list of questions. byron, i will start with you. tax policy, cuts and higher education, the disparity between four or two-year colleges. >> i will take tax policy. i will talk about where it fits

in the overall plan of this report. our thinking was that is -- there is a very robust debate about itstimulus. federal spending, aggregate macro numbers, more stimulus to tax cuts of various sorts. that debate is going on. that debate is fairly stalemated. what that debate is ignoring is that there are a number of very significant ways that we can reignite the job creation engine in this country. we really wanted to focus on those areas that we think are getting far less attention than they should. a number of my colleagues are going to redress these skills

question. i do want to say that skills were one of the four things refocused on. it is extremely important that we get the supply side of skills and the demand side right. there are some tremendous opportunities for the underlying economics are shifting back in our favor. even challenges we see in the global economy are also opportunities. we see rising energy costs, that means that supply chains will shorten. we have the biggest and the market and the country. wage rates, the global economy, it is an opportunity. wage rates are rising by 15% and a year and we demonstrated that there are dozens of cities in

the middle of america who is economics and skills, the cost and the skills of doing remote services are just as attractive as india's. we should be looking at how we create demand their. -- there. innovation is absolutely the key to this and we are going to have productivity, we will have efficiencies, if we do not have innovation, be able togoing to get simultaneously large job creation. with innovation, we absolutely can do that. i was at an event a few weeks ago that had helped care industry entrepreneurs and it was amazing what they were doing with new delivery models that used a physician assistants and community health workers. in the employee lot more people

and delivered better quality at lower costs. we have a tremendous wellspring in this country and the foundations of innovation. we can reignite the job creation engine and we can make a lot of progress. >> on the tax issue, we did a previous reports and we do tackle a lot of the business and environmental issues that are important to growth. i want to come back to the question of cyber security. one of the things that is quite interesting is that there is a bit of a myth that a lot of industries like the software industry is all about very highly technical computer science skills. it is not.

a lot of the coating is a basic scripting -- coding is basic script and dread -- scripting. if you couple that with the idea that the u.s. government is trying to do is to start opening up all types of data sets. the nasa, military, the government has an enormous amount of data that they are now opening up and allowing entrepreneurs and innovators to work with the data. it will create a new draft of jobs. we talked about new industries. >> i see that john is hovering over me. that means that we have run out of time. there were two questions about

higher education. one was from the gentleman from pennsylvania. >> i share the gentleman's concerns that were expressed. i think it is a tragedy that reflects a kind of dishonesty in america. we just spent the entire discussion on skills and education and what we are doing around the country is cutting education. there are dire budget situations. we need to think about revolutionizing education and we to think about the fact that we're making it impossible for students to complete education bread i think we all agree on the two-year versus four-year. we have all talked about up

credentials and non-traditional degree programs. i really want to take one second to say, this has been a great conversation. it has been primarily about skills. it is about the supply side of the situation. it is not what we got into a great recession and it is not why we are coming out so slowly. we have a massive financial collapse and a massive -- history tells us it is going to take quite some time and we will grow slowly. what that says to us is that in this period of slow growth and painful transition, we do every single thing we can to address the supply considerations that have always been there, to make sure that as they come out, we do not hit them again. let's use this as an opportunity

to deal with the supply side issues. if you wanted -- one of the is ags that germany deid lot of their support -- they got the project out the door fast. they got money spent. infrastructure progress -- projects in the u.s. employee lot of people. they could employ more people in the united states right now. we have money that is on stand right now because of problems in the permit area. that is an example of we need to think about the fact that we are in a slow recovery and it will be hard to pick up momentum. what time the business sector do? what can the government do right away to try to help them? >> thank you great -- thank you.

thank you very much. >> i want to close with some points. whether you are an optimist or a pessimist, it is very clear that we have a lot of work ahead of us. i think this has been a superb discussion and i want to thank our colleagues for the report. one of the best discussions that we have had a long time. i know this was not in your charter. did i not read in the economist that you had a wonderful article about france? some were buried in the article there was a reference to the fact that last year, the french created between 600,700 thousand new businesses.

-- 600,000, 700,000 new businesses. it's friends can do it, -- france can do it, that is what we did in 2006. france is 60,000 people, the size of texas. let's get with it. we do have a new subcommittee focusing on some of these issues on post secondary education. we will probably call on you to assist us. bruce is cochairing this project. we hope to help this process along. i just wish that andy stern w

asn't so shy. we have to start with a team washington. one of the things that we have been trying to do is to get business leadership and the political leadership of their ecological hobbyhorses and focusing on some of these issues that really affect team washington. it has to start here. we are trying to do our parts. i hope everyone here will read the mackenzie report and pay attention to the comments that were made here today by everyone on this panel. thank you for being here and thank you again to our panel. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> a discussion on the best ways to create new jobs. after that, the european

commission president takes questions on immigration. defense secretary robert gates on the future of nato. >> this weekend, the role of fannie mae and freddie mac in the 2008 financial collapse. henry kissinger on whether it is possible to form a true economic partnership with china. microsoft co-founder talks about his memoir. look for the complete schedule at booktv.org. more discussion concerning the future of job creation. from today's "washington journal," this is about an hour. host: robert greenstein is the founder and president of the center on budget and policy

priorities. we're also joined by kevin hassett from the american enterprise institute, where he is the economic policy director. thank you both for coming to talk about jobs and job creation. bob greenstein, what is the of job stagnation? guest: we did not have a normal recession. we had a financial crisis. history suggests that when there are big financial crises it takes much longer to recover. basically, employment fell off a few years ago. we are now gaining jobs each month, but that such a slow rate that the unemployment rate is not coming down much. in addition, the housing market is still very weak. there are problems internationally. we're part an international economy and there are issues in

europe and elsewhere. and the stimulus that was enacted in 2009, that is feeding how now. it is putting a drag on the economy. one other factor, state budgets have to be balanced even in a recession. they are laying off people right and left. in the last 18 months, 350,000 jobs lost in state and local government. those people lose their jobs and do not spend as much. it has a ripple effect. other people lose their jobs as well. host: what do you think, kevin hassett? guest: i think that bob is right. there is some work done that shows that you tend to have a really bad hangover for really almost a decade. there are a couple of wheat -- reasons why. the first thing is something that bob alluded to. you have the great recession,

but then even with different pockets of americans to live like with the teenage community -- of americans, like the team community, or young adults. or even african-american community, it is often hard to reconnect them with the work force because of still level and things -- skill level and things like that. the financial institutions tend to have a lot of bad assets sitting in the back walls. those bad assets make them very risk averse. they're sitting on their cash and not investing a lot. with the challenge for policy is, is to try to find out a way to reconnect people to the labour force. it is kind of like major tom

floating into our space. we have to send a lifeline now. they have the cash and could launch us into a strong growth. , -- into a strong time of growth, but they are sitting on a dashon aide. host: what could washington do? guest: i think that without making near-term cuts to government spending, which could throw us into another recession, we need to make our long run situation sustainable so that people have reason to be optimistic about the future. i think there's a lot of uncertainty about how it is going to work among the baby boomers retiring. i think if we could have a fiscal consolidation that shows everybody that the u.s. is on a

sustainable path, that optimism could reignite. host: bob greenstein? guest: it is typical. kevin and i do agree on the long-term sustainable activities. we need to act on it. but that is that -- if that is all we do, it will not happen very immediately. if we start cutting government programs, medicare, medicaid, and others deeply right now while the economy is still weak, we will lose more jobs. the thing we need to do, i know i do not think it is politically feasible, we need a package where we do some jobs creation element on a temporary basis. i would provide some assistance says state and local government do not keep firing teachers and police. and probably we should extend

through another year a reduction in the payroll tax, an additional bit of payroll benefits. but i would couple that with a long-term fiscal package that does not begin right away, but in a couple of years from now than you put some additional demand in the economy now. businesses need more customers and they are not gone up -- not going to hire more people. but i think you need both critics host: -- i think you need both. host: you just said you did not think it was politically feasible. how you balance that with what the white house wants? how do you move forward? guest: it is very difficult. we have a number of members of congress playing with fire by talking about not raising the debt limit, which would be

catastrophic for the economy. we do have negotiations going on with the deficit. both parties are participating. like everybody else, i do not know how optimistic to be. hopefully they will come up with something. they will start meeting three times next week. i would like to see some broad discussion to talk to our immediate temporary measures to help with job creation. although, i expect republicans will not be too keen on that. host: we are talking about -- talking with bob greenstein and kevin hassett. you can join the conversation. the numbers are on the screen.

let's go to bonnie, a democrat calling from new jersey. good morning. caller: good morning. we are still the wealthiest nation in the world, as far as my information goes, and i think the real issue here is the redistribution of wealth. without a manufacturing base we have no jobs. the essential thing is to bring manufacturing back to this country. it worked very well in my lifetime. izod and start to go where -- go away during reagan's time as president. the other thing is, the companies seem to be doing quite well. the profits are quite high. but they are investing in machinery rather than employees.

and we are giving them tax incentives to do that. the machinery is not manufactured here. it is manufactured abroad i think we really do need to have a policy. again, i think the obstacle is what is going on in the house of representatives. that is where the budget starts and that is where no business is being done i would like to hear your thoughts on those issues. the host: let's start with kevin hassett. guest: firms are making money again. i think that the problem is that they content have real strong incentive right now to locate new activity in the united states. one of the reasons why is we have a poorly-designed tax code which is really like -- unlike

any other tax code on earth where we are about to have the highest tax rate but we can locate offshore, so it gives firms a strong incentive to locate the factory in a place like ireland, which has a really low tax rate then transfer the money. there's been studies in the academic literature that find the responsiveness or scheme to locate is almost unbounded. that they are really, really responsive to these lower taxes, so what's going on in the u.s. is we've got an international tax code that just isn't up to the 2 isst century. it's not at all like those of our trading partners, and we're the highest-taxed place, so we

are locating elsewhere, so when we think of things we can do to stimulate activity, we should look at the code and revise it so people have a strong incentive to locate activity here. it's the same kind of things, when b.m.w. announces they are going to build a plant, the u.s. makes up tax incentives toe lure them to their country. every other country is playing that game except the u.s. host: bob? guest: i agree with kevin that we need tax code reform but i don't think we'd be able to do it quickly and i don't think it's a very big factor in why the economy isn't recovering quickly. corporations have something on the order of $2 trillion in cash right now. the key reason, not the only

reason but they are not hiring more workers because there isn't enough demand for their products. if you're running a business, you're not really meeting your responsibility to your shareholders if you hire workers to produce goods or services that will not be purchased we have rel8 had a big increase in the inquality and distribution of income in the united states in the last several decades and in the recovery that proceeded the recession, the family in the middle of the income spectrum actually didn't gain ground. almost all the gains went to the top. this adds to the squeeze on middle income families not buying more just to get back to their comfort tax code. so we have an interesting situation. kevin alluded to this. we have for every additional

dollar they make for corporations there's something, but if you look at the -- it's not high relative to other countries, so we have a tax code with all sorts of corporate loop holes and tax breaks and a really high marginal rate. the only good thing is you could reform it without losing money. you could close a lot of these unproductive corporate tax rates and use the savings to lower the rate and then have a more competitive corporate tax code. >> bonnie hit on a story in "the new york times." companies spending on equipment not workers. it's reported companies looking for good deals aren't seeing one in new workers. workers are getting more expensive while equipment is getting cheaper. and the economy is encouraging companies to spend on machines rather than people. one says i want to have as few people touching our products as possible. everything should be as

automated as it can be. we just can't aforward to compete with countries like china on labor costs, especially when workers are getting more expensive. two years into the recession, hireing is still painfully slow. 7 million fewer jobs. so bob greenstein what do you do about this idea of labor costs? guest: this is a very difficult issue. one thing maybe we should look at not on a permanent but temporary basis right now is the idea of tax incentives for a business that -- higher over some base level. there's some issues in designing to it figure out what the base level is. congress affected something years ago, but it was so tiny, it didn't do much good.

i think it's worthy of consideration as something to look at. host: kevin hassett, in this story we hear about an combleer -- an employer about how hard it is to find new employees, weeding through all the applicants. guest: well, there are really long lines for jobs now. and there are a couple things i want to clarify. the first thing is i don't think there's as much substitutions for machines for people going on. if you look at investment in equipment that's going on in this cycle, something, as bob knows, i've been writing about for years. but this is disappointing. we're not seeing the normal liftoff of capital spending. so capital spending might be doing better than employment, which is just terrible, but

it's not like i robot where we're buying robots to replace people. the thing i noticed about the labor sector that bob is an expert on is there's such a mismatch. you mention michigan. one of the things over time that would happen is people would go from places like michigan that have really high unemployment and move to other parts of the country where the unemployment rates are lower, and that would help us move towards having a higher rate of employment. but because of the housing crisis, it's really hard for people to move. perhaps the hardest it's ever been. so in my eyeballing of the data, it seems like there's a lot less mobility than we need to start get people moving around to where the jobs are. so there will be a lot of jobs but not a lot of applicants and then a place of large unemployment but they are stuck because they can't take that

massive loss on their homes. >> we have a financial crisis. guest: we have a housing market problem. kevin's comments pointed me in this direction. i don't think we're in a situation where, if the economy really came back robustly, unemployment would stay at 8% or 9%. we really need the whole economy to move forward. if it does, it will ultimately bring the jobs back. but if it only continues to go as the rate it is and corporations content invest with all that cash they are sitting on. then unemployment will come down, but at a very slow rate. guest: can i add something? host: sure. guest: and i think we're kind of at a transition point in the materials of the policy debate in that basically if you have a big stimulus like president obama supported. essentially, you borrow some money and then lift spending

today. when you lift spending today, you do make g.d.p. go higher today. there's a debate about how much, but it's just arith ma tick. but then maybe a year later, the government doesn't do that spending again. when the spending goes away, then g.d.p. goes back down and then you have, like, the hangover. we're starting to experience some of that. we got a boost from spending, but then the spending is going away. then tough third factor. the third factor is you have to pay for the spending. so you stop a panic, avert a crisis and spend then at some point we have to pay for it. so let's say we raise taxes, we get a negative transthat. so in the end when -- after you've done it, it's not clear that you're in a better spot. you've got this thing you've

got to pay for and a lot of uncertainty about what's going to happen next. so i think we're at that stage. we can't just do another one-year thing. i think what we need to do is give people a sense that we can put the country back on to a long-term trajectory. >> senior fellow at the american combps institute. he was a senior economic advisor to the mccain campaign and serveded as an economic advisor to george w. bush during the 2004 presidential campaign. our other guest, bob greenstein, is the founder and president of the center on budget and policy priorities. he also has spent time in the obama transition team where he headed a federal budget policy component of that asset and project and a pointed by

president clinton in 1994 and also served under president carter in the food and nutrition services program at the department of agriculture as the administrator on that. let's go to bud who is a republican calling from bloomington, illinois. joining the conversation. hi, bud. caller: hello. seems we have both parties in denial about the cause of job loss which is lopsided trading. an op-ed calls for even more free -- so-called free trade agreements to be approved and their solution to the job losses is training programs as if training somehow magically leads to job creation. the problem isn't trade. it's the basis of trade. we have trade partners to block

our exports, and who manufacture under completely different rules than we do. >> bob greenstein, what do you think? guest: well, i'm going to keep the trade part to kevin who is much more of an expert on that than i, but let me talk about the job training part. the core is right. the job training in and of itself doesn't create jobs. however, where job training programs work well. some work well, some content. but they do two important things. they increase the skills of workers so they can be more productive workers, which is good for the workers in the economy. but they can also help in areas where there's a mismatch between the skills of the workers in the area and the skills that the businesses in the area need if they are to fill their jobs. so good training programs are very important for the long-term. but just as one component of a larger set of things to do. but --

host: before we move on to kevin, what is your perspective on the obama administration's trade policies? the republicans have been critical of trade agreements that haven't been implemented with some countries that have been on the back burner for a while. >> i have to say trade is not an area i know very well. i wouldn't be able to give you a very informed opinion. i think the primary focus is to have the kind of trading regime where each country does what it can do best and most productively, and the whole international economy develops. but you get unfair trade practices and you have environmental concerns and you have to balance all these things, and of course there's all sorts of competing political pressures on the corporate and labor side that push one way or another on trade agreements. under any administration it's dot get a trade depeement

through congress. host: from the hill, obama's -- content match the rhetoric and mitch of kyi -- of kentucky says relating to the trade issue, the president said he finalized a trade agreement with china yet five months later he sent his aids out to say he won't sign them into law unless congress approved much more in spending. kevin? guest: first of all, bob's right. the trade is the difficult one to list. pretty much the only president in my adult lifetime that's been really successful on trade was bill clinton who actually led with newt gingrich, the two of them agreed to cease-fire and do some positive stuff. but it's very odd and you end up with perverse things like

the colombia free trade deal. that one is particularly heinous that it's not passing, because the u.s. lifted so the colombiaans could have free trade to crack down on the drug trade but that didn't happen. but getting anything through congress is almost impossible right now. because democrats have the support of organized labor plitly. so i think free trade is crazy, but free trade makes us better off. our firms are able to buy inputs from other countries they are able to produce and people are able to provide products at wal-marts that are cheaper, because you can buy them from a cheaper place. so you should recognize that

you caught damage like some plant in the u.s. is going to close if a plant somewhere else is cheaper. but we can't just leave those people to hang. caller: the simplest and easiest and least expensive solution would be an immigration cutoff when we have over 1 million immigrants coming in every year. the bureau labor of statistics said out of the 1.2 million jobs created in 2010, 3/4 went to foreign-born workers. host: what do you think, bob greenstein? would that do anything in your book? >> this would not g a good idea. guest: when you look at why, private market forecasters, the office of management and management. congressional budget office. why do all of them project slower economic growth regardless of what policies we follow in future decades?

the reason is economic growth -- i'll simplify it a little bit. but to a degree, it's some of the greater growth in productivity and labor growth. we have an aging population. when you look at the figures, the growth in the labor force is going to slow to a crawl as the population age it's. -- ages. that's going to hurt the whole economic thing. there are legitimate debates as to exactly which kinds of people should get preference and how you should determine who gets into the country. but cutting off immigration, while it might create a few more jobs in the short-term. in the long-term, it will create lower job opportunity. host: kevin hassett?

guest: i agree with bob on this. with the exception of mexican immigrants who are thattistically different from im -- immigrants from around the world. people join our society quickly and the second generation has about the median income and wage. just two generations in. so one of the strengths of america is we can take people from all over the world of all different colors and languages and assimilate them and give them a place where they can succeed. that, going forward, if there's hope for america, i still believe we're the best country on earth at that and that's one of our strong advantages, and we need to leverage it better. so i think a revised immigration policy has to have lots more legal immigration and do a much better job at slowing down illegal immigration.

host: let's get to a comment from twitter. monty wants to know:what manufacturing can we bring back or initiate to absorb the army of unemployed? guest: i think that one of the duties of a free market economy is one of the guys like me or bob doesn't know the answer. we know if we make a climate attractive to manufacturing, it will lure manufacturing here. exactly which manufacturing, if you try to pick, you'll pick wrong and waste taxpayer's money, but there's a background story, too. i think the importance of manufacturing in the u.s. economy has been declining pretty steadily for a really, really long time, in fact, the trend looks a lot like the

trend foring aicalture years ago. with information technologies, we're becoming more and more of a kind of service economy. and that's not necessarily a bad thing. so there's perhaps a tone in monty's question that if we make a service job, that's terrible and manufacturing jobs are real stuff. that i'd like to object to. so i think we should make whatever jobs the world needs from america now. not just manufacturing jobs. guest: i would agree we have been good at being at the forefront of new economic areas that take off. information technologies. i think we have to be concerned about where we're going to be in the future on that. we really need to stay in the forefront of the information technology. the whole area of clean technology. no question this is going to be the clean growth area. it has to be. you're talking about the things that are unsustainable and will

therefore have to change. sooner or later we'll have have to make changes in our climate. if we content invest in enough up front, and i do think there are things that the government has to help siege some of the basic development in key areas where sometimes in basic r & d corporations content necessarily recover all the costs, subsequently, so ye you need some additional work there. but we need to be in the forefront of the clean air technology. >> host: it was posted recently that it's not the size that matters but the age. he talks about a professor at the university of maryland, john, hope i'm pronouncing his

name correctly. who looks at this idea of how jobs are created he starts out by noting in an economy with about 110 million private sector jobs, firms destroy 17 million a year. the creation and destruction process. this churning goes on in all industries in all sizes of firms and even within the same firm and what drives it is the constant shifting of work from the least productive to the most product i have. so there is this cycle that takes place, so what do you think, kevin hassett, should be done to create the best environment so that these new firms can take off and have that cycle? and can be more productive? guest: right. well, i think that new firms are part of the story in the creation and destruction conversation. but for me, i have been focusing over the last couple of years on the destruction side. and have the policy to discuss with bob that i agree --