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telecommunications. >> please welcome the moderator, fox business news anchor. liz claman. >> good morning everybody, this is a big crowd. i was saying back there, i didn't think we would fill up, but they are all excited back there and i use it as an interesting term because we have the cable guys and kept guys. before we get started, i wanted to say how lucky we all are as the cable industry to have this new leader, michael powell, he is unmatched in his ability and expertise to diss tell everything that matters. so let's hear it for michael paul, just a big welcome. [applause] >> and hopefully he will use his abilities to keep the cable guys

from strangling the content guys because i think that's what's going on back there. i'm kidding. but they are excited to show you what the big issues are in all of this. we put this together in a very interesting way, three cables, three contents, let's meet our panelists. >> first the chairman and c.e.o. of time warner incorporated, jeff bewkes. [applause] >> next, the chairman and c.e.o. of time warner cable glennn britt. [applause] >> deputy chairman, president and c.o.o. much news corporation , chase carey. the president and c.e.o. of

viacom. the president of cox communications incorporated, pat esser. [applause] >> and the president of comcast cable communications knil smit -- neil smit. [applause] >> sit down, gentlemen. thank you for being here. let's get started. we have both sides represented and i was asking back stage -- i don't want the three content guys -- and going in order, we have carry is in between and great to have all of you here. number one, we're not going to be boring here and forcing him not to be because it won't help

anybody if we give these politically correct answers. we have to be honest about a lot of the answers here and looking at me like she is lecturing us. we want to hear the non-p.r. statements and ideas. we want to go deeply into all of this -- [laughter] >> you know, sit down. they are saying start with chase. we are going to start with the fact that every time i go to these shows, something is trending almost immediately and the one thing that is trending is the new amounts of choice. it's unbelievable how much choice. and it was cable that used to be the place of choice. wow! 100 channels and everybody is cool with cable, but suddenly, there are hundreds of thousands of choices not having to do with cable, youtube, amazon, google

and apple. how did you guys let that happen where it got out of the hands of cable and what are you going to do it -- to get it back. and neil, how do you get people back saying cable is the place to be and not my computer. >> it is all about a personalized experience, it's about my favorites and watch lists and recommendations that work for me and less about the tv or the internet or even apps and it's about what experience works for me, a personalized experience that can stay with me across different platforms. common user interface and wherever you go, that's the interface you get and it's permized to me or you. and i think that's the trend working and we are working hard towards. >> glenn, you know what starts

as just maybe me and my nine-year-old kid or the kid ta works on the smartphone turns into the rest of the nation. we saw that with music and they ignored it and lost complete control. cable doesn't want to be the next music industry. how do you prevent that from happening? >> i want to go back to your opening comments. didn't want us to be dull and here we allr we are pretty dull guys and we are wearing blue shirts. >> that's why i wore green. >> i think the key for all of us is to keep changing with the technology and we have to offer consumers the features that they want. and use the technology to do that. i don't think it's magic. i think we all have technical people who understand it. i think we understand consumers. and if you really think about it, what this industry has done collectively, all of us together

historically is to match an understanding of consumers with an understanding of technology. yeah, there is a lot going on and i don't think any of us know where it's going, but there is more opportunity for us from this than anything else. >> opportunities like that keep you up at night and you are thinking about how i'm going to field this, it's moving at the speed of light? >> you characterize it as it getting away from us, but we created this chaos. all this capability and what goes along with that, you give consumers choice and that creates business opportunities. how do you keep up with it? at the end of the day you have to go back to the consumer and ask them what they value and don't value and keep talking to the people that create the wonderful content for us and share that learning to create new types of business models that exist or don't exist today and continue to harvest those in the marketplace and the consumers will reward you for doing that.

in some cases, you aren't going to control everything and only 60% of it and that is the reality of the business world. >> you want to control your content obviously, but you want it to be the content that everybody chooses. >> all i can say, we are in a world of a lot of choices. the reality is that television is the foundation for a lot of the viewing that takes place and a lot of the conversation out there. yet, we have, today, the cable programming industry in the aggregate continues to gain share against broadcast. tv viewing is at an all-time high and the viewers can interact with it. we have many, many of our shows have features that include social networking activity, we have a feature with all the

tweets during the show, live tweets during the show and it creates more energy and passion around the programming and a lot of activity is carried on the pipes that these guys have. so, two parts of our industry, programming and distribution, have grown the pie together and for the content owners, there has never been a better time, because we have the ability to reach consumers in many different ways, get them more engaged, more passionate about the brands that we have, about the characters that we have on our shows and it's a great opportunity. >> well, i would think you would want that everywhere, yet you are in litigation with the guy sitting on the other side of chase. it is a rights issue and case would agree, you want to be able to say, not just ask us, but get our approval to put that stuff on the other opportunities that are out there like the tab lets.

but, chase, i mean, are you going to fight or are you going to embrace it? >> you have to embrace it. back to your core question, what we have to do is excite the consumer and deliver an experience that is great for them and look what has made apple and jobs so successful is a great experience. and we have to do a better job to excite consumers. talking about authentication for two years and still talking and we have to recognize others are doing things and we get too hung up. and we have to deliver content experiences that go along with that distribution. but in the specifics, our rights are the background and we create the content and we have to work with distributors to deliver that content in new and interesting ways, but we have to work agreements on how we do it

to make sure the rights we have in that content and how it's exploited and deployed, that is reporting to agreements that we have in place. can't just be the wild west. you have to have a structure within which you do business. we have to do a better job in bringing exciting and new marketing things to the marketplace. >> jeff at time warner, you jumped forward and said, tv everywhere. it's an easy term to throw out, but what are you doing with that? >> let's all cheer on. this is not the music industry, this is the cable industry and this is the cable convention. >> i agree. [applause] >> given the season, i was watching the debate last night, it's mourning in the cable industry. time to keep this fantastic

industry moving. we have always invented the most cutting edge, most desired and watched things in the united states. think what we have built together over the last 30 years. all of this infrastructure, the reason you can get things on tab lets and smart phones is because of the infrastructure that was frankly led by the people in this room and is now being copied and augmented by satellite companies with a fantastic infrastructure. and then what got built like the railroads next to the infrastructure is the most successful, via brant, high-quality content industry in the world and it's being copied in every country in the world. it's really healthy. it's really good. the quality is much better. you think of the content that people want to watch on internet

delivery devices, the best content is the stuff that premieres on cable systems on television screens. the quality is up, the diversity of content is up, the programming budgets are up, the profits are up, the whole thing is going great. what we need to do and everyone here said it, we have to put it on demand and make it a very good interface because that's what the internet industry is bringing and frankly it's good. they are bringing us the tools to take the great content that we've already got and making it more available for the viewers that love it. we should be really happy and excited about where we are right now. >> people want to get paid for the content and this is an issue that if you're going to do the quality content that jeff is talking about, they want it to look good -- and you can say the

television screen, but it's not necessarily the tv screen that people are looking at anymore. they are looking at a tablet and that is a whole different screen inside the home. so you guys are the ones with the pipes and the cable industry. but how do you make sure you don't get a whole different generation. i don't understand it because i'm not from that generation but this is positive, but you have nine-year-old kids telling their parents -- a hedge fund guy told me saying he bought a second house and he said don't buy cable. and he said, how does it work. he said i'll show you. >> we should be meeting consumers' demands and if they want to consume things in the house, great. outside the house, fine, on a tablet, television screen, fine,

we should meet those needs. we reached five million last month and seeing more consumption. i was talking to jeff, great premium content like hbo is being consumed. in terms of people wanting to get paid, there are different surnsies. we recently launched a catch up-keep up with the major networks and shows any rolling four episodes and when we talked to the different networks is they want to get ratings on the platforms. so we work with nielsen to do that and we reached a basic compromise that was give me some ratings on d.o.d. and fast-forward disabled and we'll give you more content. it was a real win. the more within we work within the ecosystem, the better. the pace is moving faster, so i think the conversations between

the programs and the distributors need to happen on a more frequent basis because of the pace of change. >> you guys are busy renegotiating contracts constantly and that gets contentious, so how do you have that conversation? >> the conversations aren't that complicated. the consumer is willing to pay fair value for a good experience. we have to deliver that experience and we have to continue to make that experience better. and that is what it's about, and the consumer is willing to pay for something of quality and something that is interesting. and we have to take advantage of the new technologies to find ways to make it a richer and better experience that people really want to have and if you do that, people recognize and will value the importance of that content. >> i don't know if you know

this, one of the first jobs in cable was going up telephone poles to install cables. and you know about this. but as you look at where this is going, you've got to be saying, i have to figure out a way to embrace it and get the programmers along side. this is so much diplomacy, isn't it? >> let me go back and talk about what neil is talking about. the things that we are bringing to the market, they like and they value. three products in the last 90 days, tv online, people authenticated that product. highly successful program. costs to our industry, i don't know the number. the number is probably 300 million sessions. we are doing something right. we are looking at our mobile

connect platform, 800,000 people signed up. so while hedge fund managers are telling you stories about their kids and i'm not disagreeing that the marketplace is segmented, they value the services and products that we're bringing to the market and may assemble them differently than they are today, but we have a vital role in figuring that out. i have a lot of optimism with what our future looks like and doing things differently and we have to figure it out together. >> glenn, you are sitting down with felipe. >> we are very influenced by the press and the latest company, but the scale of the industry and the scale of what we do up here, the number of hours a day that people watch video on our

platforms, the number of hours people do broadband, it's unbelievable and the usage of whatever you want to say, we are clearly doing something right. it doesn't mean we can fall asleep. we have to embrace the technologies and deliver things in new ways and we need to embrace -- there is no such thing as a tv, we have to do all that, but we shouldn't sell ourselves short. we are doing things really well right now. >> i want to bring this up and this is for the programmers, the content guys, google tv, apple tv, we are waiting to see what that really is, but net flicks, you have -- netflix, this is using up a massive band width, but they are announcing they are going into original programming.

if i'm you, i'm thinking what are they going to do and is that a threat to me and how do i make sure i'm getting cool content that's going to hit the brains of the people out there looking for interesting things to watch? >> netflix is a service that provides library programming and that's what we have. we have prior seasons of some of our shows there and it gets people interested in watching the current programming and our industry has always been about windowing content. so we solicit our distribution relationships. netflix got involved in one show that was a paid television kind of project by david fincher and it's not their fundamental business. it's a tough exercise as chase

and jeff know. the number of major studios around today, not the exact same studios that existed 75 years or more. we are 100% focused on content in our company and we have continued to increase the stakes. we have increased our investment programming year after year through the recession, good times, bad times to serve the consumers, which is what it's all about and working with distributors here and elsewhere to provide great experiences. so we work with the cable industry. we work with the netflix of the world and work with the consumers where they want to see the content. we have had value in the "beevis and butthead." >> you are making money off of

it. >> which allows us to invest in more original content which first airs on the distributors sitting here. they get the first crack at our shows when we use the money. >> a very smart guy who has come up on showtime with quality programming and they pulled their full shows off of netflix as soon as they announced they were going into original programming. what does that tell you? >> i hesitate to say that much about it. the way we think about it is you asked about netflix, it is subscription video on demand which is a category that we are talking about, what's the value of that for consumers. and we all know that there --

there are several subscription video on demand networks. one of them is pretty famous called hbo. it's subscription, it's on demand and been on your television for 10 years. now it's on all your internet devices for nothing if you are a subscriber. so that's the biggest and the most prolific in terms of programming rights, original programming, movies, et cetera, subscription services out there. there are several others that are pretty well established, still are. showtime, netflix, maybe amazon. and there can be a role for structures, in the case of netflix their streaming product is available internet only and you put it on your tv.

they do in -- some useful things for consumers. they are easy to find and access programming, much of its streaming is older programming that is later in the window and that's what you would expect. they could afford because it's an lrs 8 or $10 service and hard to see how they could afford a very substantial budget of current original programming. to the extent they can do it, i think it's fine. it adds to competition. if i think of it from hbo's point of view, we have been making a lot of original programming for years competing with absence, nbc, cbs originally. now with a lot of basic cable networks like fx, they are all doing great programming.

adding more programming, whether it's an on-demand basis, versus the basic cable business, we are all sitting here at this convention on the cusp and we have all agreed to this, that we are going to take every channel on television with all that debate programming and put all of it on demand and so you can find your favorite show on fx or showtime and all of these networks are going to exist along with apple and amazon tv on every device as glenn said. what we need to do together is to get all those networks, get them on every device, get an interface that your subscribers really like that can be personalized and can serve them. that's the job we have to do now. >> there has been a long

tradition in this industry of the content, working with the distribution side, developing new technologies, getting involved in v.o.d., which has become a big thing, startover products, et cetera. i think it is important for the future success of our combined industries to continue to collaborate. and i agree with what chase said earlier in that regard. it's important to continue to work together to serve the consumers and that both sides of the equation here emerge happy with the collaboration that has benefited all of us. we are all sitting up here because we have been successful working together. it's important that we continue to do that, because we need to remember the consumers. we all agree on this panel and we need to serve the consumers, providing them with what they want and do it at the right time and in the right ways when we've

met the business objectives that allow us to create the content that people enjoy. so if we are supportive as many of us are on our networks, we need to have a measurement system in place so that the viewing on the devices in the home gets measured, because that's the currency. that's the currency we go to the advertising. >> but kneel sen isn't measuring, -- nielsen isn't measuring, are they? >> for hbo and showtime, it's a different story. we were the first pay service that went on true tv in a multi-platform way. and we would like to see all of

our services that way, but we would like to have the technological obstacles overcome and the modernization object ta calls overcome. unless we do that, we will enter a new era of satisfying consumers. >> a comment that people were talking about for a while, there were people eliminating cable. i want to know what kind of evidence do you see of it or is it just sort of few people that were part of the housing slowdown. >> we aren't seeing any evidence of core cutting. and if you look at the television industry, they put on 500,000 subjects last quarter and we are seeing a healthy industry and i think our perspective on it is let's never give a reason for the consumer to make a core cut. if they want to watch an ipad or television screen, let's let

them view it the way they want to view it. we announced skype video partnership this morning, bringing more function atlanta to the screen. >> do you see core cutting yet or not? >> no. and i'm sitting here think about what is core cutting. voice is a pretty trivial user of band width and there are people that are core cutting their wire lines and going to cell phones. that's not welly what people are talking about here when they use that term. i agree with neil that the people disconnecting their video packages and do things over the internet is barely measurable and that's what the studies say and what have you.

and clearly and i see netflix as another programmer, clearly that's what they are. but if there's something that makes consumers not want to buy the big package that we are collectively selling, that then is a threat to all of us and that's why we have to work together on the functionality. there is no evidence that more than a handful of customers don't want the big package that chase makes. that is what we do. we have more content in many countries in the world. >> i'm assuming you probably agree, but this reminds me back in 2007 subprime was starting to look a little scary, subprime mortgages and someone said 1 1/2% of all subprimes are failing and another person said that means 98 1/2% of people are

paying their mortgages. a lot more mortgages unwound. you are looking at the horizon, you know with a telescope. what do you see? >> i can look back. we are in a very different economic environment than we were five years ago. when i look back, we used to gain 250,000 new households. last year we gained 70,000. it was up. it's not a reflection of the multi-channel video we bring to the market. >> what is it a reflection of? >> the economy. the consumer's ability to have disposable income. craig has been warning us for the last year that all the research he has been doing, looking at the marketplace is that while costs have increased, there are segments of population

whose disposable income has stayed flat or possibly declined and we have to be very sensitive that at the end of the day we serve customers and they either have disposable income or don't. and that they have the ability to pay for it. and i worry about that than i do about chord cutting, making sure that we have the values and services that they believe in and also affordability. >> i think it is remarkable, we went through the worst recession that people on this panel have seen in their lifetime. and it's remarkable that the last thing people cut back on is their television subscription, because that provides great value. you have a lot of choice. people are spending a lot of hours in front of the television set or utilizing broadband. it is truly remarkable how well

in all categories that held up. there were a couple of quarters where there was a minor decline in households subscribing to cable or satellite and now it's going up again. and if you look at the source for that, it's germly the lack of households and the economy. we should be pleased with how we have weathered the worst recession we have lived through. >> if i can jump in there, i think there is truth in all of this. there were more vacant houses in this country during the recession than ever before, as close as we can get the statistics. and our products are fundamentally sold to households and not individuals. if the house is empty, they aren't going to buy our services and people were moving in with other family members and all of those things we read about. that seems to be moderating

about, which is why we see what neil said. we see this around the country, there clearly is a growing, unfortunately underclass of people who literally can't afford this. they want it. and i think it would behoove all of us to work together on smaller packages and that would meet the needs of that population. most of the people want the whole big thing, but there are people who want something smaller. the economics of all of us make that difficult and i understand that, but it would serve us well to worry about that group. [applause] >> going back to the ipad and tablet issue as people want to move around, just before this session, i taped an interview

with espn and he said two million people have downloaded their es pmp n apps. he wants to embrace all of this. chase, how do you, a news corporation and all of the entertainment products that are out there, do you make sure you grab those, too? two million since april, he said, is pretty impressive. >> we are doing more and we are going to launch up networks. we launched a complement to speed, speed two, that has been out there for a number of months. we are going to launch another, that is geared towards getting an expanded service and enhanced service to the big 10 and we need to continue to do that to get expanded coverage.

and i think we are certainly making it a priority that we have to take all those franchises, channel, content we have and figure out how to create that richer experience. >> can we show hands that people watch things regularly on their ipads or tablets. people are getting this more. my kids want to watch "modern family" when, where they want to watch it. how much does it hurt the cable industry that hd was a great innovation and best innovation for television in a long time, but what needs to happen next to keep people watching and i'm sure the sony and pana sonic people are interested, too? >> what we are finding with our

ipad a pmp p, 50% of the people are using tools. and 25% of them are watching content and the kept we are seeing as the most sticky right now is the premium content. we have 6,000 choices and can be viewed in or out of home. the ipad is an exciting tool to both tie together the various platforms as well as to view. in terms of what needs to happen next, to be consistent with what everyone is saying, we need to be flexible and need to work together collaboratively and the pace of that change is only increasing. and so, we are talking on a very frequent basis and the programming conversations is that there are always great issues, but it's about flexibility. i did a turner deal recently and it was across all the different platforms.

and it was -- and then in the final strokes, it was less about the great penetration but more about the great flexibility across the platform. i think that's the way things are evolving right now. >> you said don't be politically correct and you mentioned the nine-year-old saying -- i would just say, don't be afraid of your kids. [laughter] >> you sure about that? >> and i like top watch. >> you like to watch? >> what are you asking? >> if -- what is going to be the next opportunity with that screen on your tv, because they'll lose more and more people watching that tv and then you guys will be faced with bigger issues. so passing hd as being an issue,

how do you make that experience of what you're programming and what you're creating better on television? >> put the tv on the internet device, that's the first thing. put the tv on all the internet devices and don't change the business model and don't charge people to do it and make it easy for them to use it the way they are accustomed to, which is in their favorite channel or -- [applause] >> or through a personalized user interface. put the tv on the internet. secondly, we really all have to remember, it's this infrastructure industry that allows for quality audio and visual display of the materials. if you think of what's going on in hollywood with, say, the film industry and the things that are going on in c.g.i., 3-d,

increase in quality of picture and sound -- we all know you can see it but let's use 3-d. it can be a powerful experience if the film is conceived for it and not just a gimmick. can be very powerful. we haven't yet got 3-d working on electric screens -- on display devices. we will. when we get that, your infrastructure will be the highway, the number one place that is able to deliver sound and picture quality of that type in the kinds of programming venues, user interface guides that consumers will demand to have. speaking of the pure internet two-lane road infrastructure as being capable of doing that, it cannot do that and won't be able

to do it for a long time. and if it is to do it, then the internet delivery of video bits and bytes has to support the infrastructure, the cable companies are going to have to make to deliver it that way. so there really is a quality lead that serves consumers in the existing infrastructure big package, double and triple play offering. and we ought to keep moving that out as quickly as we can so that consumers get a seamless adoption of the other technology quality, better pictures, better access to what they want when they want it. it's all in this room. we have it and it's admittedly -- there are a lot of us, look at us sitting here, trying to organize. so anybody who with take the lead and create an interface

that works, hbo is a pretty good example of what a channel we all know went to multiplex, that is a good example of how it can work and how important the meshing of how quality video with on-demand access and in the highest quality of transmission. that is the advantage of this industry. and it is not an advantage of the so-called internet industry. we need to work on that advantage. we need to press it. we need to keep moving. >> i would add to this, the consumers are changing behavior, it's not just putting television on the internet. you need to have interactivity as part of the television experience. and we serve largely young audiences and we do a lot of research in that area.

one of our shows, we have twitter followers and twitter wall in the background and they read it during the show. we have 2 1/2 million facebook fans of this one show. we have an app that we launched two months ago that has had half a million downloads and we are going to have a lottery, which is location-based live during the show ap the host of the show will call randomly, someone on the app while they are watching the show, call that person in los angeles and call him live on the show. you need to provide that kind of interactivity and you can have experiences on the internet and people are chatting about the shows and you need to have more and more original programming. that's what people want. they don't want to watch a 17th

repeat of a show. we have to shift of how we view our consumers and what the experience is, because it is changing. you are seeing it in younger people and they are going to get older. >> we have 10 minutes left and i wanted to get to another issue that just recently, the f.c.c. and department of justice approved a massive merger, comcast and will you have operators and -- >> we are going to remerge. >> but do you think there might be more mergers such as that? is there an opportunity for that ? >> i don't know if my opinion really counts, but there has been more consolidation going on

in the industry and comcast and nbc were able to find a business relationship that worked well for both companies. that's what's going on, people are looking for scale. they are looking for efficiency and leverage assets across larger platforms and it's a fast-moving marketplace. i want to stay with something you started, we talked about future opportunity and how consumers want to get their content information, their communication across their platform of choice and if the content is really good, then they are trying to get the best they can, whether it is a two-inch screen or 60-inch screen. there has not only to be great content bought but a lot of infrastructure built in this country and takes billions and billions of dollars to do that. we have to agree on business models that we are willing to support to get those things in place to give consumers the kinds of things they are expecting of us or at least

enable the capabilities to the kinds of things. i don't want to go back to an old topic, and that is, we have to figure the business models out. >> and chase, can we? you have in certain regards, but do you see intranssi against on behalf of certain operators because you guys yanked the world series off -- got it back on for yankees' fans. you have been known to a guy who stands -- stands with a fist. >> yeah. i honestly do. there is a long history of working together. you are going to have a buyer-seller tension and i think it is important for us to recognize we have a much bigger agenda than to let the

buyer-seller tension bog it down. you are changing sort of a traditional practice, find more friction everyone normal and the payment values. we had to change the path that the broadcast business was on. and i think you had that change and more friction in that buyer-seller relationship. both sides have to recognize that those sort of issues of commerce can't interrupt the whole. industries have had difficult negotiations around the value of content for 20 years, 30 years, and at the end of the day, the industry has continued to go forward and grow. so certainly, i think it is important, i do believe, we can

resolve those issues of commerce and continue to grow the business and get to a place of what is fair value. that is the only one we had in that process and it is our goal to try to work constructively with the broader industry. >> aside from the financial side of the merger, what has been very interesting is that steve and i can pick up the phone to each other every day and not that i want to do that with steve every day, but we can. and we put together flexible programs -- they have launched a program called "the boys." we promoted a little bit more and the ratings were up 40% in comcast markets versus other markets. it's the matter of the conversation happening. gee, let's try this and do that. and the experimentation aspect has been very positive. and i don't think that is

necessary for a merger to happen, but i think that's the way the world is evolving towards. >> a lot of this is experimentation, but what the cable industry doesn't want to do is get caught in saying, we didn't see it coming. so how do you avoid that? in the end, how do you make sure that doesn't happen? is it to work together and do peace, love and happiness and not get into litigation? you know what i'm saying? how do you get beyond this -- and i know jeff said we aren't the music industry, you very well could be if you're not careful here. >> i think the best way to not get caught by surprised is to keep looking around. that sounds pretty simple, but we need to know what is going on

in technology, what consumers want and if we keep our eyes open, we will be fine. there is a tendency to focus way too much on technology and we have more technology than anybody knows what to do with. it is about understanding the consumer and pretty simple needs and they are changing and it's our ability to do it together. we do have to experiment and sometimes our business relationships get in the way of that, because everybody wants to know about the money before we experiment. we have to do stuff and see what the consumer wants. >> we have to sort of grab the attention, i think, of the youth today. in the end, right now, we are unleashing, thousands and thousands of college graduates. i want to know from all of you, knowing what you know about the industry and knowing where you are saying i wish i had a guy or woman who could do x, y, z, what

would you advise people looking for jobs in the television industry, cable, broadband to major in? 9.2% unemployment. what do you need the most when you're looking to fill slots? >> i would say engineers are a highly desired skill set and software engineers, moving into the software space and software development time. i have a son who just graduated who is an engineer -- >> are you going to hire him? >> no. but that's a whole other story. >> poor kid. >> that is a skill set we are seeking more of. >> i'm going to go a little different here, i spend more time inside my company giving people permission to disrupt the business model. there is this bizarre pull in my company and in others that people want you to conform and

get back in line with businesses that exist and any time you live outside that path, you get pounded back in and giving people permission to build small teams and give them the independence to pursue opportunities that normally would not ever exist because we are so disciplined. more time is spent internally. we have summer interns coming in. we have had them say, if with you were given these resources, what would you do with it and giving those groups along with existing leaders' permission to explore that and experiment with that business model. we have to get better at that. >> what are you looking for? >> creative people who can make new shows and people who understand programming. >> do they have to be people who have had experience, a.m. turs? >> we have had several on-air

shows and we discovered the talent on the internet. now there is a lot of stuff out there and you have to filter it, but we need to get more young people into our company and they need to be able to produce content for many different platforms. >> chase, who are you looking to hire? >> in other ways, i agree, it's content. talked about netflix, google, youtube and facebook, you need content, great content and content stands out. you have more choice and if you got is content that is indistinguishable, it's not going to get you anywhere. whether it's content targeted, make that -- the content is the common experience, the

interactive dimensions and the other things you can add to it. it's the ability to create that content and excite people with that content and then figure out how do you distribute it through all these vehicles that are out there. >> glenn? >> engineers are in short supply, but i think the skill set is in even shorter supply, people who can understand technology and explain it in simple terms that the rest of can understand and relate it to business models and consumers. that's the whole package and that's really rare. >> i join demren. great content companies need people who can make great content in original forms, great distribution has always been hand in hand with making great content and developing business models that work for all these sophisticated. can i add to glenn and i want to

say this right, it's true that technology is really important, but we shouldn't over emphasize. look at the success of apple. apple certainly has brilliant technology in what it does. what apple did all the way back to mac, it focused as much on design, on human interaction with technology in the way the experience the people would have and did the improbable thing of taking a device, making devices, which standard thinking would believe, well, you can't really make a standout saying, if you are doing devices with china and korea making what they make, but they did. and they did it by focusing on human interaction, design and experience. and what i would say what we

should learn from that is that we've great content. we have the best technological plant sitting in this room. what we need to do, and it's hard, is to get the interface with our viewers who are currently happy and engaged for now watching their favorite shows on tv. but that's not going to be enough. they are going to need to be able to have the same control and engagement and feeling that they have with internet devices for our content that we have been -- we all grew up giving it to them on television. the interface is really the key. and sitting in this room are very different companies with geographic territories. we have to figure out how to get the best in class interfaces adopted in a kind of a universal way for the benefit of consumers all throughout this country.

and that will enable you to do it more economically and enable your clients as they move around, know how to use it and you'll get the benefits of scale which essentially is the leading advantage that the tech industry has. so i think a laser focus on interface, user use, fairness to consumers and the point of some big part of the country during this economic condition, they're going to be kind of squeezed for quite a while. we have to think very carefully about serving them well. >> right before we wrap up, i want to ask each one of you, what channels that is not owned by your company do you watch the most? [laughter] >> start with jeff.

>> let's see. pbs. [applause] >> i thought you weren't being politically correct. >> you don't own that channel. >> what channel do you like to watch the most? >> i like nbc. >> chase? >> sports junkie, espn. >> fox business news, of course. >> thank you. >> history channel. >> i'm going to start -- stop with jeff started and saying c-span. >> exciting guys. >> any premium that's on. >> what a terrific panel we had. figuring out a way to move forward and be all things to all people. thank you guys. excellent job.

really appreciate it. thank you so much. enjoy the rest of the cable show. [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute] >> president obama is expected to announce he is withdrawing roughly 10,000 u.s. troops from afghanistan this year. the associated press reports one brigade of 5,000 forces would be leaving this summer and second brigade of similar size coming home by the end of the year. an official discussing the plan ahead of the president's speech, tomorrow night the formal announcement tomorrow at 8:00 p.m. and we will have live coverage. the administration announcing nine new warning labels that convey the dangers of smoking. the food and drug administration saying they are on to be u.s. cigarette packs by 2012 and you

can watch that on c-span-3. while the u.s. house is about to gavel in, members will be making one-minute speeches with bill debate later on beginning at 5:30 eastern. members will consider four bills to rename post offices. votes at 6:30 and then debate on eliminating the assistance commission after votes. now live to the house floor here on c-span.

pursuant to clause 1 of rule 1, the journal stands approved. the pledge of allegiance today will be led by the gentleman from tennessee, mr. fleischmann. mr. fleischmann: would you join me in the pledge to our flag. i pledge allegiance to the flag

of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. the speaker: the chair will entertain requests for one-minute speeches. for what purpose does the gentleman from south carolina rise? mr. wilson: ask permission to address the house for one minute. the speaker: without objection. mr. wilson: mr. speaker, on friday, congressman darrell issa conduct add field hearing in north charleston, south carolina. a witness who really brought home the consequences families will face as a result of the nlrb's job killing complaint with cynthia rainmaker who is currently employed at boeing. bringing a human face to the complaint, she explained how the nlrb is denying her right to work. she explained the boeing's new 1.1 million square foot building is already completed.

manufacturing is to begin this summer with over 1,000 jobs already and up to 3,800 more jobs could come. with construction and suppliers ultimately 9,000 jobs would be created. boeing was attracted to south carolina because of the trained, world class work force, a welcoming pro-business climate, right to work laws, and pro-business government of republicans and democrats. the job-killing action of the obama administration is a threat to american workers. in conclusion, god bless our troops and we will never forget september 11 and the global war on terrorism. the speaker pro tempore: the gentleman from tennessee. mr. row: i ask unanimous consent to address the house for one minute. the speaker pro tempore: without objection. >> mr. speaker, today i will introduce my first piece of legislation since taking office. and i am proud it saves the taxpayers of my home state of tennessee an estimated $50

million. the unfunded mandate put in place by the new standards of the federal highway administration is an undue burden on states when they can least afford it. that is why i am joining congressman desjarlais and senators alexander and corker to allow local governments to meet these new standards at the end of a road sign's natural lifecycle and not the accelerated timetable put forth by the federal highway administration. while this administration and their departments might have the mindset of tax, borrow, and spend, local governments cannot do the same. at a time when we are working to be fiscally responsible and balance their budgets, the federal government is telling them to spend money they don't have. washington politicians should take a clue from their local and state officials and get to work on balancing the budget instead of telling states how to spend their money. i yield back.

the speaker pro tempore: the gentleman from texas. without objection. >> mr. speaker, since president obama was elected 2 1/2 million more of our fellow citizens have lost their jobs. mr. hensarling: unemployment has now been above 8% for 28 straight months. the longest stretch since the great depression. if you look at the underemployment numbers and those who simply given up, the situation is far worse. the top three credit rating agencies have now all issued warnings about our spending-driven national debt. a recently poll by the bureau of labor statistics says that new business start-ups are at a 17-year low. mr. speaker, we got to get this nation back to work. america is experiencing a deficit of jobs because job creators have a severe deficit of confidence in the

president's economic policies. washington cannot help the job seeker by punishing the job creator with massive debt, massive regulations. house republicans have a plan for america's job creators which will put the nation on a fiscally sustainable path, make our tax code more competitive, help create more american made energy, and take the burden of regulation off our job creators' backs so america can go back to work. the speaker pro tempore: the gentleman from illinois. without objection. >> mr. speaker, last friday marked one year since president obama promised the american people a recovery summer. but looking at the greatest grim -- latest grim economic reports, it's clear recovery is further from the truth. unemployment rose to 9.1%. the highest rate since december.

the stagnant economy created only 54,000 jobs, less than half of the 125,000 many economists predicted. and housing prices fell to new depths in april. mr. speaker, it's painfully clear that president obama's policies of excessive spending, borrowing, and regulation are failing. the american people are paying the extremely high price. and they are demanding changes, an end to the spending and borrowing, and more pro-growth, pro-job policies. that's why we are working hard on real recovery agenda that will create jobs, cut spending, and restore our nation to fiscal health. i yield back. the speaker pro tempore: pursuant to clause 12-a of rule 1, the chair declares the house in recess until approximately 5:30 p.m. t

but also provided significant short-term boosts in many cases. it this examined what fiscal

guard rails would keep congress on track to reduce federal spending relative to the size of our economy. this study found several things. a balanced budget agreement to the u.s. constitution would not had counteract the bias toward higher federal spending unless it contains explicit spending limitations. the federal government needs to statutory spending cap with a credible enforcement mechanism regardless of whether constitutional balanced budget amendment is ratified. the item reduction veto has reduced the growth of state spending by strengthening the role of the governor relative to the legislature and making spending decisions, enhanced rescission authority would also help control the growth of spending at the federal level. sunset provisions which have been effective in eliminating inefficient and unnecessary programs and agencies in the u.s. states would be helpful at the federal level. so long as the president and professional democrats continue to behave in fiscally

irresponsible ways, businesses will look to the future with trepidation. that is the concerns and the issues and the reason we meet today. senator kasey will be here at about a quarter after to give an opening statement as well and then we'll recognize him as he enters. at this point i'd like to introduce our witnesses and again on behalf of committee, thank you all for being here today. we welcome the honorable john b. tailor, george b. shultz from the hoover institution, and the marion robert raymond professor at stanford university. he also has taught economics at princeton, yale and columbia universities. dr. tailor has received a prize for his intellectual achievements and the alexander hamilton aword for his overall leadership in the finance.

he served as the undersecretary of the treasury for international affairs during the first term of president george w. bush, previously he served as a member of the president's council of economic advisors during the foreand george h.w. bush administrations. dr. taylor has a long list of academic publications to his name and a recent book. he is a frequent contributor to the editorial page at "the wall street journal" and other widely read publications on the state of the economy. he earns his ph.d. in economics at stanford university. welcome, dr. taylor. simon johnson is a professor of entrepreneurship at the sloan school of management at the massachusetts institute of technology. is he senior fellow at the

peterson institute for economics and a member of the congressional budget office's economic advisory panel. dr. johnson previously held the position of economic counselor at the international monetary fund and was the director of its research department. he is a co-director of national bureau of economic research africa project and works with nonprofits and think tanks around the world. dr. johnson's co-author of the 2010 book "13 bankers: the wall street takeover of the next financial meltdown." he's a bloomberg columnist and frequently publishes economic opinion pieces in major national, international news publications such as "the washington post," and "the financial times." he's co-founder of the blog, the baseline scenario. he earned his ph.d. in economics. welcome, dr. johnson. kevin is a senior fellow in the director of economic policy studies at the american enterprise institute for public

policy research. before joining a.e.i., he was a senior economist, the board of governors, the federal reserve system, and associate professor of economics and finance at the school of business of columbia university. he was a politics consultant at the treasury department during the george h.w. bush and clinton administrations. he served as an economic advisor to the george w. bush 2004 presidential campaign and as senator john mccain's chief economic advisor during the 2000 presidential primaries. he also served as senior economic advisor to the mccain 2008 presidential campaign. he is a columnist for "national review." he earned his ph.d. in economics at the university of pennsylvania. dr. hassett, welcome. in our fourth panelist today, chad stone, is a chief economist at center and budget priorities where he specializes in the economic analysis of budget and policy issues. dr. stone was the acting

executive director of the joint economic committee here in exetch and before that staff director and chief economist for the democratic staff of the committee from 2002 to 2006. he held the position of the chief economist sfor for the senate budget committee in 2001 and 2002, previously he served the president's council as senior economist and chief economist from 1996 to 2001. his other congressional experience includes serving as chief economist to the house science committee. dr. stone has also worked the federal trade commission, the federal communications commission in the office of management and budget. he's been a senior researcher at the urban institute, dr. stone co-authorized a book titled "economic policy in the reagan years." he earned his ph.d. in economics at yale university. dr. stone, welcome today. so, dr. taylor, we'll begin with you. invite your testimony and we will reserve at least five

minutes for each of our panelists today. thank you. >> thank you. thank you very much for inviting me to testify. i appreciate the opportunity. i'm going to refer to a couple of or three charts during this opening. two years ago this month the recession officially ended and the recovery officially began. however it's been a very weak recovery. by any historical comparison. and that's why the unemployment rate is still over 9%. i think if you compare this recovery to the last deep recession we had in 1981 and 1982, and i show that in my first chart, it's quite striking. economic growth in the two years, seven quarters we've observed so far since the recovery began has been only 2.8%. .8% average. and you can see in the bar

charts that's the blue line quarter by quarter. in contrast, during the recovery from the 1981, 1982 recession, economic growth averaged 7%. so more than twice as high during that same corresponding period of timement and those are the red bars. you can see how much of a difference there is. so this is a weak recovery by any definition. i think the reasons for this in my view are policy. fiscal policy, monetary policy and regulatory policy. since the focus of this hearing is on fiscal policy, i just mention i think the $862 billion stimulus package did not stimulate the economy, the increase in spending, federal spending as a share of d.d. -- g.d.f. from 19.7% in 2007 to over 24% now did not stimulate the economy. things like cash for clunker, if

anything, moved spending a few months further. instead what these policies did, along with taking our eye off the basic ball of controlling spending, is to raise u.s. debt levels very high and they're continued to go high in the future. i think these high debt levels raise a great deal of uncertainty. there's even concern of another crisis, but there's certainly concerns about higher inflation, higher interest rates down the road. so i think the solution to this slow recovery, this weak recovery and nonexistent recovery is to restore sound fiscal policy. i think it will bring attention and allow more private sector growth and that was where the jobs will come from. my second chart shows the quite striking correlation between private investment in the united states as a share of g.d.p. and the unemployment rate. and as you can see, when private

investment goes up as a share of g.d.p., the unemployment rate comes down. right now we have low levels of investment and high unemployment . in contrast, if you look at the next chart, the third chart, you see that changes in government purchases and other component of g.d.p. have no such relationship of anything, it goes the other way. but i would say it's just not existent so you should be should not be worried about reducing government spending. that brings me to the last part of my opening remarks, how do we restore sound fiscal policy? i think it's very important to have a strategy to do that, a strategy which is credible and understandable to the american public. i'd say it should have four parts. first, a game changer which demonstrates a different attitude about spending, bringing spending down, starting in the 2012 budget. that establishes credibility which is so important for the effectiveness of a program like. this number two, outline a path

for spending. number three, as much as possible, legislate what's required to get that path accomplished. don't simply rely on promises in the future. that doesn't restore credibility. and number four, as you referred to, mr. chairman, some kind of caps on spending that correspondents to the path of spending reductions. my next chart basically, you mentioned in your opening, just represents what i think this amounts to. it shows you the share of spending by the federal government as a share of g.d.p. you can see that's gone up so rapidly in the last few years. the first budget the president submitted didn't really deal with that. that's the top line. the next line slightly below that is the c.b.o. baseline. and the line at the lower part is the house budget resolution which does bring spending down as a share of g.d.p. to levels that are consistent without

increasing any taxes. so in my view it's pretty clear the credible strategy is the one closer to the bottom, the policy which doesn't deal with the problem is the one at the top. right now people are looking to negotiate. i believe -- negotiate i believe something in between. if we do negotiate something in between that will be an important step of progress but really not enough if it doesn't go all the way. thank you very much. >> thank you, dr. -- thank you, doctor. dr. johnson. >> thank you very much. i'd like to make three points, if i may. first, i fully support the goal of what i expect to be everyone in the room would like to bring the debt of g.d.p. under control in the united states, tratjectry that we face going forward, if you look out, the i.m.f. forecast of 2016 look at the c.b.o.'s longer term projections to 2030 or 2050. the number's in the base -- the

number notice baselines are not encouraging. and we need to have debt to g.d.p. level should come under control and be brought down. the second point, though, directly to the topic at the hearing is whether we can experience at this point in the u.s. cycle what is sometimes called an expansionary fiscal contraction, meaning that if we were to cut spending, for example, immediately this would stimulate the economy and actually help with growth directly. this is a policy, for example, that the government of the united kingdom is attempting to pursue at this moment. now, expenseary fiscal contractions from experience around the world, this has been set carefully by the international monetary funds, it can be expansionary. but i do not think that we currently have those circumstances in the united states. for three reasons. the first is fiscal contractions can help with the private sector economy if they restore

confidence. if there is either a high perceived risk of sovereignty or some other concerns weighing on either consumer confidence or on -- [inaudible] confidence. i don't see evidence of that right now in the united states. long-term interest rates remain low, there are plenty of programs with debt overhang from the credit boom and those are difficult problems and that's the main reason why we're growing slowly in this case. but they're not going to be mutually when directly addressed by cutting spending, unfortunately. the second thing that can happen and this is very much the likely scenario in the united kingdom, you can combine a restrictive fiscal policy with an expansion monetary policy. if the u.k. economy slips back toward recession which is a real possibility, although the latest data is inconclusive on this, i would expect that the bank of england would cut interest rates and otherwise increase its

easing policies. now, in the case of the united states, i doubt very much the federal reserve would feel it had the space to do that, short-term interest rates are very low, it's already intervened a great deal at the long end of the term structure. i also don't think it would be a good idea for the federal reserve to continue its innovations in that direction. so monetary policy would not be able to offset fiscal policy. the third way in which fiscal contractions can sometimes be expansionary if s if they contribute to depreciation of the exchange rate. if the value of the dollar were to fall, that would help us compete against imports and that may well turn into a factor in what we will see in the united kingdom over the next one to two years. but in the case of the united states, give the nature of the dollar as a reserve currency, given the way that the world economy is developing and particularly given the problems in the euro zone which are very severe and tending to push holders of the reserve access toward dollars, not away from dollars, it's again very unlikely that the dollar would

depreciate whether or not we have contractionary fiscal policy. taking all of that together and comparing it with the cross country evidence, i do not consider us to be -- to have circumstances that would allow fiscal contraction, for example, in the form of spending cuts. i do not think that would help stimulate the economy. the third point i would make in conclusion is that we should not lose track of how we got to these problems with debt. and as you said, mr. chairman, to some extent these are longer term problems and i completely agree that we must deal with those issues. over a sufficiently appropriate time horizon but at the same time debt to g.d.p. went up very sharply. because we had a major financial crisis. big risks were allowed to build up within the financial sector and coming from a meeting this morning at the fdic, its new systemic resolution advisory committee, which is a public hearing, and i have to say the tenure of that conversation was

not particularly encouraging. there are very big risks around the financial sector that pose fiscal risks and threaten, if there is another crisis or when there is another crisis, to push up government deaf and -- debt and i hope we don't lose track of the fiscal damage brought by past and potential future financial crises in our budget discussions today. thank you. >> thank you very much. dr. hassett. >> thank you. over the past several decades many developed countries have undertaken fiscal adjustments in attempt to reduce debt levels. these countries restructuring set varying degrees of success and failure, both in producing debt and stimulating growth. the economic literature is focused on answering two main questions in this area. what aspects of fiscal consolidations produce lasting reductions in debt and what aspects encourage macroeconomic expansion? the answer to the first question is clear. based on review of the economics

literature and analysis of countries, two of my colleagues and i recently found that cugget expenditures is more likely to produce a laughter reduction in debt than increasing revenues. it's also typical that the more aggressively a country cuts expenditures, the more likely it is to successfully reduce debt in the long-term. averaging across a range of methodologies, the consolidation consisted of 53% tax increases and 47% spending cuts. in particular, cuts to social transfers and the government wage bill are more likely to reduce debt and deficits than cuts to other expenditures. there's more debate over the second question. what aspects of fiscal consolidation encourage macroeconomic expansion? the essence of the debate hinges on the balance between two economic affects of consolidation. the expectational affect is the positive affect on investments when policy is put on a sustainable path. these likely surge after a

consolidation because of expectations of lower future tax liabilities. in other words, an immediate consolidation will alleviate the hoarding that companies fear. expenditure-based consolidations would provide stronger expectational affects because there's a better chance they're successful at reducing debt and because higher near term taxes are hardly designed to ignite optimism in investors and consumers. the keynesian affect reduces demand and therefore g.d.p. growth when government spending declines. the controversies over whether the expectational affects can outweigh the keynesian affects in order to create short-term growth, there's less controversy around the view that the long-term benefits around fiscal consolidation are successful. two schools of thought emerged from the debate. some argue that consolidation, especially expenditure cuts, can lead to a burst of growth starting immediately. a team of i.m.f. economists identify possible flaws in studies and claim that the

typical fiscal consolidation would be craxary. the fiscal consolidation optimists would believe that it is correct and a large fiscal consolidation would lead to near term growth. but a pessimist would point to the work of the i.m.f. and argue that the growth affects are more uncertain. but it's important to note that even in this case, the i.m.f. study points to positive growth affects in the fiscal consolidation is correctly designed. that is both sides of the literature find that reducing expenditures will provide a better growth outcome than increasing revenues. although a tax-based consolidation would reduce g.d.p. following implementation, they find that the negative affects of a spending-based would be small. that is even in the most pessimistic corner of the fiscal consolidation literature, there's little to dissuade us. moreover they find that spending-based consolidations that are focused primarily on transfer cuts could produce

positive near term growth affects although we should add that those aristically insignificant. the latter point's especially interesting. one might expect that these would have a relatively large short run affect. the fact that expectational affects dominate suggest that out of control entitlement spending has a profoundly negative impact on forward-looking sentiment and business and consumer confidence. this also suggests a policy opportunity. given the math of imbalances that exist today, it's likely that consumers have little faith that programs will remain in place. accordingly cuts to entitlements that phase in gradually over time will likely have little impact on their perceived lifetime wealth as the benefit cuts are affectively already factored into consumer expectations. if consumers don't expect promised benefits. which means, of course, that the expectational affects of the fiscal consolidation could easily be expected to dominate and produce significant near term growth, that there are few

immediate cuts to benefits but significant longer term cuts. if in addition the fiscal consolidation were paired with the tax reform that brought in the tax base and reduced tax rates, then a significant growth spurt would be the natural expectation to draw. thank you. >> thank you. do you know we've been joined by chairman kasey today with his permission we'll finish dr. stone's testimony and then he'll be recognized for the full opening statement. >> thank you. thank you for invite knowing testify before a committee where i have a strong personal connection. i have a longer written testimony for the record which i'll summarize here. u.s. policymakers must make smart choices about taxes, spending and deficits to craft the right set of policies, to help the economy emerge from this current deep slump and achieve sustainable economic growth with high employment and broadly shared prosperity.

making smart choices requires differentiating between, one, the longer term policies needed to produce sustainable growth at high levels of employment, and, two, the short-term policies needed to restore high levels of employment in the wake of a deep recession. in particular policies aimed at reducing the budget deficit are a key ingredient of longer term policy but are likely to be counterproductive in the short run if implemented too precipitously. this is the mainstream economic position as enunciated, for example, by federal reserve chairman. in my statement he observes that fiscal sustainability is a long run concept and achieving it requires a credible, practical and enforcement long run plan. in current suckers, he says, an advantage of taking the longer term perspective is the policymakers can avoid a sudden fiscal contraction that might put the recovery at risk. at the same time, there are advantages to acting now, to put in place a credible plan for

reducing future deficits. the congressional budget office has made similar points and we believe this is the right framework for thinking about deficit reduction and economic growth. i recognize that one of the purposes of this hearing is to highlight a different point of view for what i regard as this mainstream economic consensus. but for the reasons that i'll lay out, i think that some of the arguments that are produced to support that view are unpersuasive. the premise is that we are suffering from an unwarranted explosion of government spending that's produced an immediate debt crisis, immediate reductions in government spending are necessary and could even make the economy grow faster in the short run and the deficit reduction is more likely to be successful if it is composed largely of spending cuts. questions about all three of those premiseses. first, policies enacted since the 2008 election are not the

main drivers of deficits -- excuse me, of deficits and debt. the u.s. fiscal imbalance problem is a long-term problem that has little to do with the short-term imbalances that have emerged as a result of the financial crisis and the great recession. the main driver over the long-term is unsustainable growth in health care costs throughout the u.s. health care system and the public and private sectors alike. as my testimony shows, increases in the deficit due to policies enacted over the past few years are temporary and only interest costs add to the longer term deficits. the reason government spending remains higher than it was before the crisis is primarily long standing trends in heament costs and large interest costs on debt sombed with deficit, finance tax cuts from an earlier era, deficit finance wars and deficits arising from the economic downturn. c.b.o. ziments that discretionary spending as a

share of the g.d.p. would be 2.1 % lower in 2021 than it was in 2008 and that net interest costs would be 2.1% points higher. second, large intermediate cuts in government spend willing hurt the still fragile economic recovery. we've heard some discussion about the international evidence and both the international monetary fund and recently the congressional research service in a report have looked at this evidence and we have also looked at it and we're surprised to see the extent to which when you look into the data the examples tend not to conform to conditions that we have in the united states. the best circumstances for reducing deficits are if you're experiencing a debt crisis, interest rates are higher high, monetary policy has the ability to react, if the exchange rate can react. that's not the situation in the united states.

third, and i should say, most importantly, that when you have a situation of economic slack such as the united states has, the degree of economic slack that the united states has, deficit reduction efforts that are short and sharp are unlikely to be successful. third, on the question of the composition of deficit reduction, international evidence has little to say about how much of u.s. deficit reduction should be spending cuts and shutch should be revenue increases because it's focused on the short-term. it doesn't deal with the kind of long-term deficit reduction that we need. if also -- it also does not come to grips with the fact that the united states is unique in the extent to which it relies on the tax code. the trillion dollars a year of so-called tax expenditures which are a prime place to go to find worth while budget save, it's not clear if they should be regarded as spending or revenues. and finally, it ignores lessons from the successful longer term

deficit reduction efforts such as the united states pursued in the 1990's when revenue measures were a significant component of the 1990 budget agreement and the deficit reduction act of 1993, which were followed by the longest economic expansion in our history and a balanced budget by the end of the decade. thank you. >> dr. stone, thank you very much. chairman casey, thank you for joining us and you'll be recognized for your full opening statement. >> thank you, vice chairman brady, i have to apologize for being late. but i appreciate the testimony of our witnesses. and i know there are others who are going to be asking questions and maybe making statements. i'll be brief. i wanted to first of all to make the following assertion. i don't think there's any disagreement on this committee and i actually think throughout most of the country about the need to reduce the deficit. and have a strategy to do that. i think it's shared in a bipartisan manner and we're all of one mind to do.

that the questions that we're trying to resolve here is about the timing of that and what policies yield the best results. on these questions i think there's honest disagreement but also significant disagreement. we're having a robust debate about it as we speak and throughout the next couple of weeks and months. today's hearing is part of that debate and it's important that we have this debate at this time. we have a lot of able economists across the country and several here today who offer their perspective. i want to provide a little bit of context in terms of the way i see this, in terms of some of the assertions that have been made today and will be made today. one assertion is that government borrowing is interfering with private investment. that's one assertion. the second is that deficit reduction can promote economic growth in the short run, in the short run, and thirdly that deficit reduction is best achieved through spending cuts

rather than revenue increases. i think a number of us would have significant disagreement with the one or more of those or at least part of those assertions. but i think at the same time we can all come together and agree that we have to have more spending cuts, deficit reduction, but we also have to be mostly concerned, i believe, about job creation. and my main concern with any strategy that might be discussed today or that we would enact into law is that we don't take a step that would derail the recovery in what we do in the next couple of weeks and months. if we do that, if we take steps that will in fact derail the recovery, it will worsen the long-term budget outlook and it will reduce revenues and increase government spending on automatic stabilizers like unemployment insurance. the u.s. economy's recovering

and we've recorded now seven consecutive quarters of growth but the rate of growth that we've achieved so far has been modest. in the first quarter of 2011 g.d.p. grew at less than 2% of an annual rate. the reality is that there are still major economic challenges in front of us. 14 million americans unemployed, housing crisis continued to decline, consumers have been hit hard by rising gas prices, businesses are waiting for demand to return before expanding their operations and hiring more workers. small businesses, of course, are struggling as well. and the biggest challenge we face, i believe, is job creation orality -- at a minimum, creating jobs. getting people back to work has to be our number one priority. we cut this year's budget substantially by tens of billions of dollars. but there's more to do. and there is waste and

inefficiency that we must cut, rooting out that waste and inefficiency is a prime way to reduce federal spending in the short run. i was the auditor general of pennsylvania for eight years and state treasurer for two. and in that decade i spent a lot of my days and my team did locating and eliminating waste and fraud. so i know something about it. but i also believe that making deep indiscriminant cuts immediately, immediately to proven strategies that we know will help our economy grow and create jobs could in the end be self-defeating. so i think that question of time something critically important. let me wrap up just with a reference to someone who has spent a lot of time analyzing these problems for many years, chairman of the federal reserve, ben bernanke he said recently the following, if the nation is to have healthy economic future, policymakers urgently need to put the federal government's

finances on a sustainable trajectory. but, he said, on the other hand, a sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still fragile recovery. unquote. he goes on from there. chairman bernanke has laid out the challenge that we must confront. we must have a credible plan to put our fiscal house in order for sure, reducing the deficit in the medium and long-term. a strong economy is critical to sustainable deficit reduction. we cannot reduce the deficit if we're not growing and creating jobs and getting people back to work is the key to that and i'm grateful for the opportunity today to be part of this hearing and grateful to chairman brady for getting us here. >> chairman, thank you very much. i appreciate the testimony of all four witnesses today. i recently held a round of town

hall meetings with job traders, small and medium sized businesses and had their input on how we jump start this economy and i dutifully criticize my debt crisis power point to focus on job creation, going through a list of ideas that come from washington, d.c. they said, put away that power point, go back to the debt crisis one. because in their view, until we tackle debt and deficits, they were not going to make decisions to create jobs at least in our 11 counties of texas. so i'm going to ask dr. doctor taylor and dr. hassett. doctor taylor, you talked about a game changer to restore credibility in our financial order, but we're oftentimes told up here today that we can't do that. that introducing a fiscal consolidation program would mimic that of the great depression where spending reductions, they claim, created the recession of 1937 and 1938

and they use that analogy to apply to today. what is your assessment of that analogy? and is it important for us to engage in a serious fiscal consolidation program now in order to spur the economy? >> i think it's essential to engage in a consolidation program now and it will spur the economy. again, since this recovery began and it's quite frankly hardly a recovery, growth has been only 2.8%. so the low growth now is just consist went this pattern over the last two years since the recovery began. and as i said before, if you compare that with the last time we had a big recession, the growth is less than half as much. it was 7% at that point. and when i look at it, i think that negative difference, that low growth we have now, is because of all this fiscal

activism. you look carefully at the data, that increased spending we've had, and it's huge, over the last two, three years, has not really stimulated -- it's the weakest recovery we've had by comparison. there's no evidence that it has. so i think that if you start undoing that and after all, what's so draconian about bringing spending back to where it was in 2007? why should that be so hard? and as a share of g.d.p. so when we use the words draconian or deep, i think about, for example, the 2011 budget which you agreed to recently, that did reduce spending in terms of budget authority from what was originally asked for, but the outlays are only down by less than $1 billion. less than $1 billion in 2011 compared to 2010. so the focus should be on how do you get a game changer, get enough spending down so that it's credible?

the problem isn't trying to find ways to spend more, the problem is trying to find ways to spend less. the more that you can go in that direction, the more you will demonstrate to the country that we can get our house in order and that will be definitely be beneficial to people who are worried about the debt, who are worried about inflation, who are worried about higher interest rates down the road. so i think i would emphasize so much just taking the efforts now to get started because if you don't, if you just promise us the future, it will not be viewed as credible and won't work. >> thank you. dr. hasset, what types of cuts do governments undertake that restore confidence for those making private business investment and consumers, what worked? >> the two biggest components of the successful consolidations were entitlement reductions and reductions in the government payroll.

i think that both of those show a kind of credible commitment to getting the fiscal house in order. you both know, mr. vice chairman and mr. chairman, how difficult such moves would be politically. it would require broad bipartisan consensus and to show that we could accomplish that would really create kind of a celebration in financial markets because people would think, oh, well finally the u.s. has solved this big problem. i would point, mr. vice chairman, to the beginning of my testimony and highlight the urgency of action. i think that in a that -- that dictional recession in the last 11 months or so and the recovery that grows 5% or 6% or 7% in the year that we launch out of the recession, if you have a well-timed keynesian stimulus, you might take a percent or two of growth out of the recovery year and move it into the recession year and if you're growing that much, that trade could be something that everyone on this committee would want to consider. the difference this time is that

we know from the work of some that the recovery from a financial crisis is a long slog. it lasts maybe a decade. and so if we take a keynesian approach, then what's going to happen is that the hangover from the keynesian spending is going to be present in the slow growth period and maybe even if you're a keynesian optimist about the affects of government on growth, push us toward a recession and we might have to have the argument that we need another stimulus. i would urge members to consider leaving the keynesian roller coaster and thinking about policies that can put us on a sustainable growth path without hangover. >> thank you, doctor. chairman casey? >> thanks very much. dr. stone, i wanted to ask you a question that relates to part of this debate. as you can tell from my statement, i want us to focus more on job creation. tell me what your sense is in terms of what is the optimal or

even if you have by way of a list, the optimum way to create jobs in the near term, meaning the next year or two? in terms of either a strategy that the federal government employees or -- employs or just by way of tax policy. we had as you know a tax bill at the end of last year, elements of which both parties really disliked. and other elements which they embraced. but both sides were willing to look past their disagreement or their objection to parts of the bill in order to keep tax rates where they were and to add features like a payroll tax cut which put $1,000 in the pockets of the average american family. but when you think about either government action or a strategy that has been tried or maybe has not been tried in addition to tax policy, how would you --

what do you think the best approach is to job creation and how would you itemize those if you can? >> ok, let me begin by endorsing the idea of that on the budget, a game changer would be really good. and my vision of a game changer is bipartisan agreement that recognizes the reality that tax measures, starting with going after the tax expenditures, perhaps, and spending cuts need to be part of a sustainable, believable, credible budget effort. so there's no disagreement on the panel about the importance of putting in place a plan to get our fiscal house in order and that that matters and it needs to be credible. the issue is if you do it too fast, does that harm the recovery? so my first answer to your question is, you know, the hippocratic oath.

first do no harm. don't try to do too much too fast on the deficit reduction effort, while the economy's still struggling to recover. that doesn't mean that you can't put a plan in place that is serious and begins to teakt effect a couple of years down the road. the most recent economic news has been pretty disappointing and therefore i think we should be considering whether we want to allow the payroll tax holiday to continue and also the unemployment rate is still extremely high and unemployment insurance is one of the most effective measures of injecting demand into an economy that's suffering from inadequate demand. and yet the unemployment insurance benefits are scheduled to expire at the end of the year. so i think that those are two things that are already in place , probably it's worth while extending them into next year. this is particularly true because the fed is -- it's not out of ammunition but the ammunition it would have to use

to provide further demand stimulus to the economy is very unusual measures that we don't have a lot of specious with -- experience with. so i think that don't cut too fast, put a credible deficit reduction plan in place and consider extending the payroll tax and the unemployment insurance. >> just very quickly, i don't know if others have an opinion on this, but we had at least three really good private sector job growth months in a row, above 200, one was, if my memory serves me, 230, 222 and maybe even a third that was higher than that. but and of course may came along and the overall job growth, private sector number was a lot lower. anyone have a sense of why that happened in that particular month and do you think it will

prevail or do you think we can get back in june, july and august or january to april? >> i think the important point that dr. hassett made is this is a fairly standard recovery from a serious financial crisis. and i think that's why it's so different. the employment pat ebt is so shocking -- pattern -- pattern is so shockingly different than what we've seen from post war recessions in the united states, especially the one in the 1980's. this is what happen when is you take on a massive amount of debt, particularly in the housal sector. you will have some sort of stop-start on the job side and personal willy i don't think that you should be throwing more keynesian roller coaster-type stimulus at it. i don't think that works. but i would emphasis that most of the debt to g.d.p. is due to automatic stabilizers. you have to let them work. they are relatively weak compared to almost every other

industrialized country. that's a main reason why it made sense to supplement them at the beginning or the deepest part of the recession. but that's done now. that's history. i think that i agree completely with dr. stone that you don't want to derail the cover recovery now by overreacting. sure we want debt to g.d.p. will come down but it will come down as the economy recovers. if you try to cut spending too much too soon, that will have counterproductive affects -- effects. i haven't heard anybody on the panel make a convincing case for, it i don't think mr. bernanke would also be inclosed -- inclined to make that case. >> i just wanted to -- >> i'm out of time. >> mr. vice chairman brady nodded, i think. i just wanted to add that we did a recent calculation comparing the u.s. recovery to this financial crisis to the past

financial crises that were studied by reinhart and asked ourselves if we have the typical experience of a country after a financial crisis, what would the employment rate in the u.s. be in 2018 amend the answer is about 8%. so we're in a base case that's a really tough slog and a real painful challenge for america's workers. and if we don't get serious about doing something that's not going to jack up growth for one year, but really fix the problem, and i think that we need both the fiscal consolidation and a fundamental tax reform, then we're looking at a base case that's really terrible. and i think that's probably something that we all agree on as a panel. >> thank you. >> thank you. >> thanks to all of you for coming. i wanted to start with dr. taylor. what do you think would be the impact of a tax rate increase on our economy at a time like this one? >> i think it would be very harmful to have a tax rate increase. in fact, i think senator casey asked about explanations for

that sort of little pickup in job creation. you know, it occurred around the time of december when the deal was made to postpone the tax increases. remember, i think that was quite significant. whether it was permanently postponed, but there were tax increases on the books and they have been postponed. i think that was positive. it give us some sense of what you can get from the green not to increase tax rates. it would be very harmful to the economy. >> what if we limited the tax rate increases to the wealth j in -- wealthy? >> it's a very important step. if you could -- tax reform is also important, i'm glad to hear there's more interest in that on capitol hill at this point. but to me the first step is don't increase taxes, leave those tax rates alone. and -- >> even in the higher income brackets. >> just across the board. there's no reason to increase those tax rates. there's this phrase that people sometimes use there's spend aing

problem, not a tax problem. that's the truth, actually. if you look and you look at the numbers carefully, it's hard to convey that to people without looking at the numbers, but when you look at the numbers, that's really what it is and you don't want to risk the disincentives, there are enough disincentives now for firms to invest with the regulations and the fear of the debt problems and for that matter the monetary policy, but there's lots of reasons that investment is not as sthrong as -- strong as it should be or could be. house something part of that. and thls unless we get investment moving, unless firms start investing, unemployment is going to stay high. that's what we drive at. private investment, whether it's equipment, structures, annual jobs, jobs being created -- >> and that investment that you would argue is less likely to occur when those who would be investors have the promise, the assurance that they will be able to keep less of that money?

>> yes. you know, you tax something more, you're going to get less of it and these days there's a fear of increasing taxes quite a bit because of the budget. so i think that's part of the idea of being credible, predictable, is to recognize that the best way to do this is by not trying to raise tax rates. and quite frankly i don't see as much interest in doing that in the country pace in. >> would it be fair to conclude that a supposed tax rate that affects only the rich is in fact a misnoemer because it would impact perhaps most acutely, most severely, those most vulnerable people, those people who most desperately need jobs, who would be less likely to find them as a result of diminished investment leading to less employment? >> if you make -- reduce intendtifics for firms to invest and expand, you're going to reduce the incentives for them to create the jobs and that's where the jobs come from. the jobs are not coming from more government purchases or

even less government purchases, private sector investment, that's what the data show. and to the extent that you can encourage that by not raising the tax rates on those firms, there's a lot of small business firms, larger small business firms shob tour -- to be sure, it's going to be counterproductive and will have this high unemployment rate which is a tragedy for quite a while. >> we hear a lot of talk about the debt limit and how a failure to raise the debt limit could result in this or that economic catastrophe. is there not also an economic catastrophe that could and would await us if we were to raise the debt limit reflexively as it has been raised many times in the past, without any significant strings atatched, without attaching it to significant binding spending caps? >> i think tying the spending reductions to debt limit increase is very important. i wrote in "the wall street

journal" about that a couple of weeks ago. i think the position that has been taken there has been very productive, it's actually driven i think the talks in a good direction. so a clean, so-called clean debt limit increase without spending would damage credibility, especially at this point because we've had such a surge in spending. so i've argued strongly for tying these together and i can see why they would like to have a clean debt limit increase but especially at this point it would be a mistake. i hear about these budget negotiations, we stand a good chance of tying those together, as the speaker originally suggested. >> thank you. >> thank you. congresswoman sanchez is recognized. >> thank you, mr. chairman. thank you, gentlemen, for being before us. oh, gosh. i always am amazed at the difference of opinions that we

get whenever we speak about the economy, and i'm always amazed, also, when i'm at events and people think they all know about the economy and try to tell us what we should be doing. what i've learned in the 15 years i've been here and my studies when i graduated with an economics degree, an m.b.a. and former investment bankers is sometimes you just don't know. you know, i would like to say something about the stimulus because it has been maligned about the recovery package. yes, it was $800 billion. some of that was tax cuts. it was not spending. it was tax cuts. so you can't have it both ways. you can't say that the renewal of the bush taxes in december were not -- were not spending.

you just can't say that. you can't say -- you can't count spending a third of the spending package that were taxes as spending and not count the bush continuation of tax cuts as not spending either. you can't have it both ways. we either count it one way or we count it the other. when we were told in december that if we pass that package of tax cuts it would give stability and businesses would start using their $1.4 trillion that they sit "encore booknotes" their balance sheets. and you know what, they haven't. it's been a jobless recovery. so we hear, keep the taxes low. the fact is that bush's comptroller has stated 70% of the debt and the majority of this debt was accumulated under

george bush. the 70% of that was due to the tax cuts over and over and over during that time. and then, of course, we had some other things. a couple wars i didn't vote for. a couple wars i think we should be out of. a couple wars we should be spending money on. more and more. it's keeping us from investing in the future of our military because it's operational and halfway around the world and it's not money going in our pockets. it's money outside of our economy. so, you know, i'm hearing all sorts of information out there, but the bottom line is i think we need a little of both. we need to talk about some real spending reforms. i think defense has to be on it. from the looks of the house, the bill passed recently, that was increased. significantly.

the defense increased significantly. by the way, it's not going to our people working back at home or defense contractors trying to build systems. they're in fact being cannibalized and they're not being paid and they're stopping their production lines. which is going to cost us more in the long run to retool and reset our military. so i want to ask each of you, do you really think that it doesn't take a little bit of both, some spending cuts, maybe in a moderate way but with a firm commitment and some increase in taxes to start -- to get this back and maybe we'll start with dr. stone and go down the list. >> i did say i think we need a balance that has both. i think that one of the things that's problematic about debating over the debt limit which has nothing to do with controlling deficits.

it may be a way to get people talking, but when people are talking they have to talk about something that can really happen and that would require a balance of the two. when you ask businesses what's -- what's the problem? they don't say -- they always say it's taxes, but that's the constant. what's really gone up is sales. to get business incentives to add capacity when they don't have customers in the stores is problematic. i think they need the customers in the stores first. >> yes, thank you. in my testimony say it should be both. i recommend modeling it after the typical successful consolidation. >> thank you, doctor. >> i completely agree with you, congresswoman, that military spending needs to be capped in the long run. particularly health care spending as a percentage of g.d.p., if you look out to 2030, 2050, that would be a major problem. i would go further than dr. taylor right now. if you have the possibility of putting in place a credible

limit on future health care spending as a percentage of g.d.p., by all means, tie that to the debt cap discussion or implementing it in some other way. that would have a major effect. that is mostly about spending. i would emphasize, it's not just government spending, federal government spending, you have to look at general government spending and also private sector spending. when i talk to entrepreneurs, which i do a great deal in my various jobs, they are worried about health care costs they will face in five years, 10 years, 20 years. that's a major burden we have not yet seriously addressed. i would put that in the front and center of the long-term fiscal needs. >> thank you, doctor. >> i use a couple of my charts to answer this question. i guess not. ok. one of my charts shows that if we brought spending back -- maybe this goes to the next to last one, i believe. yeah, this one.

so this is federal spending as a share of g.d.p. going, you know, back a few years. you can see how it grew a lot in 2008, 2009, 2010. it was 19.7% of g.d.p. in 2007. and the house budget resolution, which is the line that brings it down -- brings it back to the same level, 19.7% of g.d.p., so -- and that's roughly what you need. maybe a little bit less. depending on what we think is happening with taxes for a budget balance because the budget was about 1.7% of g.d.p. in 2007 or so. that's what i think is the spending problem. that's why i say it's that way. if you look at the next slide -- my next slide -- that first slide divided everything by g.d.p. because i think that's how economists would like to think about it. we're not talking about cutting

things. this is the total spending without just what it is. you can see where it was and see where it would go with the president's first budget and see where it goes with the house budget resolution and they all increase. i mean, these are all increases. i think you have to put that in perspective as well. then the question about the part of aaora and the tax part of the 2008 stimulus is a very important question. when i look at the impact of the tax rebates or the one-time payments, they seem to do very little good in terms of stimulating consumption. both in 2008, february, 2008, the economic stimulus act, and 2009, the tax components of those were mainly just to send money to people, tax credits from previous earnings and mostly was spent. it did not jump-start the

economy. you can see that in the data. when we talk about tax rates increasing, that's a different story. that's what you'll do if you create a job or if you expand your business. the money you're going to get by doing that or the benefits from that, that's not a rebate from the past which tends to get wasted, unfortunately, in terms of stimulating the economy, but what's so important to these tax rates, and that's why in the answer to senator lee's question i said that tax rates would be incredible at this point. >> thank you. >> thank you, mr. chairman. i'll talk about what the congresswoman was talking about. see if we can't find some similarities of opinion in what we're talking about today. i'd like to start with taxes, following up what the senator said as well. if they could bring up slide number one, if you please, which is the federal income tax revenue, top tax income rate.

once they get it up you'll see the red line is the federal revenue as a percentage of the g.d.p. and the top tax rate. and as you can see, i think several of you may be familiar with this graph, over the course of the last 60-odd years the federal government has generally taken out between 15% and 20% of g.d.p. in tax revenues. i think the average of the course of the last 50 years is roughly 18.5%. but during that period of time where the government's share of the economy was relatively stable, tax rates were all over the map. this is the top marginal tax rate. what i heard just a moment ago from this panel, as we went down and talked about the importance of having a mix between spending reduction and tax increases, i did not hear anybody clamoring for dramatic increases in the income tax. what i heard dr. stone was tax expenditures. dr. hassett, i read some of your work.

i think you did some work on other physical consolidations which focused on tax increases on consumption as opposed to productivity. what i'm looking for, gentlemen, as we look our hand over and as we look at different options that are available to us, is it fair to say that increasing the top marginal tax rates is probably the least desirable way to go forward? and i'll start with dr. stone. >> i mentioned tax expenditures because that's something we ought to be able to agree on. dr. taylor is talking about how government spending has moved to a new higher level. i think if we're realistic about the demographics in this country, about rising health care costs and the increased interest that we're now paying because of the debt incurred as a result of a recession, we're not going to be able to go back to historic levels of spending as a share of g.d.p. without more revenues. and proposals -- the

president's proposals would move us back to -- would include some increases in tax breaks in the income tax. it would get us back to the levels we had in the 1990's when we really did not have -- when we had our longest economic expansion and a balanced budget. it's not prohibitive. very high marginal tax rates are discouraging but modest tax rates we don't need to be afraid of. >> i don't mean to interrupt. i'll give everybody a chance. i look at the rates during the late 1990's when they were increased and while they did represent a slight -- they did lead to a slight increase in the government share of g.d.p., it was not marked at all. in fact, you could argue it was the g.d.p. growth that was experienced during that time that boosted the government share of revenues. it wasn't the tax increases that boosted the revenues. it was the larger share of the overall economy. >> don't disagree that the

strong economy helped and importantly those tax rates did not interfere with that very strong economy. >> thank you. dr. hassett. >> i agree, mr. mulvaney. i would add it's especially urge ept, as mr. camp said -- urgent, as mr. camp said, we are about to have the highest corporate tax on earth. why is that? it's the longest time we've seen a growing plant building. they're being located offshore to take advantage of much lower tax rates. i think as we think about the fiscal consolidation, one of the urgent design problems will be finding the space to get the u.s. to at least sort of the middle of the oecd in terms of corporate rates if we expect growth to resume here. >> dr. johnson? >> i agree with the need of tax reform. i don't know the details of dr. hassett. i think taxes consumption and doing that in a way which

protects four people which is done in other industrialized countries, that's a good idea. however, with regards to what you do about marginal tax rates within the existing code, just two point. first of all, i don't think anybody pays the rates we paid in the 1960's. i don't propose it to go back to those levels. however, i for one did argue against extending the bush tax cuts in december. in terms of the feasible ways, credible measures you can take to bring the budget under control, if you have ways to control health care spending, if you have ways for end wars, i'm completely open for that. i think that would be better. but given the feasible choices before us, addressing a little discretionary spending is not going to make a difference. addressing or not extending the bush tax cuts, by the time they would come up in 2012, would make a difference. now is the time to start considering that. >> mr. chairman, i ask that dr. taylor be given an opportunity to respond. >> dr. taylor.

>> i -- your chart is very important to take into account when you're taking of -- when people are thinking about raising marginal tax rates. history shows, especially if the top ends where people can avoid them or take actions not to pay them, it doesn't raise the revenues people think. but i would also add, since spending is an issue here, if you grasp spending way out into the future along with what taxes will be with the marginal tax rate increase, spending just dominates. spending is like this exponential thing that will eat you alive. if you try to raise taxes to deal with it, it may -- it's hard to notice in a graph. it's hard to notice what it will do. so forget that for a while. you know basically that's not the thing to do in a weak recovery. put that off the side. look for tax reform. broaden the base and reducing marginal rates is always good to try to do. but in the meantime, it really

seems like it is a spending problem, as people say. >> mostly health care spending in the 2050. >> thank you, gentlemen. >> thank you, mr. mulvaney. let me ask -- we hear spending cuts will endanger this recovery. however, it is. but fiscal consolidation, looking at our competitors around the world who in the last four years took on various forms of fiscal consolidation, as many of you mentioned, and in 26 instances they grew their economy in the short term as well. they spent less, controlled their fiscal policy. they owed less and the nation reduced their debt mainly through targeted spending cuts and grow the economy in the short term. canada is a great example. less than 1% growth.

high debt levels. they went on a constant effort to reduce their spending. lowered their country's debt by around 12 percentage points. the economy went to 3.25%. averaged that for more than a decade. sweden did the same. new zealand had more interesting streaks along the same way. so to this theme that if we control spending it will harm this economic recovery. dr. taylor, dr. hassett, do you believe that to be the case? do you think congress is capable of such severe spending cuts that it will endanger this remarkable recovery? >> i don't -- i don't think so based on the 2011 agreement which was good. budget authority shifted from plus 39 to minus 39. and the discretionary accounts -- in the discretionary

accounts. outlays less than $1 billion. that's an example of why it's so hard. i would say the -- quite frankly, i think that the credibility is very important to make sure it does have positive effects. willy-nilly, unpredix dictible changes in government policy is not good. it makes for more uncertainty, so everything that you can do to say that what we're doing is part of this long-term path, caps on spending, debt increases, put it in legislation, everything that can make it a credible, believable deal will make it more powerful in a positive sense and mitigate the negative things that dr. stone is referring to. the credibility, the ability to plan for the future. this is what government is doing. at least it's clearer now than what it is.

they're getting their house in order. it would enable businesses to expand. i put a great deal of emphasis on credibility. it's good to be gradual almost for sure. that's the nature of the politics. it will be gradual. i think to some extent the statements that's going to hurt the economy if we go too fast, that it's too draconian, i don't think it helps the discussion because it puts up this thing which is like a strawman. the charts are not draconian. even with the most ambitious budget, there's not draconian changes we're talking about. >> thank you, doctor. dr. hassett. >> mr. brady, one thing i would like to talk about the potential scales of near-term effect, potential value is something like $100 trillion if we try to let medicare the ray

way that it's planned. so on. if businesses plan to pay their fair share of tax increases, we're talking about a tax liability that's bigger than $10 trillion. bigger than $10 trillion. bigger than 10% which is closing on the market cap for u.s. firms. and so the scale of the tax shortfall is humungous and it's really large compared to corporations. maybe they don't think we'll cover the whole thing with tax increases. if they think half of it will covered with tax increases then that's a significant liability, impolicity liability that's on their books. if -- implicite liability that's on their books. you can set off an investment boom today. i think the scale of the problem is such that this expectation effect could be large if it's credible if the spending deal with the company

by maybe some very clever new gramm-rudman style rules that made people believe these spending cuts are there to stay. >> thank you, doctor. i want to point out, we often talk, people look to the clinton years, the golden years of the economy. i want to point out that president clinton, working with a republican congress from 1993 to 2000, lowered the debt to g.d.p. ratio from over 21% to around 18%. and the economy grew as we did. so spending less, owing less can spur this economy very much in the right direction. >> excuse me. may i -- >> absolutely. >> couple things. you point out what happened in the u.s. in the 1990's and you mentioned the canadian experience. i won't ask that the chart be brought up but i have a chart in my testimony that talks about the canadian experience.

two things are notable. one is as the expression goes, when the united states, you know, that canada is very sensitive of u.s. economic conditions. and canada rode the expansionary boom of the 1990's that you talked about. also, canada started with a higher level of spending than we had and came down not all the way to the level of spending as us. so i'd be careful about canada as an independent successful experience. one other thing, the -- you talk about the 26 episodes of expansionary contraction. expansion was defined in that study of being in the top quarter of the 107 episodes that they studied. when you look at examples that were both expansionary and successful in bringing down debt to g.d.p. ratio, there are only nine examples. and three of them are norway.

one's sweden. one's the netherlands. the scandinavian economy is a bit different than ours. >> i would point out, too, if we could bring up another chart of canada. it came as experience. there you go. total government spending whereas you could tell very struggling economy. took on concepts to reduce their debt, including a spending cap on each budget area where agencies that were run in effect by members of parliament could not increase but without commensurate spending cuts to keep under those caps, they lowered their debt and grew the economy in a substantial way. it is as a neighbor i think a very keen example how countries can constantly control the spending and grow their economy in the shert tomorrow as well. senator lee.

-- economy in the short-term as well. senator lee. >> some of you discussed credibility as we approach the debt limit increase and other decisions that will affect the spending of congress as we move forward. and dr. hassett, you spoke about gramm-rudman legislation. i was in high school when it passed. i had great optimism for it. i was disappointed when it ceased to do its thing. as we found over time, congress has a certain tendency to be a walking, breathing, living waiver onto itself. one congress may not bind another congress. we can't speak now for what successive congresses may do. pay-go was a great idea but pay-go has been waived so many times that it doesn't really do a whole lot. but there is one way that we could find a future congress

which is by amending the constitution to cap to a fixed percentage of g.d.p. the level of our spending, to require a balanced budget and to put certain restrictions on what it would take to raise tax rates. what do you think about that, dr. hassett, in terms of the credibility of the marketplace? >> i would very much support such a cap, but constitutional amendment -- it could be impossible to change it. >> nothing's impossible, doctor. >> a constitutional amendment with a spending cap, especially if the spending cap would be something relative to potential g.d.p. so that we wouldn't have a pro-cyclical approach to the rule then i would support it. >> potential g.d.p., explain to me what you mean. >> if we were at full implement then it would be -- full employment then it would be how much g.d.p. we could make and if that's the sort of metric we would use, how big should government be, then we won't have a problem if the g.d.p.

collapses then we're hitting this cap and reduce government does in the middle of a recession which would be hard for the automatic stabilizes to work. >> dr. johnson. >> just to reinforce that last point, that's absolutely correct. if you had an amendment that said you must hit a number in terms of government spending in terms of actual g.d.p. sometimes that might work fine. you could have a calamity, financial crisis or some other kind of problem and the g.d.p. falls below 20%. and then if you had to reduce government spending to hit constitutionally the target ratio, well, you would have to do all kinds of things which is raise taxes when -- at the worst possible moment which is in this economic freefall. then, of course, when you talk about potential g.d.p. there are issues of how do you define potential g.d.p.? who will be the ash tore of this? -- arbiter of this? and this cross-country

experience with this very tough and hard budget rules which are only good as you say or congress or the equifflept body. you could redefine potential. >> it's harder than you think. >> sure. i understand why the task of defining potential g.d.p. would be difficult. that's one reason why basically all balanced budget amendment proposals, including that sponsored by all 47 republicans in the senate, have provisions in them allowing for these restrictions to be circumvented, it has a higher vote threshold. do you want something to add? >> short of a constitutional amendment, there are almost every states that has a balanced budget requirement. they also often have things like supermajority rules to increase taxes. and the me cancally it's often the case -- mechanically it's often the case they could ignore the supermajority rule. it almost never happens. if you think designing a

constitutional amendment you might try to think of whether a supermajority rule could create a tab auto that senators and representatives -- taboo that senators and representatives would not want to agree. >> i have one final question for dr. taylor. interest rates are really low right now. they're substantially below the 40-year average. as i understand it, as much as 350 basis points below the 40-year average. how high do you think interest rates could rise, say, in the next, i don't know, 18 to 24 months once qe-2 comes to an end and factors come to an end, how much play in the intermediate term, 18 to 24 months? >> well, right now the weak recovery that i referred to before is one of the reasons why rates are so low.

so maybe we can go back to more normal levels. normal levels you could have a real interest rate of 2% and if inflation is two then it's 4% on the short end. that's kind of a normal level. i think the fear and the concern is when we might get behind the curve on dealing with inflation and that means inflation would, you know, go higher. like overshoot any reasonable target. of course that would drive interest rates up dramatically. that would be very harmful. we haven't talked about monetary policy, but there is a concern with all this overhang of reserves and money that would the fed be able to pull it back out at a sufficient speed without also being disruptive as it pulls it out to prevent inflation from picking up down the road? we already had some movements up in inflation.

i think they'll probably come down a little bit, but the real concern is if it goes back up again and that would be the main driver of interest rates down the road. it's a concern to me. >> thank you very much. >> thank you. congresswoman sanchez. >> thank you, mr. chairman. i just wanted to read into the record, because we were talking about -- i think it was dr. taylor saying it's not draconian to go back from where we are today back to the 2007 fiscal numbers, for example. i have stated that, you know, i think in fact we have to have some spending -- some spending cuts and we have to look at them carefully and in fact we have not had spending on defense. in fact, my republican colleagues continue to increase it. just want to read into the record in fiscal year 2007 the total for defense spending was $110 billion at a base and $109 billion because the wars we were in for a total of there

are 219 billion. in the fiscal year twelve -- 2012 bill that was approved in the last week or two, the authorized amount is $690 billion. so $690 billion is what they have set it out from the house with a republican-controlled house, $219 billion are your 2007 numbers. so, again, i think there are a lot of places to cut. i think that would be one of those that would show some credibility of how congress feels about some of the spending. and we also note for the record with respect to pay-go because it was brought up by one of my colleagues. i personally when i first arrived here in the congress voted for the pay-go rule almost 14 years ago as a blue dog. we were the ones who proposed it. we were the ones who helped get it through.

i will remind my colleagues that it was actually when the republicans controlled both the house and the senate that they let the pay-go rule expire. so, i mean, there can be a lot of talk about what we want to do. we actually had it and it was working, but because of the large spending that happened when the republicans controlled both houses of the congress, they did not want to abide by pay-go and they let it expire. and i just would like to have those comments in the record, mr. chairman. >> probably no chance i could one up that one. mr. mulvaney. >> thank you, mr. chairman. and, gentlemen, the chairman has informed me i am last which is ordinarily a bad thing. he says i can have more than the five minutes if need be and it's a tremendous opportunity for me to sit here and get you all in unone room. good -- i look forward to reading more about dr. stone and dr. johnson's work after

today. i want to talk about a couple of topics. let me talk about canada, something i spent a little time looking at. dr. stone, you talked about the fact they may have been along for the ride on the economic boom we had in the 1990's and that might have contributed that to their success and i would encourage you to consider the fact that they also dramatically reduced their economic -- automatic stabilizers. one of the things they did, the two major reductions they had to their spending was number one their health care which also was their employment benefits. we talked about leaving the automatic stabilizers in place. but clearly if we do look to a canada data, it's clear they actually reduced their automatic stabilizers. i'd like -- i drive around talking to employers, i hear oftentimes it's difficult for them to find people go to work because of the stabilizers. i have several examples of them going back to folks they laid

off during the downturn getting their jobs back. they have eight months of benefits left and please call them in 7 1/2 months. do you gentlemen not think extending these automatic stabilizers -- i think dr. johnson said it in his testimony -- there is a negative effect on ongrowth? we have essentially incentivized unemployment. so, dr. johnson, i'll let you begin. >> no. this is a tough place to be unplanned parenthood. you get relatively low ben pets. you get it for a relatively short period of time. i'm sure you're right, there are employers who have trouble finding the precise workers that they want. in general the employment picture around the country is bleak and that's actually another very disconcerting parallel or comparison with other postwar recessions. previously, the s.n.l. crisis, when texas was in big trouble other parts of the country were

booming and people were able to move to those booming parts of the country. that's not available right now, and we had the problems of house mortgages and people being underwater on their homes. making it the hardest move. automatic stabilizers are weakened. with regard to canada, where i was just a couple weeks ago meeting with finance canada people, the treasury and the central bank, you know, it's true that the worst reforms, it's trude they had one of the greatest commodity booms of all times, and their health care system is far more generous than the u.s. system. i'm sure you are not proposing we go in the direction of canadian health care. >> let's talk about jobs for a second, gentlemen, because i think dr. hassett mentioned while you don't see the plants being built any more down the roads and i think there is a tax component to that. i think there is a regulatory component to that. i live in a tech area.

the regulatory climate i think certainly explains why we're not seeing more job growth. but i had a discussion the other day with folks in the construction business. that's what i used to do. the analysis that they go through on whether or not to build a new plant i think is in sightful. not only are they looking at the after tax returns, there's no question about that. not only are they looking at the regulatory environment but the net present value of their particular investment which means they have to focus relatively sharply on what the discount rate is going to be. and i think it was dr. johnson who said that, you know, one of the things they're concerned about is the long-term implications of what they're doing. i think you're seeing that raise its head in the discount rates. we hear inflation is zero. i hear some incipient inflation that they think it's higher than reported because we took energy and food out. but i think businesses look at what we're doing and recognize that there's going to be inflation, that businesses look

at us and say, either they're going to have to print money in order to get out of this. they're never going to be able to agree on tax increases. never agree on spending cuts and end up printing money. and as a result the discount rates that businesses are looking at are dramatically different than we think from an academic standpoint. would you agree with me, gentlemen, by us continuing to run up these dramatic deficits we are discouraging investment in this country? is there anybody who disagrees with that statement? >> i agree completely. but the c.b.o. forecaster 2030, 2050 we have massive deficits, much higher debt to g.d.p. than any other country, including japan, is mostly due to uncontrolled health care spending. that's the primary driver. the federal government, general government and also the burden on the private sector, on the private business. that's what they're terror find of with good reason. if you fix that you will be

heroes whatever side of the political spectrum you come from. >> in the long run, health care costs are the game. if you can control them in the economy, the deficit problems are manageable. if you can't you won't. but the other thing that's driving those horrible long-term pictures, i guess the c.b.o. will come out with the long-term outlook tomorrow, if you're running deficits now you're building -- you're incurring debt and there's interest on the debt. so a huge amount of what's going on in the outyears is spending on interest payments and if you control the deficits now, whether with taxes or with spng, you get rid an awful lot of the spending problem that's due to interest in the outyears. >> lastly, i'm getting ready to finish, if you could bring up, please, dr. taylor's figure number three, and i can't get -- i was -- i can't get too

highly guys and can't get them to see where it went on this graph? the top is the interest rate. the goment line is percentage of g.d.p. you can see unambiguously the two lines run together. when the government spends less people go back to work. the other graph that the committee came up with is the correlation of private payroll employment and those two numbers are perfectly correlated. see if they can bring that up. so tell me, gentlemen, what i'm seeing in the real world, and the reason i'm no longer a keynesian, when government spends less, people go back to work. the exact opposite is true. so tell me, why are we still clinging to the concept when the government needs to spend more in order to put people back to work? >> you have to ask the question of causeation. i'm not by any means

reconstructive keynesian. i'm the former chief economist of the international monetary fund. i'm a fiscal conservative by any standard. what happened in the united states in the 2007 and 2008, we had a huge cry sifments we can argue for a long time about the reason for it. the major financial crisis, every country which it happens, drives up unemployment and causes the economy to contract. dr. hassett told you will have government rise higher to g.d.p. whether or not you have automatic stabilizers and if you have some reasonable -- automatic stabilizers that aren't superstrong that's the consequence. certainly of the big changes thaw see here. over longer period of time, i think it absolutely makes sense to keep tax burdens down, to allow them to get beater return on their investment, to have less uncertainty about the

value of future taxes. >> i don't mean to interrupt you. you may hit on exactly my point and the reason i no longer -- maybe your side or dr. stone's side of the aisle is that we have been doing this forever. we have been in a keynesian stimulus for the last 25 years. i guess i can agree philosophically if you get in a short term you can use the stimulus in order to prevent the bottom from falling out. we've been filling this keynesian idea for the past 10 years. >> it has lent away from balancing the budget toward big deficits and running up the debt. sometimes you've been helped by administrations and sometimes the administrations have pulled back a little bit. there's no question that spending has tended to outrun revenues in this country for a long time. actually to be honest, the other point we have not discussed is how we finance these deficits? increasingly finance them by selling bonds to foreigners. now we run 11 new carriers

around the world, nobody else has a single one. we sell bonds to china. how does that make sense? if you find something taboo i would say that, selling debt to china because that surely is not going to prove ultimately sustainable. >> thank you, gentlemen. the tapping sound i've run out my patience with my chairman. thank you, gentlemen. it's been a privilege. >> good line of questions. you would have done that all day. i think we all would have, too. this is a great discussion. we really are at -- we are all looking for a game changer, i think, in this country. how do we do it and do it smartly and what the best approach is? you provide good ideas and input and insight. thank you for the testimony of you today. thank you to our members for being here as well. with that this hearing is adjourned. [captioning performed by

national captioning institute] [captions copyright national cable satellite corp. 2011]

>> the joint economic committee, one of several

hearings that c-span is covering today, along with our regular senate and house coverage. the house will be coming back at 5:30 eastern and members then will consider four bills, renaming post offices. votes postponed until 6:30. that will be followed by debate on a bill eliminating the election assistance commission. the bill -- the commission was created after the 2000 bush-gore election. local election officials have been updating machines. later this week possible bill includes changes in the federal patant and trademark law. also, the defense department spending. the fema director at the time of hurricane katrina in 2009, michael brown, has written a book called "deadly indifference" at the press club at booktv.org. also, this weekend on "american

history tv" they'll continue their various aspects of the 150th anniversary of the civil war. on saturday massachusetts senator charles sumner, who has been in the senate for 23 years, and a leader in the anti-slavery movement. you'll see a presentation about his life this weekend saturday at 6:00 and 10:00 p.m. eastern and sunday morning at 11:00 on c-span3's "american history tv." >> this weekend book tv and american history tv look at the history and literary life of savannah, georgia, with book tv events on c-span 2 including the childhood home of novelist and short story writer, flannery o'connor. and the sister of jim williams. also, a tour of urban slavery sites with civil war savannah co-author, vaughnette goode-walker. travel to the founding days of savannah as we visit the site of a plantation and explore

antebellan war. this weekend on c-span 2 and 3. >> mr. president, thank you very much. i feel deeply honored to be nominated to become the 20th director of the central intelligence agency. >> with his senate confirmation hearing scheduled for this thursday, learn more about general david petraeus during his nearly 50 appearances online at the c-span video library. with more than 115,000 people and every c-span program since 1987. all searchable and free. it's washington your way. >> federal communications commission commission julius genachowski announced yesterday the f.c.c. is considering rules to protect telephone customers from unauthorized phone bill charges. the unauthorized charges are placed on them by the phone

carriers as well as by third parties. the f.c.c. chairman says only one in 20 consumers notice these cramming charges. his notice is about half an hour. >> good morning, everyone. thank y'all for being here and a very warm welcome to our c-span odd -- audience. i'm the executive vice president here at cap, the center for american progress, and we're delighted to have here for the second time the chairman of the federal communications commission, julius genachowski. this morning's discussion is about empowering and protecting consumers and it's an important one. as families across america are struggling to buy fwroseries, save for the future and even just to make ends meet. last month the bureau of labor statistics reported that real hourly wages had fallen 1.6%

seasonally adjusted over last year at this time while consumer prices continue to rise. it rose again last month with food prices up half a percent. although the economic recovery is slowly perhaps gaining traction, rising costs and stagnant wages diminish the purchasing power making it important for american families that they have the tools to avoid unnecessary costs. today, chairman genachowski will discuss what the f.c.c. is doing about cramming. when there are unauthorized or confusing charges on your monthly telephone bill. as a busy mother of two girls i can tell that we have very little time to spend carefully going over our monthly phone bills to double check every charge and even less time to call and complain and try to get a charge remedied if it doesn't belong there. if this is hard for us, and both my husband and i have a consumer protection background, manley what it's like for most american families who face -- imagine what it's like for most american families who face

these challenges. the f.c.c. under the chairman's leadership has taken steps to protect and empower consumers. the chairman's consumer empowerment adjustment draws on the internet and 21st century technology to give consumers the information they need literally right at their fingertips to make smart choices. the chairman has here at c.a.p. to provide consumers with simple and easy to understand tools to prevent phone bill shock. that's when you have a dramatic increase in your payments usually because it's mobile phones. today he's going to talk about steps the f.c.c. will be taking to empowering consumers to protect themselves on their phone bills. we are very pleased to welcome the chairman back here at c.a.p. and while i think in many cases he needs no introdux, let me give him a background. he was the law clerk at the supreme court and u.s. court of appeals for the d.c. circuit for chief judge micfah.

and counsel to the former f.c.c. chairman. he was an executive and entrepreneur in the technology industry working to start, accelerate and invest in early and mid-stainled technologies in other companies. from 1997 to 2005 he was a senior internet executive at i.a.c. internet corporation. his career is rich in social enterprise. he was a member of the founding group for something called the new resource bank which serves the needs of green entrepreneurs and sustainable businesses and served on the advisory board of environmental entrepreneurs. as an advisor to his harvard law school friend during the presidential campaign he then harnessed senator obama to introduce strategies to change the way presidential campaigns are run forever. since his appointment in 2009, chairman genachowski has focused on protecting the consumer and making sure our

telecommunications work for real american families. by helping them to become aware of their rights as consumers and providing them with the tools to protect themselves against unfair practices, the f.c.c. aims to help american families keep their hard-earned money by becoming savvier people. he deserves our thanks for making a positive and long-term impact on the livelihoods of american families. i look forward to learning today about the steps they are now taking on the question of cramming. please join me in welcoming chairman genachowski. >> thank you very much. happy father's day to everyone here. see some nice new ties in the audience. i got mine. i'm pleased to be back at c.a.p. as sarah mentioned, i was here last october to announce the launch of a major new effort to crack down on bill shock.

bill shock is when mobile subscribers see their bills jump unexpectedly by lots of money. ten's, hundreds or even thousands of dollars from one month to the next. i said then that oir bill shock efforts were part of our consumer empowerment agenda which focuses on harnessing technology and transparency to empower consumers with the information they need to make smart decisions and make the market work. the day after that announcement, the commission voted to move forward toward an automatic alert system that allowed consumers to avoid surprise overage charges. that process is on track, and i expect we'll have a practical solution in place in the not too distant future. later that same month, the commission took strong action to deter mystery fees. as you might guess, these are fees that mysteriously can appear on consumers' phone bills that are unusual unauthorized by the customer.

the f.c.c. investigated report that verizon wireless had charged 15 million customers improper mystery fees. at the conclusion of the commission's investigation, verizon wireless agreed to repay their consumers more than $50 million in overcharges and to make a $25 million payment to the u.s. treasury, the largest settlement in f.c.c. history. now, the f.c.c. is taking important steps in our efforts to crack down on cramming charmings and other mystery fees. we've proposed high fines for companies that have taken millions of dollars from consumers through unauthorized fees. we're taking new steps to educate consumers about cramming and tomorrow i will circulate to my colleagues on the commission an item that will empower consumers to better protect themselves from cramming. these are important next steps to protect consumers from hidden fees that can cost them

money, that can take valuable time to resolve and that can undermine the public's confidence in communication services. cramming is a term of art in our space. what is it? it's the illegal placement of an unauthorized fee on a consumer's monthly phone bill. the cramming party, the crammer can be the customer's phone provider or an unaffiliated third party. the improper charges can be for voicemail or long distance service that the consumer didn't request and can be for completely unrelated items. we've seen people getting unauthorized charges for yoga classes, cosmetics, diet products and, yes, psychic hotline memberships. these improper charges typically range from $1.99 to

$19.99 per month. maybe small for any specific unauthorized charge but it can add up to real money when so many americans are trying to get by and struggling in this tough economy. these mystery fees are often buried in bills that can run 20 pages, and they're often labeled with hard-to-decipher descriptions. we looked at one last week that was an unauthorized long distance charge. what appeared on the consumer's bill was usbi. not surprisingly these charges can go undetected for months or more. sometimes they're never detected. in fact, according to a survey done by the federal communications commission, only -- f.t.c., om one in 20 cramming -- only one in 20 cramming victims ever notice

the charges. as a result, consumers too often get milked out of hundreds of dollars or more. it's simply unacceptable, and we must do whatever we can to protect consumers from getting nickel and dimed by these unfair practices. anyone can be a victim of cramming of these mysterious unauthorized charges. we estimate that this problem may affect up to 20 million americans a year. people like a st. louis, missouri, woman who was charged for 25 months of long distance service she never authorized or used. when she protested the charges, the company sent her a copy of the form that she had supposedly used to authorize the service. it had a different name, different address, different email address and different birth date than she did. even so, the long distance

company offered to credit back only a fraction of the cost. cramming is not only illegal, it erodes consumer trust in communication services. that makes it both unfair to consumers who are getting ripped off and unfair also to most communication companies that cothe right thing every day. the f.c.c. will not tolerate cramming and mystery fees, will not tolerate unauthorized charges on phone bills and we're turning up the heat on companies that rip off consumers with unauthorized fees. at the end of last week, the commission, acting on our enforcement bureau's recommendation proposed $11.7 million in fines against four companies that appear to have engaged in widespread cramming. the enforcement bureau found

that each of these companies was charging thousands of consumers for a type of long distance service they never ordered or used, each billing consumers $3 to $15 at a time this resulted in the overcharging of consumers to the tune of $18 billion this commission action was bipartisan, it was unanimous. we all at the commission want to send a clear message. if you charge consumers unauthorized fees, you'll be discovered and punished. we also want to communicate to consumers that they need to be individual lant to protect themselves from crammers. the statistic i mentioned, only one out of 20 consumers noticed. that's a problem. consumers should review their bills every month. i know we don't have the time but it's worth the money.

review your bills and if you see potential unauthorized charges or discrepancies, report that to your phone company. as i said earlier, it can be hard to spot improper charges on your bill. that's why we're issuing a consumer tip sheet on cramming, available today at fcc.gov, it lays out a series of questions to ask yourself to spot improper charges, questions like, do i recognize the names of all the companies listed on the bill? are there charges for call is didn't place or products or service is didn't authorize? the rates i'm being charged consistent with what i signed up for? we encourage consumers who think that something is wrong on their bill to contact the companies billing them or the third parties that are putting on charges and request

adjustments to their bill. if you need help resolving your dispute, contact us. you can contact the f.c.c. at fcc.gov. or call 1-888-call-fcc. consumer complaints served as the foundation for last week's enforcement actions. they play a vor important flole protect -- a very important flole protecting and empowering consumers, as do events like this that get the word out that if you rip off consumers, you'll be caught and punished. i'm also going to suggest to my colleagues on the commission that we find new ways to catch and punish crammers. we believe that companies that put unauthorized charges on

bills must be punished and i believe we'll be united in crafting sensible rules that empower people to make the right decisions. it will increase transparency and smart disclosure, part of the larger effort at the f.c.c., one weir taking across the board. i believe that technology driven transparency, technology-driven smart transparency is critical thome powering consumers to make informed choices in the communications marketplace. i'm pleased that other parties are looking into this issue of cramming, including the senate commerce committee, the federal trade commission and a number of states. in particular, i welcome chairman rock ferrell's call for a hearing on this issue. i look forward to working with all these parties to crack down on this illegal practice. our work on cramming, bill shock, mystery fees and other issues like this are all part

of our larger consumer empowerment agenda which focuses on empowerment, education, and enforcement. consumer empowerment and protection are among the commission's highest priorities, along with promoting competition, innovation, and job creation, and these go hand in hand. once again, the strong staff of the f.c.c. has done great work on behalf of all consumers, i thank our enforcement bureau and our consumer governmental affair buse roe. we have here today michelle ellison, chief of the enforcement bureau, we also have the deputy chief and the chief of governmental affair buse roe. they'll be joining me up near a minute. today we are saying loud and clear to consumers trying to

navigate the complex and constantly changing communications landscape, the f.c.c. is on your side. we are focused on helping all americans seize the tremendous opportunities of communications technology. thank you very much and i'm happy to take some questions. why don't i invite joel and sara. >> questions were submitted in advance from the audience. you can stay there, i think your colleagues are going to join you, that's great. so these are questions, some of them have come from members of the audience, there's another one there, tuck pick it up that would be great. i'll go through these. let me start with, is there a way to block companies putting charges on my phone bill? >> that's a good question. if you don't sign up for something -- sorry, you don't sign up for something, there shouldn't be anything on your phone bill system of the

question is is there an opt in mechanism soing in ever appears on your phone bill without prior consent and joel, why don't you field that? >> what we hear from consumers is very often when they call a company and notice they've been subject to a cramming charge, that company, their land line provider will offer to block third party charges if they want it. i think this is something you can explore with your carrier. but most carriers do have the technical ability to block third party charges at your question. >> these are two related questions, the first is, what should you do if you think you've been crammed, and the second, tchow you file a complaint and what happens to the complaint once filed? >> if you think you've been crammed, i advise people to look at the bills every month, sara and i have the same

problem, we're busy, we have kids, but there's no substitute for looking at your bill and seeing if there's something suspicious. if you find something suspicious or that you're sure was unauthorized, start by calling the companies. you can call either, if it's a third party charge that company. the phone number should be on the bill, or call your phone company. in many cases that will resolve it. sthroor what happens in many cases when you call your credit card company. if that doesn't work, call the f.c.c., 1 -- fcc.gov or 1-888-call-fcc. we have a complaint center set up and we'll take appropriate action, either something that we will look into, investigate, as i mentioned, the four multimillion dollar fines we issued last week started with consumer complaints coming into the f.c.c. in some cases, if the complaint concerns something that's not within the f.c.c.'s

jurisdiction, we'll refer it to the agency that has jures diction. -- that has jurisdiction. >> the one thing i would add is one thing that the f.c.c. does that many people are not aware of, and that is one of the real things we're proud of as an agency, we will not only thereon a complaint, we'll act. we have dozens of people who handle calls and are very skilled at helping to get a dialogue going between you and your land line or phone carrier if you're having trouble getting satisfaction from them. and we urge people to take advantage of that service. it's one of the things we provide. >> just a word of thanks to the employees at the f.c.c. who do this. we have a terrific staff of people who operate our call centers they take calls, we have a mixture of people who have been doing it for a long time, they've seen patterns, and it can help them act efficiency. we also have newer people

coming through, but we're proud of the team that we have and they do excellent work. >> great. you mentioned yoga fees. that may be for the class i sign up for but never go, that one is probably on me, but there are charges, in that case, that's a third party telling your phone company you've bought a service when you haven't purchased it. but i was confused, if you can explain, some of these charges are placed by the phone companies and some by other vendors. how does that work? >> the answer is both. if i get a yoga charge moin bill, i know it's unauthorized. it's an easy example. and you set up the answer in your question. some charges that are improper charges are charges that your phone carrier itself might put on, unauthorized mystery fees if it's unauthorized come call us. some of the charges rf on -- of

concern in the topic today can come from third parties. there can be at least a couple of different types of third parties. the third parties might be long distance companies, voice mail companies, companies that are when the f.c.c.'s jurisdiction and the four companies that we issued notices on last week are in that category. some of the companies, and a yoga category would be in this category, wouldn't be in our jurisdiction. if we got that call, we'd refer it to the federal trade commission which will look at cramming complaints from third parties that are outside the f.c.c.'s area. but between us and the federal trade commission, we look at making sure that we have the landscape covered. we have a joint f.c.c.-f.t.c. task force on consumer issues to make sure that between the agencies, we're protecting and

empowering the consumers, that's an important part of what joel does, talking to his counterparts at the federal trade commission to make sure nothing is falling through the cracks. there are new issues that arise. we work with the senate and the house committees of jurisdiction to suggest ways that the relevant statutes can be updated or amended. >> i know if i get a charge on my credit card that i don't think i imposed, typically they don't make me pay it, wile it's being investigated it can be held in dispute. are there similar procedures for phone companies? >> there's nothing formal. for credit cards there's a formal $50 limit on what you're held liable for, thress nothing like that we've seen a variety of practices. there are cases where consumers complain and they're made whole fairly quickly. other cases have come to our attention that are out of the

investigation that the enforcement bureau did where people have had charges monthed after month that added up to $200 or $300 or $400 and they have to go to us or the state public utility commission to get satisfaction. there's a large a really wide variety of practices but we think that consumers who have been subject to cramming and other practices should be able to get full redress. >> you said you're circulating an ithome empower consumers to your colleague is this new rule making? >> yes, i'm glad -- it's another term we use. this would be a proposal sent to the other commissioners to look at ways to improve disclosure and transparency on phone bills to help consumers do what we're asking them to do to look through the phone bills and see if there are unauthorized charges. one complaint from consumers is even when they look through the bill, the unauthorized charge

can be hidden. so we're going to be look at that together at the commission so that we can empower consumers and make it difficult, not impossible, for unscrupulous companies to get away with what they try to do. >> i've got a couple more here that are a little bit longer questions. i'm trying to read them once before i read them to you. is cramming also happening on internet or cable billing or does it only apply to your phone stpwhill >> the record we have so far shows significant problems around telephone service. and that's what we're focusing on. we want to focus where there is a problem and where we know government sachs appropriate to tackle it. we are monitoring the other areas. we certainly encourage consumers to let us know if there are complaints. tpwhoin is thinking of cramming

another service should be aware that if we see evidence of a problem, we will attack it. >> this one says, are listed services a type of cramming? listed service, a charge for a second listing in a directory, say to put your spouse's name also. in this person says, my charges in 2006 to 2007 range from $1.89 to $3.15. >> i don't remember us coming across that -- across that particular one as a type of cramming, but our advice would be the same if you see a charge that you don't think you authorized and don't understand if there's a phone number for a third party call there, otherwise call your carrier and if neither one works, please call us. >> this is another one if you have the capacity to anticipate, put yourself in the mindset of the crammer far

second, those who are seeking to cry to in this case to find willing people who they zsh there an effort made to target these practices to particular consumers? or does it seem to be a blanket practice? >> we're not aware of any particular targeting. but there's one thing about the way crammers operate that i think is important towns, technically to place a crammed charge on your bill all they need is your telephone number. when the chairman mentioned before one of the case our enforcement bureau found where a woman asked to see the supposed authorization form and it had a different name, date of birth, address and email, other than that it was probably accurate, that's not a unique situation at all. the companies are suppose to get your authorization and ehave a clear record that you authorized this. we have another case where the company said, you authorized the charge online and the woman

said, that can't be, i don't have a computer. they can do this just by having your phone number. that's important because it shows how open consumers are to this kind of illegal activity. >> it's also why this process of fining companies, when the fine is justified and appropriate, is important. the companies need to understand that we're trying to catch them. and if we catch them, they're going to pay very large fines, measured in the millions of dollars. we're not going to let it be a good business to rip off consumers. >> so let me, i have a couple of questions here that are related. there are multiple agencies in the federal government that have jurisdiction over consumer practices, the new consumer financial practices only on financial practice, the f.t.c. has authority you have authority, what's being done to

create a more seamless web of authority between these agencies? >> working together in an appropriate, coordinated way, and so the task force that we set up with the federal trade commission is important to us. we -- with the justice department, we have well worn practices where if something rises to the level of criminal violation we refer it to the justice department and in the past two years there have been criminal enforcement actions that came out of our referrals. so there are historical reasons why different, improper conduct that has some similarities or handled by different agencies. congress at some point may or may not look at it but the point is, for us, today, we jointly have an obligation to coordinate to cooperate and make sure it's seamless from

the perspective of consumers. >> i think that's last of the questions. i wanted to give you a chance to say anything, closing remarks to our audience. >> no other than thank you very much. we regard this as very important, one, because empowering and protecting consumers is at the heart of our mission at the f.c.c. and also because we see every day the tremendous benefits that communications technology and services can bring to consumers, particularly in these economic times. there's no sector that can contribute and is contributing more to economic growth and job creation. a lot of that turns on consumers having confidence in communication services. it's one of the biggest barriers we see to adoption of communication services. it's one of the reasons we make this a priority. both because consumers protect and empowerment is a priority but also pause we see a

straight line between getting this right and job creation and economic growth. thank you, everyone. >> thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> c-span has launched a new easy-to-navigate website for politics and the 20202 presidential race. with bio information on the candidates, and facebook updates from candidates and reporters, visit us at c-span.org/campaign202. >> former utah governor john

huntsman announced this morning he's seeking the republican party nomination for president, becoming the eighth g.o.p. candidate in the race. he was president obama's ambassador to china up until april. he spoke at liberty state park in new jersey for about 20 minutes, a place where ronald reagan made a campaign speech announcing his candidacy in 18980. he was accompanied by his wife and family. >> help this family build a global operation.

to learn from the good days and chose to give back. married forever, five great kids, adopted two more. elected utah's governor. the ultimate conservative. forever pro-life. brought what he'd sneen business to make it work for the state, cut the government, cut taxes, cut waste. bold, meaningful cut, not ones that just look good. some say the state had the best financial management of any. took on the tough health care, did it right. no antics, free-market based, not government-run.

>> no mainstream -- never raises his voice, seldom takes no for an answer, not in it for the balans, just in it to use his god-given gift to help remind america how fortunate we are. he has a different perspective, strength here or strength overseas. this is the guy who can win, he's tough, wise, firm and disciplined.

[applause] >> thank you. thank you. thank you. i'm john huntsman and i'm humbled. i've been a governor of the great state of utah. i've been a businessman. i've been a diplomat. i'm the husband of the love of my life, the greatest human being i have ever known, mary kate, for 28 years. [applause] i'm the father of seven terrific kids.

i'm the son of great parents who are here with me today celebrating a very important anniversary, including a birthday. i'm from the american west where the view of america is limitless. with lots of blue sky. i've lived overseas four times where the view of america, from 10,000 miles away is a picture of liberty, opportunity, and justice. people secure in their rights and in love with their liberty. people who have done more good for more people than any other nation on earth. and today, i'm a candidate for the office of president of the united states of america.

my kids can't believe i just said that i'm kg for the greatest privilege americans can bestow on a fellow citizen, and you're entitled to know the reasons why you see, today, americans are experiencing, through no fault of their own, something that is totally alien to them. a sense that the deck is stacked against them by forces totally beyond their control. no matter how hard they work, save, and plan, the opportunities are not there for them that were present for previous generations. perhaps saddest of all, we have lost faith in ourselves. for the first time in history,

we are passing down to the next generation a country that is less powerful, less compassionate, les competitive, and less confident than the one we got. this, ladies and gentlemen, is totally unacceptable and it is totally un-american. [applause] and it need not, must not, will not be our permanent condition. we will not be the first american generation that lets down the next generation. we have the power, we have the means, we have the character to say astonnish the world again by making from adversity a new and better country. this inexhaustible land of promise and opportunity. you see, we have everything a nation could ever hope for.

we have our freedom. we have rule of law. the longest surviving constitution and our abiding belief in personal responsibility. we have freedom of speech, religion, and press. we produce a quarter of the world's g.d.p. and we are the most productive society on earth. we have the finest colleges and universities and the most skilled, powerful, and selfless armed forces. and we have character. character that made a new world from a wilderness. character that made the desert bloom and the cities rise to the heavens. character that made the world

safer, freer, and more prosperous. what we now need is leadership that trusts in our strength. leadership that doesn't promise washington has all the solutions to our problems, but rather looks to local solutions from our cities, towns, and states. leadership that knows we need more than hope. leadership that knows we need answers. we must make hard decisions that are necessary to avert disaster. if we don't, in less than a decade, every dollar of federal revenue will go to covering the costs of medicare, social security, and interest payments on our debt. meanwhile, we'll sink deep

entire debt for everything else, from national security to disaster relief. our country will fall behind the productivity of other countries, our influence in the world will wane. our security will grow ever more precarious and the 21st century will then be known as the end of the american century. we can't accept this, and we won't. but here's the channel. we must proceed at a time of weak economic growth and very high unemployment. we desperately need jobs and the opportunities they carry. so we must play to our strengths and give the most innovative society on earth the tools they need to succeed.

we must make broad and bold changes to our tax code and regulatory policies, seize the lost opportunity for energy independence and re-establish what it means to be a teach for the society. we must reignite the powerful job creating engine of our economy, the energy, innovation and trail blazing genius of americans and their enterprises and restore confidence in our people. we can and will own the future. now, we did many of these things in the great state of utah when i was governor. we cut taxes, we flattened rate we balanced our budget, we worked very hard to maintain our triple-a bond rating status, something few states can claim and when the economic

crisis hit, we were prepared. and by many account we became the best state in america for business. we also were named the best managed state in america. you see, we proved that government zrunt to choose between fiscal responsibility and economic growth. i learned something important as governor. for most american families there is nothing more important than a job. internationally, we'll lead the world in way that speaks to pre-eminence and let us not forget we are a nation at war this came home to me as i spoke to the v.f.w. convention recently in the state of new

hampshire, joined by my good friend paul chevalier, a former marine. we looked at america's greatest generation, they were there in their ribbons and -- outfits and ribbons they had earned in the conflict. i saw in their eyes stories that you could make into movies. they lived through depression, live through the world war ii and beyond. and they delivered to this country in ways that proteched and preserved our liberty and freedom. i'm here to tell you, we have another of america's greatest generations coming up and they are ready to rebuild america just like earlier generations. we're at war, ladies and gentlemen. and we must manage the end of

these con demricts without repeating past mistakes that made our engagement longer and our sacrifices greater than they should have been. it's not that we wish to disengage from the world. don't get me wrong. but rather that we believe the best long-term national security strategy is rebuilding our core here at home. now let me say something about civility. for the sake of the younger generation, it concerns me that civility, humanity, and respect are sometimes lost in our interactions at the -- as americans. our political debates today are corrosive and not reflective of the belief that abe lincoln espoused back in his day that

we are a great country because we're a good country. you know what i mean when i say that. we will conduct this campaign on the high road. i don't think you need to run down someone's reputation in order to run for the office of president. of course we'll have our disagreements. that's what campaigns are all about. but i want you to know that i respect my fellow republican candidates and i respect the novet united states. -- the president of the united states. he and i have a difference of opinion on how to help a country we both love. but the question each of us wants the voters to answer is who will be the better president? not who is the better american? behind me is our most famous

symbol of the promise of america. president reagan launched the 1980 general election campaign from this very spot. it was a time of trouble, worry, and difficulty, and he assured us that we could make america great again. and through his leadership, he did. today, i stand in his shadow. as well as the shadow of this magnificent monument to our lib ter i -- liberty. for 125 years, through triumphs and hardships of all kinds, her lamp has been a beacon reflecting america's highest aspirations and values, america's promises have been kept. and each generation in their turn has worked very hard to keep her lit. now, it's our turn. our challenges are many and

they are urgent but our problems are no bigger than our opportunities, and they're not insurmountable for a people who always used our freedom to make the future better the past. we are a resourceful, ingenious, determined, problem-solving people. we don't settle for less than our character and talents will achieve. we choose our destiny as a nation. we always have, and we always will. this is that moment. we're not just choosing new leaders. we're choosing whether we are to be yesterday's story or tomorrow's. everything is at stake. this is the hour when we choose our future. i'm jon huntsman, i'm running for president of the united states.

thank you all. thank you. thank you.

>> jon huntsman from earlier today. next up, to the white house briefing from earlier today as well. here at the start of the meeting -- start of the briefing, jay carney is joined by health secretary kathleen sebelius on new warn frgs cigarette boxes. this is from the white house earlier today. >> good afternoon, ladies and gentlemen, i have with me two special guests, on my left, secretary of the department of

health and human services, kathleen sebelius, on my right, the commissioner of food and drugs, margaret hamburg, the top official at the food and drug administration. they are going to talk to you at the top of the briefing about a new ruling on rables -- labels for cigarette and tobacco products. what i'd like to do is have them make a few remarks at the top, take questions from you, so that -- all the questions you have for them, we can do at the top. i'll excuse them after 10 minutes or so 15rks minute or so, and we can start again and i'll take your questions on other matters. with theark secretary of health and human services. >> thank you, jay,, good afternoon, everybody. we're here to announce a major new step we're taking to reduce deaths and diseases from tobacco use. new warning labels will go on

cigarette packs and tobacco products. tobacco use is the foremost preventable cause of death in america. it costs the u.s. economy about $200 million bel annually in medical costs and lost productivetivity --ivity. every day, approximately 4,000 american kids between 12 and 18 try their first cigarette. 1,000 of those children become daily smokers. for years we watched as tobacco rates fell. in 1965, over 42% of americans smoked. by 2004, it had fall ton just under 21%. and that's good nusmse but despite the well-known risks, youth and adult smoking rates that had been dropping for decades staaled. so when president obama took office, we decided the numbers weren't changing and our actions had to change. we're committed to taking steps that will help prevent children

smoking. we have gop to work making it harder for tobacco companies to market to kids. we have restricted companies from using terms like light and mild on products and in marketing. we're supporting local programs to help people quit smoking and to stop children and adults from starting. as part of last year's health care law, we gave americans better access to counseling to help them quit smoking before they get sick system of today, we're announcing a measure that will forever change the look and message of cigarette packs and ads. the new graphic warning labels will be the toughest and most effective tobacco health warnings in this country's history and they tell the truth. they'll replace the old warning phrase with pictures showing negative health consequences of smoking that are proven effective. with these warning, every person who picks up pack of cigarettes will know what risk

they're taking. over the last two year, we have made giant strides in our fight against tobacco and our efforts are paying off. i'm here with a renewed sense of hope and momentum that we can make tobacco death and disease a part of our past and not a continuous part of our future system of i'd like to turn over the podium to our talented and dedicated f.d.a. commissioner, dr. peggy hamburg. >> thank you very much, madam secretary. let me say how proud i am of the part f.d.a. has played in this crompe hencive, ambitious initiative championed by secretary sebelius and president obecause bheasm share a vision for a healthier nation free of the dangerous cons quovense tobacco. the sad truth is that tobacco is the leading cause of premature, preventable deaths in the united states as secretary sebelius said and an enormous source of avoidable

disease and disability. the public health consequences are enormous. with an estimated 443,000 americans dying each year, most of whom began smoke tpwhevering age of 18. combating this national tragedy must be at the forefront of our public health goals and that is why congress and the president were committed when they enacted the family smoking prevent and tobacco control act. since then, f.d.a. has worked hard to implement that vision. we have taken important steps such as banning the sale of fruit and candy flivered cigarettes, which are especially appealing to children and youth, and for the first time requiring tobacco companies to tell us exactly what ingredients are in their products. last november, the f.d.a. unveiled the 36 images that would be considered for inclusion on every cigarette pack in the country for graphic health warning labels and today we're publishing the nine

selected. these graphic warning labels represent the first major change to cigarette labels in 25 years. the final nine images were selected based on a number of important criteria. we took into account public comment from plksly 1,700 stake holders, including experts and industry, some of whom submitted scientific research studies. we also conducted a national study of our own to gauge people's response to graphic cigarette health warnings, actually the largest study ever conducted involving some 18,000 participants. we examined how effective the proposed warnings were at communicating the health risks as well as the warning in terms of its ability to encourage smokers to quit and if they discouraged nonsmokers, particularly kids, from ever wanting to smoke. consider this. a pack a day smoker will see these labels more than 7,000

times a year and kids who are under the impression that smoking is cool or glamorous will be confronted by a very different reality when they are temperatured to pick up a cigarette 135k months from now. these powerful images, coupled with the valuable cessation resource, 1-800-quit-now which will be on every label, will go a long way toward a time where we can and will make tobacco-related death and disease a part of america's past, not its future, in the words of secretary sebelius. thank you very much. >> i'll call on people who have questions. april. >> secretary sebelius, as it relates to the pictures, they are very graphic, do you think that the public will become desensitized at some point and you'll have to step up the photos because after a while

you're seeing the same thing? >> actually, the law contemplates a sort of users getting used to them if you will and gives f.d.a. nottle on the authority but the direction to change them on an ongoing basis system of immediately after the launch of the first set of nine, we'll begin the studies to make sure that we are keeping people sensitized and we have the authority then to move to a new set of labels system of we see this as a continuous -- you're absolutely right. i think any time you have a frozen image, what may seem shocking at the beginning, people get used to fairly quickly. >> will they be more graphic in nature or along the same lines? >> i think the plan is, i'm looking to peggy if i give out incorrect information she'll help me with it, but i think we'll continue to test to see if they're making a tinches. one of the things that was done with this 18,000 person survey

was really look at different quadrants of population, which of the ads that really hit kids, what appeals to or distresses pregnant women, what men respond to differently. so we are trying to be very market sensitive and i think that surveying will go on on a regular basis. >> can you tell me what the reaction was from the tobacco industry to your campaign, this effort? >> we did engage the industry as we were developing the selections for these nine graphic health warning labels. they were part of our public comment period and of course we've had meetings with them. this will be a dramatic change in what a cigarette package looks like no doubt about it. these warning labels are very

graphic, they're large, the law even specifies they take up 50 noveget cigarette package, front and back work colored pictures, printed health warning statement and also the 1-800-quit-now line. so it will change the consumer response to a pack of cigarettes but frankly, that's what we want and that's what we're striving for and that's what will make a difference for health. >> i believe you said earlier that at one point cigarette use was going down and then it stalled. why did it stall? did you look at that? >> wen't zrnt the law now in place that poth because ma encouraged to be passed and signed, the tobacco regulation law, so we've been table ramp up efforts since then and i think, you know, we hadn't made any progress on changes of labels, as dr. hamburg said, it had been 25 years since we changed labels.

a loft the aggressive work done early on had become common place. we really weren't doing much at all to focus on what is now killing about 443,000 americans every year prematurely, the number one cause of preventable death. certainly for kids, although some states have gotten aggressive, i think at the federal level, there really just wasn't a natural focus on this. i think what the president made clear and we are certainly very much engaged in is this is now a new national -- renewed national focus on smoking cessation, one we think can pay nauf dividends in lives and health care costs and we know it can because it's been successful in other neeferts world. >> dr. hamburg, which of these images do you think will target teenagers, especially teenage girls who seem to be so attracted to smoking, picking

up the habit? >> well, i think that some of the powerful images are a reminder of health risks, some of the images like the one of the mouth with the sort of rotting, dirty teeth and ulcerating threengs lips are also reminders that smoking causes disfigurement. and i think that those are very powerful messages for potential teen smokers. we do hope that each time pick up that cigarette package, they will deepen their understanding that there are really serious consequences of that. >> is there anything about the campaign that would try to deter them from picking up a package to begin with? >> of course these images will be part of privent advertisements for cigarettes but i think it's -- when we think about having a real, ongoing, sustained impact on public health and bringing those smoking levels down, this is an important activity but has to be part of a broader, comprehensive set of public

activities and secretary sebelius has been spearheading a national tobacco control strategy that looks at how different exoventse government working with partners at the state and local level and with partners in other sectors can work together to make a difference for public health. >> on the teenage thing, i think there are a couple of things also, somebody said when they first saw the warnings, these are really gross. and they are. we want kids to understand smoking is grose, not cool. there's nothing -- is gross, not cool. there's nothing pretty about having mouth cancer or making your baby sick if you smoke. some of these are very driven to dispeling the notion that this is cool. the ore thing is we've done a very ramped up effort already on the second tyre advertising, so it was not ok for cigarette companies to directly advertise

to kids. but they were using lots of techniques about logos at concerts, appealing to younger generations with cool mottos, developing products clearly for a teen audience, not for an adult audience. those are now also being banned. so we're not just looking at the packs, but all sorts of strategies to try and keep cigarettes away from our children. >> i have a question on a different topic. the absence of nationwide data about the lgbt community's health has been a problem. the government won't collect data for the lg fwmbings community. we have been ad vo kating to

collect they data including thonlte national health survey and the risk factor system. you have been an advocate for evidence-based decision making, what's the holdup? >> we fully intend to collect lgbt data but the problem is, it's never been collected. what our folks came back with, we're trying to market test the questions, how do ask questions in a way that elists accurate responses because -- that elicits accurate responses because collecting data that doesn't reflect reality because there's been so few questions asked, we don't know how to ask them. it is a commitment. we will be adding data questions to the national health surveys and we are looking at developing a slew of questions, market testing them, coming back and making sure we

have the right way to solicit the information we need. >> madam speaker, on the -- madam secretary, on the cigarettes, if any other product in any other category killed 143,000 people a year, i don't imagine it would be allowed to remain on the market. do you see a day when cigarettes will be illegal? >> that's up to lawmakers to decide. if you look at the history of passing the tobacco control act with a torturous path, it took a number of years a number of starts, there are people in our office who have been working on this for 20 years so to say that this step was not a major hurdle to if go over underplays, i think, the efforts of the past and i think we'll continue to collect the data and look at the information. i think the more people understand the health risk,

hopefully we will be in a situation where not smoking will be the preferable norm but there will be a lot of consumer pressure, which there already is. people are insisting they don't want to live in housing projects where there are smokers, they don't want to be in open spaces, know manager about secondhand smoke, knowing it's not just the smoker, it's others affected. i think there's a growing awareness that this is very dangerous and tobacco is unique. >> the -- a former surgeon general foresaw a smokeless united states. that's never going to happen, is it? >> i really can't tell you. i think we're making some great strides. i think the lawmakers have to take a look at the data and take a look at what they're willing to do. i think if you had ever told me that more than half oh the states in the country would have passed smoke-free laws and the majority of cities had passed them and we'd be taking

these kidse of steps against advertising and rebranding our cigarette packs, i would have said that's probably not going to happen any time soon but i think people are becoming very aware of the unique power of nicotine, the addictive quality and also the fact that, as you say, $200 billion a year in health costs that we clearly could spend better elsewhere and the loss of 443,000 lives a year, that's a huge toll to take on a country. >> thank you. madam secretary, dr. hamburg, i want to segue over to the proposed warnings and retooling of the recipes in cereals and desserts that have come out, that have been written primarily by dr. hamburg's office as well as federal trade commission and center for

disease control. many in the food industry say this is a case of change the recipe or else. and do you see it that way? will these eventually be enforced? these are the restrictions, of course, on cereal and other things. >> i'll let peggy also comment on this, because dr. hamburg's office has a particular set of these issues. there is a lot of effort under way in the area of nutrition and certainly aimed at the obesity ep democrat take is affecting one out of every three children and adults in this country so whether it's the let's move initiative which is doing a lot of work voluntarily to let companies begin to look at both sodium and sugar content and trans fat

or conversations going on in the industry itself to look at reformatting their products or wal-mart who is now saying that as a major purchaser they only want suppliers who meet certain standards or the c.d.c. which is looking at sodium and the f.d.a. which is convening conversations around nutrition qualities, reformatting of the new food place that was announced by the department of agriculture, getting rid of the food pyramid, i think this is some space that is going to continue to have a robust conversation because again, it has a lot to do with underlying health costs and overall health of our nation. peggy can talk a little bit about the f.d.a.'s involvement in this area. >> these are just suggestions now, they're not enforceable. now, they're not enforceable. >> what you're referring to is