computers the size of a closet to the use of wireless technology in the palm of your hand. but we cannot protect the technologies of today with the tools of the past. the current patent system is outdated and dragged down by frivolous lawsuits and uncertainty regarding patent ownership. unwarranted lawsuits that typically cost $5 million to defend prevent legitimate inventors and industrious companies from creating products and generating jobs. . our competitors are busy developing new products that expand their economies. according to a recent report, china is expected to surpass the united states this year as the world's leading patent publisher. 9 more time we waste on litigation, the less time on innovation.

the average wait time for a patent approval is three years or more. these are products or innovations that will create jobs or save lives. inadequately funding the p.t.o. harms small businesses. the bill allows the director to adjust the fee schedule and prevents congress from spending agency funds on unrelated programs. this will allow the p.t.o. to become more productive, reducing the wait time. it will improve on the front end, which will reduce litigation on the back end. the patent system focused on giving the patent to the first inventor. this is similar to h.r. 1249. this improvement makes our system similar to the international standard that other countries use, only it's better. we retain a one-year grace period before they file as well

as the create act as well as research does not create prior art. there are some who think this bill hurts small businesses and independent inventors, but they are wrong. it ensures that inveptors can compete with larger companies both here and abroad. those seeking protection here in the united states are taking a first step to protect their patent rights around the world. it makes the small business ombudsman permanent. they will look out for their interests and helping them. this bill protects small businesses and ipped inventors by reducing fees for both. this is a fair compromise and creates a better patent system for innovative industries. patents are important to the united states and the world. for example, during the war of

1812, american troops burned the canadian town of york. in retaliation the british marred in the summer of 1814 to put the capital city to the torch. a superintendent of the patent office delivered an i am passioned speech asking the red cots where the patent office was housed. and it said it could never be replaced. anybody who destroyed them would be destroyed. the british officer relented and the hotel was spared making it the only public building in washington not burned that day. american inventors have led the world in new technologies for centuries from ben franklin. but if wep want to foster

creativity, we must encourage today's enventors. now is the time to act. i urge the house to support the act and i reserve the balance of my time. the chair: the gentleman reserves. the gentlewoman from text california is recognized. ms. lofgren: i have worked on the patent reform effort since 1997 and disappointed that here today i'm unable to support the bill as it exists. i did vote to report this bill out of our judiciary committee, but since that time, we have seen two unfortunate things occur that have made this bill not viable. the first and exceedingly important is that the protections for patent fees so that all the fees would stay in the office have been removed.

the regular appropriations process will allow for fee diversions in the future. it has been the policy of the house, for example, not to divert fees from the office. however, fees continue to be diverted. in fact in this c.r. approved by the house this year, we diverted between $85 million and $100 million in files from the patent office. and that is the reason why the combill is defect tive. and if we are moving to a first to file system, there has to be robust protection for prior user rights, including prior use irrights in the grace period that exists under current law. sadly, those protections are missing in this bill.

the manager's amendment talks about disclosures only. it is a shame that other prior art, such as trade secrets and the like would not receive the same protection. so i would urge that the bill, unfortunately, cannot be supported. i intend to oppose it, as well as the manager's amendment. and i would yield now to the distinguished ranking member of the i.p. subcommittee, the honorable mel was such time as he may consume. was was i thank the gentlelady -- >> i'm the ranking member of the subcommittee on intellectual property on judiciary and i too, supported on reporting the bill to the house floor.

the problem is that the bill we may end up debating is not the bill that we reported favorably from the judiciary committee. and there are reasons for that. i understand what those reasonsr but they -- if the amendment that is being offered as the manager's amendment passes, it will put us in a position where substantial people who supported the bill will be unable to do so here's the equation. one of the primary purposes for which there was a strong

alliance of people and groups and interests supporting patent reform was that in the past, fees that had been paid to the patent and trademark office have gone through the appropriations process and over the last 10 years, almost $800,000 of those fees have been diverted to other purposes other than the use of the patent and trademark office. the effect of that is there has been a hidden tax on innovation in our country. and the united states senate passed a bill that would end that diversion -- they passed it

by a vote of 85 to 4. we passed a bill out of our judiciary committee that would end that diversion. and all of a sudden, we come to the floor and a manager's amendment is being offered that if it is not defeated, will undermine that unifying thing that has held the groups together and allowed people to support the bill. so i have to be in a position where i am strongly opposing the manager's amendment to this bill. i don't think the groups out there -- i mean, it's not often

that i get to come to the floor and say i'm speaking for the u.s. chamber of commerce. the chamber of commerce would like for the diversion of fees to stop. it's not often that i come to the floor and say that i'm speaking, i think, for the united states senate. they have already passed a bill that would stop the diversion of fees. it's not often that i come to the floor standing up for the bill that came out of our committee against forces that have taken it over and convinced or putting forward a manager's amendment that we simply cannot support.

now, i understand how we got here. the operators would like to continue the process. and they said we will object to this and we will raise a point of order and they came up with language that professes to solve the problem. the problem is, then, that that raised another point of order because the congressional budget office said, well, if you do it that way, you are going to do -- you are going to put yourself in a situation where we have to score this bill in a different way. and so then the leadership on the chairman's side then said, ok, we'll wave that rule and i'm -- waive that rule, and i'm

saying if you can waive the rule, you are the people who have been so much worried about the deficit, if you can waive the rule, why couldn't you waive the rule that allows us to take up the bill that we passed out of committee? so i need to be addressing my republican colleagues here, if they want to stop thm process over the way -- the way to stop the process is to vote against the manager's amendment. that's the simple way to do it. at that point, we can get back, hopefully, to a bill that does clearly not divert fees and that

the whole population of supporters has said, we would support. so that's where i am, mr. chairman. i don't want to belabor this and take away time from people who want to speak, but i just -- it's not the bill itself that came out of committee that's the problem. it's if we pass the manager's amendment, we've got a problem here. i mean, we could tinker around the edges of the bill that came out of the committee and solve the minor concerns that we got there. but there is no way to tinker around the issue. either you support the diversion of money or you don't support the diversion of money and it's time for us to stop diverting -- stop this hidden tax that we have imposed on innovation in

this country and only way to do that is defeat the manager's amendment. and i yield back. ms. lofgren: i reserve the balance of my time. the chair: for what purpose does the gentleman from texas rise. mr. smith: i yield three minutes to the gentleman from from north carolina, mr. coble. the chair: the dean of the north carolina delegation, mr. coble, is recognized for three minutes. mr. coble: i thank the gentleman from texas and it was my belief that diversion had ended. let me make my statement and maybe we can get to this subsequently. a robust patent system is critical to develop a strong economy and it serves this goal by ending diversion of user fees to other agencies. ending diversion is essential to

a robust and strong patent system, it seems to me. this is not a new concept. it has been a controversial issue for many years but we are at a point if we aren't doing something, the office will be overwhelmed. i answer, two words, bag log, pendency. the number of pending applications is around 700,000 and average time for an application to be reviewed is 30 months. this is unacceptable and the number of pending claims that should be, approximately 300,000 and the pendency time period should be approximately 20 months or 10 months less of what it is now. patents provide economic incentives for creators and if our system loses, it will be diluted and when inventors

decide to find other production for their ideas or begin their marketing ideas independently to avoid the costs and sometimes hassle for filing for patent protection. reducing the backlog depends on the office's ability to improve the performance of exercise. and 1429 in my opinion, and ending diversion, will provide that meeting certainty for the office to meet these goals and i yield back and i urge my members to vote in favor of the bill. the chair: the gentleman yields back the balance of his time. for what purpose does the gentlewoman from california rise? ms. lofgren: i would yield 30 seconds to the gentlelady from ohio who also has a unanimous

consent request. the chair: the gentlewoman from ohio is recognized for 30 seconds. ms. kaptur: i thank the gentlelady for yielding to me, ms. lofgren, and i thank the chair. i wanted to place on the record dozens and dozens of organizations that oppose this bill. they oppose the manager's amendment and what's amazing about these groups is they range the vast ideological spectrum from liberal to conservative to moderate and they all represent people. thousands and thousands of people. such as the american bar association, the eagle forum, the american civil rights union and the christian coalition, the family research council action and friends of the earth. i mean, if one looks across this list, national association of realtors, innovation alliance, they have deep concerns about this bill and oppose it and i would like to place this on the record, madam chair. the chair: without objection and

the gentlewoman's time has expired. for what purpose does the gentleman from texas rise? smith schmidt i yield five minutes to the gentleman from -- mr. smith: i yield five minutes to the gentleman from virginia, mr. goodlatte. the chair: the gentleman from virginia is recognized for five minutes. mr. goodlatte: i thank the chairman for yielding and for his leadership on this issue. and i rise in strong support of h.r. 1249. for the better part of the past decade, congress has been working to update our patent laws, to ensure that the incentives are framers envisioned when they wrote article 1, section 8 of our constitution remain meaningful and effective. the u.s. patent system must work efficiently if america is to remain the world leader in innovation. it is only right that as more and more inventions with increasing complexity emerge we examine our nation's patent laws to ensure that they still work efficiently and that they still encourage and not discourage innovation. the core principles that have guided our efforts have been to

ensure that quality patents are issued by the p.t.o. in the first place and to ensure that our patent enforcement laws and procedures do not create incentives for opportunists with invalid claims to exploit while maintaining strong laws that allow legitimate patent owners to enforce their patents effectively. h.r. 1249 addresses these principles with regard to ensuring the issuance of quality patents, this legislation allows third parties to submit evidence of prior art during the examination process which will help ensure examiners have the full record before them when making decisions. in addition after the p.t.o. issues a patent this legislation creates a new post grant opposition system in which third parties can raise objections to a patent immediately after its issuance which will both help screen out bad patents while bolstering value -- valid ones. furthermore, the bill contains a provision on fee diversion where

any fees that are collected but not appropriated to the p.t.o. will be placed in a special fund to be used only by the p.t.o. for operations. this solves the fee diversion issue and it assures that the problem that we have had in the past will not take place in the future, but at the same time it also assures that the congress will continue its oversight authority because the patent office will have to come to the congress, to the appropriations committee to justify those expenditures. they can't be spent on anything else, but they have to be justified to the congress before the funds are appropriated. these funds will still be subject to appropriation but will be set aside to only fund the p.t.o. with a backlog of almost a million patents applications and many waiting three years to get an initial office action on their patent applications, this agreement could not come at a more crucial time. we have been trying for 10 years by the way and this is the

closest we have ever come. in addition to these patent quality improvements, h.r. 1249 also includes provisions to ensure that patent litigation benefits those with valid claims, but not those opportunists who seek to abuse the litigation process. many innovative companies, including those in the technology and other sectors, have been forced to defend against patent infringement lawsuits of questionable legitimacy. when such a defendant company truly believes that the patent being asserted is invalid, it is important it have an avenue to request the p.t.o. to have another look at the patent in order to better inform the district court of the patent's validity. this legislation retains a re-examine process which allows innovators to exaling the validity of a patent when they are sued for patent infringement. in addition, the bill allows the patent and trademark office to re-examine some of the most questionable business method pat

ebts which opportunists have used for years to extort money from legitimate businesses. by allowing the p.t.o. to take another look at these patents, we help ensure that invalid patents will not be used by aggressive trial lawyers to game the system. the bill also ensures that abusive false markings litigation is put to an end. current law allows private individuals to sue companies on behalf of the government to recover statutory damages in false markings cases. after a court decision two years ago that liberalized false marking damages award, a cottage industry has sprung up and false markings claims have risen exponentially. h.r. 1249 maintains the government's ability to bring these actions but limits priority lawsuits to those who have actually suffered competitive harm. this will discourage opportunistic lawyers from pursuing these cases. the bill also restricts joinder rules for patent litigation, specifically it restricts

joinder of defendants to cases arising out of the same facts and transactions which ends the abusive practice of treating as co-defendant parties who make completely different products and have no relation to each other. furthermore, the bill addresses the problem of tax strategy patents. unbelievably tax strategy patents grant monopolies on particular ways an individual taxpayer comply with the tax code. can the gentleman yield an additional 30 seconds? mr. smith: i yield 30 seconds. mr. goodlatte: over 140 tax strategy patents have been issued and more applications are pending. tax strategy patents have the potential to affect tens of millions of everyday taxpayers, many who don't realize that these patents exist. the tax code is already complicated enough without also expecting taxpayers and their advisors to become ongoing experts in patent law. hundreds of orlingsings in -- organizations in fact support

these reforms. it is important that this house support the manager's amendment and by the way the united states chamber of commerce supports the manager's amendment and the bill. the chair: the gentleman's time has expired. the gentlewoman from california is recognized. ms. lofgren: may i inquire how much time remains? the chair: the gentlewoman from california has 20 minutes remaining. ms. lofgren: thank you. the chair: and the gentleman from texas has 17 1/2 minutes. ms. lofgren: at this point i would be honored to recognize the gentlelady from texas, a member of the judiciary committee, ms. sheila jackson lee, for three minutes. the chair: the gentlewoman from texas is recognized for three minutes. ms. jackson lee: i thank the distinguished member from california and to my colleagues on the floor, this has to be or could have been or hopefully can be one of the greatest opportunities for bipartisanship that we have seen in any number

of years. that was the process that was proceeded under in the judiciary committee, though obviously there are always disagreements. but the whole idea of our debate and the support of the present underlying legislation without the manager's amendment was to in fact create jobs. in the committee, a number of my amendments were accepted but in particular the focus of converting from a first inventor to use system to a first inventor to file was promote to progress of science by securing for a limited time to inventors the ex cluesive rights for their discoveries and to provide inventors with greater certainty concerning the scope of protections granted by these exclusive rights. further, this new system was to be or should be able to harmonize the united states patent rebling administration system with similar -- registration system with similar systems used by nearly all other countries with whom the united

states conducts trade. this was to shine the light and open the door on american genius. in addition, so many of us have waited so long to be able to give the resources to the p.t.o. in order for it to do its job. we were aghast in hear togs hear that there is a 7,000-application backlog and so i rise as well to express enormous concern with the manager's amendment which as the p.t.o. director has indicated every time we do not process a p.t.o. or a patent for some genius here in the united states, some hardworking inventor, every patent that sits on the shelf at the p.t.o. office is taking away an american job and that job is not being created. and as well it is denying a product from going to the market and it is someone's life that is not being saved and our country ceases to grow. we need jobs in this country. we need a patent office that is

going to expedite and move forward. we don't need discussions about lawyers fighting lawyers or trial lawyers. this is not a case of an antilawyer legislation. we hope that some of the small businesses and large companies have their lawyers fighting to preserve and protect their patents. this bill will give them the opportunity to have that protection. but i am disappointed that all of a sudden the manager's amendment changed around and took an enormous amount of those fees and invested them elsewhere instead of helping out small businesses. i'm also disappointed that we don't recognize that a bill that helps big businesses can help small businesses as well. and so i'd offered an amendment that would extend the grace period while the small business is working to funds its patent, the period is now a year. i indicated 18 months because -- can i get an additional 15 seconds? ms. lofgren: the gentlelady has an additional 15 seconds as requested. the chair: the gentlewoman is

recognized for 15 seconds. ms. jackson lee: because a small business has to reach to others to help fund their invention and they let the secret out of the bag. 18 months protects their disclosures for a period of time for them to be able to move forward. lastly, i have a sunset provision that would help small bitses -- businesses as well as relates to the -- sunset of business method patent review. this could be a good bill. i hope we can correct it and i ask my colleagues to consider correcting this bill. i yield back. the chair: the gentlewoman's time has expired. the gentleman from texas voiced. mr. smith: i yield three minutes to the gentleman from ohio, mr. shadegg, who is a senior member of the constitution subcommittee and a senior member of the intellectual property subcommittee of the judiciary committee. the chair: the gentleman from ohio is recognized for three minutes. mr. shadegg: thank you. i first want to thank chairman smith and chairman goodlatte for their leadership in getting us to the point that we are in this important legislation here this evening. section 8, clause 8 of the constitution states that the

congress shall have power to, quote, promote the progress of science and useful arts by securing for a limited time to authors and inventors the exclusive right to their respective rightings and discoveries, unquote. the constitution clearly grants congress the authority to grant patent rights to inventors and it defers to the discretion of congress how best procedurally to award these rights to the inventor. i rise in support of h.r. 1249, the american -- the america invents act. the first inventor to file provisions shift us to a system used by all modern industrial nations. this system would end the need for expensive discovery and litigation over priority issues and would put an end to expensive interference proceedings that small entities overwhelmingly lose. this provision also ensures that inventors can establish priority dates by filing simple and inexpensive provisional applications. this is a much-needed change which former u.s. attorney

general indicated would be both constitutional and wise. congress has the right, in fact, the duty to protect those who invent or discover. through in depth studies conducted by the uspto commissioners, the first to file system has been found to be faster and cheaper in resolving disputes among inventors. the current system creates an environment for exorbitantly expensive litigation. it is also -- it has also become cost prohibitive for small businesses and independent inventers to fight the claims filed by larger corporations which can cost over a half million dollars just to litigation. in the past seven years only one independent inventor out of three million patent applications filed have successfully proved an earlier date of invention over the inventor who filed first. however, with the new first inventor to file system, a bold timeline of filing dates will allow these small businesses and

independent inventors to more easily defend and settle their disputes over the rightful patent holder. . supreme court has never said first to file is unconstitutional. we are going to what our founders established. it is a procedure that will spur new jobs and stimulate the economy and i think as we all know if we need to get this economy moving and get america back to work we are in that time right now. i yield back. the chair: the gentleman yields back the balance of his time. the gentlewoman from california is recognized. ms. lofgren: i would yield to mr. mann zuleo for the two minutes that he has requested. the chair: the gentleman from illinois is recognized for two minutes. mr. manzullo: madam chair, in my

office, there are two photographs, one with me and edwards demming and the inventor of the m.r.i. the doctor visited our office and i said what's wrong with this bill and he said everything. he said if this bill were law, today, we would not have the m.r.i. there are a lot of problems with this bill. this is my fourth patent site but we agree but we have two persons who disagree on policy. back in 2004 when i chaired the small business committee, i was instrumental inputting in a fee structure for small businesses. and to do that, i had stricken from the bill, the authority of the p.t.o. director to set fees. this new bill gives the ability

to set fees even though the initial filing fees for small businesses had been lowered. the problem is that the p.t.o. can come in and simply raise fees to sokol manage their operations. in fact, two reports filed in june of 2002 by the u.s. p.t.o. said fees, based upon a highly progressive system based on limited applications contain very high number of claims and also the same thing in 2007. their idea of decreasing claims in the patent office is to raise fees. obviously, who's that going to hurt? it's going to be the little guy. and that's why it's one of many reasons i oppose this bill, but we should not delegate the authority that congress has to set fees and one of the constitutional function that is we have in this body to somebody

in this body who already state state the he is going to raise fees. guess who gets hurt? the little inventors, the people who invent things in this country, the true creators of jobs. and i yield back. the chair: the gentleman yields back the balance of his time. the gentleman from texas is recognized. mr. smith: i yield one minute to the gentleman from new hampshire for purposes of a colloquy. mr. bass: i want to discuss legislative history and how two sections will work together. i think we can set down a definitive clarity. mr. smith: one can issue for clarity and actions under the two sections and intend there to be an identity if it is such

that it attributes and inherently has the grace period. mr. bass: the legislation has action between 102 a and b and will not stumble into a bar. such inventors will have to be diligent and file within the grace period if they trigger 102 a and if an inventor striggers that, they have triggered the grace period under 102 b. mr. smith: i yield myself an additional 0 seconds. contrary to current precedent, inorder to trigger it, it mismake the subject matter before the filing date. section 102 b is designed to make a strong grace period for

those who have made a disclosures and are protected during the combrace period not only from the disclosure but from any art. this is an important protection and i reserve. the chair: the gentleman reserves and the gentlewoman from california is recognized. ms. lofgren: i recognize my colleague from california, mr. rohrabacher, for two minutes. mr. rohrabacher: i hope everyone is paying attention to what this is all about tonight. first of all, we have dan lungren, one of our muslims, who is a former -- one of our members who is a chairman of the judiciary committees, all of them add mant that this bill is unconstitutional and we have a lot of people talking about

backlogs and what is wrong with the efficiency of the patent office as if that is what this is all about. this is not what this is all about. this is a patent fight going on for 0 years. you have some very large corporations who are trying to harmonize patent law with the rest of the world even thousand patent law has been stronger throughout the rest of the world. you weaken the patent procks of the american people and weakening it. is that what we want to do? i don't think so. that will have dramatic impact on our country. one of the most highly respected think tanks in the united states have four of their scholars go after this bill and three of the

points they have made, thumbs down on this american invents act, patent rip-off bill. here's what hoover institution says, it will protect large companies at the expense of market challenging competitors. we have overseas multi-national corporations and wreaks havoc on property rights and they are essential for economic growth. this bill is a job killer. and the jobs that will be killed are the united states of america. now the multi-national corporation -- i ask for 30 seconds. ms. lofgren: i yield. mr. rohrabacher: these multi-national corporations, they are creating job overseas. they don't care if the jobs are lost over here. and the american invents act would inject massive uncertainty

into the patent system. we have had -- we have had the strongest patent system in the world and yielded us prosperity and security as a people. we do not need to change the fundamentals of this system and harmonize with weaker systems throughout the world. and vote against this patent relationship-off bill. the chair: the gentleman's time has expired. the gentleman from texas. mr. smith: i yield two minutes to the the gentleman from ars. mr. quayle: i thank the gentleman. i rise in sport of this bill. it reduces costly litigation within our patent system. innovation is the key to our mediate and future economic growth. innovators are being held by a

backlog patent system. in order to unleash the potential, we must reform this system which has president been reformed in 60 years. this creates a business-method pilot program and will review the validity and showing that that a patent is invalid. and the resulted in frivolous lawsuits which cost between $5 million to $10 million. they cover a method of cunthing business, which includes -- including business or getting a tax. the tort abuse created by these patents has become legged area.

section 18 has broad bipartisan support in the senate and is an alternative to costly litigation that will save 90% of the cost insurd in civil litigation. i support chairman smith's work in creating an alternative to abusive litigation and oppose any effort to strike section 18. as part of the republican conferences to spur economic growth, i urge passage of this important legislation. i yield back the balance of my time. the chair: the gentleman yields back. the gentlewoman from california is recognized. ms. lofgren: i yield myself as i may consume. i want to talk about the manager's amendment under this general debate time because there is a constrained amount of time for that discussion. i want to touch on two things in particular. first is the fee issue. i know there has been discussion

that somehow the fees won't be diverted under the manager's amendment and i think that is not a credible argument. i remember back in the year 2000 when we were promised that the fees would not be diverted by the prapetors, but subsequent to that there was diversion and so long as this is part of the appropriations process, the fees can and i predict will, be diverted as they were during the adoption of the c.l. this year. there is a prediction of the $100 million. that is a special tax on innovators. you raise the fees and you divert it for general purposes, that is a special tax on them and that is wrong and i cannot support it. i want to talk about msh -- my

colleague talked about we could resolve the issues. and there are two issues i want to address and they are closely related and they are complicated but they are important. under our laws, an idea must be new, useful and non-obvious in order to receive patent protection and and this this is the prior knowledge that exists. if an idea exists in the prior art, you can't get a patent. under current law, a variety of things create prior art, such as prescriptions of a prior idea, printed publications, as well as public uses or sales, but current law has what is known as the are grace period which provides one year to file a

patent application after certain activities that would otherwise prior art. if there was a new invention, he or she would have a year to file a patent application. and this is an important provision and this is unique to the united states. the p.t.o. director referred to this grace period as the gold standard of best practices. now as we move into the first to file system as is propped in this bill, it is essential that the revised grace period extends everything that is prior art under today's rules. and unfortunately, that is not the case in the manager's amendment. the grace period would protect, and this is a direct quote, only disclosures. what would that not protect? trade secrets?

offers for sale that are not public? you could have entrepreneurs who start an invention and start a small business who won't be able to get a patent for their invention under the grace period and entrepreneurs might then be forced to delay brage their products to market, which could slow growth. this needs to be addressed, not in a colloquy, but in language. and we agreed in the committee, when we stripped out language that didn't fix this, that we would fix the 102-a and b problem in legislation. there was a colloquy on the senate floor, similar to one that has taken place, but we know that the language in the bill needs to reflect the intent. judges look to the statutes first to determine its meaning and the legislative history is not always included. so the ambiguity that is in the

measure is troublesome. and although we prepared an amendment to delineate it, it has not been put in order and therefore, this remedy cannot be brought forth and small inventors -- and even big once, may have a problem. . i got an email from the general councils of technology company and i won't read the whole thing but here's what this general council said. the prior use rights clause as written will be a direct giveaway to foreign competitors, especially those from countries where trade secret test is rampant. what we're saying to american companies is that if you have a trade secret that you want to protect under the grace period

prior our rules, you're out of luck, you're quite potentially out of luck. you'll either have to disclose that trade secret and we know that there are serious concerns in doing that, we don't want to get into maligning countries around the world but there are some that do not have the respect for intellectual property that we have. or else we will say to that inventor or company that you can't use your own intention, that you have devised, without being held up for licensing fees, from someone who got to the office before you did. so this is a big problem that is not resolved even if the manager's amendment is defeated. this problem will remain in the bill. and it is an impediment to innovation and an impediment to making first to file work. if we're going to have first to file and i can accept that it must have robust, broad,

rigorous protection under the grace period with a broad definition of the prior art that is protected. that is just efficient in this bill -- deficient in this bill. i would urge this -- i know down in the weeds, it's a little bit nerdy, we've spent many years talking about this in the judiciary committee, i'm just so regretful that this bill, after so many years, has gone sideways in the last two days and is something that we cannot embrace and -- embrace and celebrate. i would reserve the balance of my time. the chair: the gentlewoman reserves. the gentleman from texas is recognized. mr. smith: i yield two minutes to the gentleman from arkansas, mr. griffin, who is also a member of the intellectual property subcommittee of the judiciary committee. the chair: the gentleman from arkansas is recognized for two minutes. mr. griffin: thank you, mr. chairman. i rose today in strong support of h.r. 1249, the america invents act, and i urning my colleagues to support it.

make no mistake, the america invents act is a jobs bill. at no cost to taxpayers, this legislation builds on what we as americans do best. we innovate. bolstering american innovation will create jobs at a time when we need it most. the american invents act ends speed diversion and switches the u.s. to a first inventor to file system. these changes will streamline the patent application process to help american innovators bring their intentions so market. each new commercialized intention has the potential to create american jobs. this is a jobs bill. a provision that i worked on included in the bill would make permanent the patent trademark office's ombudsman program for small businesses concerns. this program will provide support and services for independent inventors who may not have the resources to obtain legal council for guidance on obtaining a patent. this provision ensures the small guys will always have a champion at the p.t.o. to help them

navigate the process. in addition, the american in-- america invents act puts an end to fee diversion, a process what has siphoned almost a million dollars in knees from the p.t. ofment. too many applications have sat untouched because the p.t.o. does not have the resources it needs to review them in a timely manner. ending fee diversion will expedite the preview and unleash the potential to create american jobs. this bill is endorsed by the u.s. chamber of commerce, the national association of manufacturers and the small business and entrepreneurship council. i urge my colleagues to support this jobs bill. i thank the chairman for the time. i yield back. the chair: the gentleman yields back the balance of his time. the gentlewoman from california is recognized. ms. lofgren: i continue to reserve. the chair: the gentleman from texas is recognized. mr. smith: madam chairman, i ask

how much time remains on each side. the chair: the gentleman from texas has nine minutes remaining . and the gentlewoman from california has 5 1/4 minutes remaining. mr. smith: madam chair, i am preparing to yield three minutes to the gentleman from virginia, mr. goodlatte, as i mentioned a while ago, the chairman of the intellectual property subcommittee of the judiciary committee. the chair: the gentleman from virginia is recognized for three minutes. mr. goodlatte: thank you, madam chairman. and it was mentioned earlier by

one of those speaking in opposition to the bill that the national association of realtors was opposed to this legislation and we will make available for the record a letter that we received dated two days ago from the national association of realtors on behalf of the 1.1 million members of the national association of realtors, we are pleased to support h.r. 1249, the america invents act. it goes on to explain in great detail why they, along with literally hundreds of other organizations, support this legislation. that includes the united states chamber of commerce, the national association of manufacturers, the retail federation of america, there is a whole host of organizations and individual companies, both large and small, who support the legislation because they know that this is what is vital for

job creation in this country. we need to have reform of our patent laws because unfortunately in recent years countries like china have overtaken us in the productivity of their patent office and the fact of the matter is unless we change our patent laws we are going to continue to be at a disadvantage. the advantages that we've had in the past are no longer available to us because quite frankly the complexity of inventions have increased and more and more we find ourselves in a situation where the laws that we operate under today, which were written in -- were last updated in 1952, need to be updated to address a lot of the abuses that you've heard described here this evening. we also need to pass this legislation, to make sure that the fee diversion that, as has been noted, has kept nearly a billion dollars from going to

the operation of the patent office, to work down the three-year, $1 -- one-million patent backlog, also can be addressed. and we also need to recognize that this legislation, in addition to being a jobs bill, has recognized by all of these many, many, many companies and associations of various trade groups, it is also major litigation reform. it cuts out the abuses with tax strategy patents and other business method types of patents, where individuals do not produce anything other than lay and wait for somebody else to come up with a similar idea and then comforward and say, hey, that was my idea and now you pay me a lot of money. they aren't creating jobs, they in fact are causing jobs to leave this country. so, there are many reasons to support this legislation and i would urge my colleagues to do so. we have not yet come to the

manager's amendment but it provides a critical component to making sure that fee diversion does not occur. the chair: the gentleman's time has expired. the gentlewoman from california is recognized. ms. lofgren: i yield myself such time as i may consume. the chair: the gentlewoman is recognized. ms. lofgren: i want to get back to the original reason why we've worked so hard on this bill only to be here at the end of this process with a bill that we can't support. you know, we started with hearings in the 1990's, with the federal trade commission and the national academy of science and one of the things they pointed out was that there are more patents than there are inventions and we started focusing in on the abuse of litigation that occurred as well as the needs of the office. my colleague is correct, the patent office has a tremendous

backlog and that is a serious concern for inventors and really for the country. the examiners have such an enormous back load they can't spend sufficient time reviewing the applicants, this has led to a flood of poor quality patents that was issued over the last decade and a half that i think and most believe should have been denied by the office. these dube rouse patents do significant damage -- dubious patent does significant damage to particular industries like the information technology industry as they can be used by nonpracticing entities to demand rents from legitimate businesses and to sbench with the development of legitimate products. now, i don't blame the examiners at the p.t.o., they're working hard. but they don't have enough time to give each application the consideration it deserves. the bill as approved by the judiciary committee would have

helped remedy this problem. by making sure -- a lot of people don't realize that the patent office doesn't get any taxpayer money. the patent office is entirely supported by fees submitted by inventors and so to keep all of those fees that the inventors are paying in the office so that the patents can properly be dealt with in a timely fashion, was a key component of this measure. unfortunately under the manager's amendment, that strong protection is simply gone. and i know as i said in the past we've had unanimous votes of the judiciary committee, we've had promises never to do it again, but the diversions have continued and it is clear that they will continue under the manager's amendment provision because it allows a regular process to continue as it has in the past. i have not submitted lists of

letters of who's in favor, who's opposed to this bill, it's my understanding that the realtors association is in fact opposed to the manager's amendment, but we're not going to vote on these amendments tonight, we're rolling these votes until tomorrow. so we will research that and we will find the truth of where they are and make that information available to the members because certainly realtors are a very valuable part of our nation's economy. i want to talk a little bit as well about whether we can fix the defect on prior art by an amendment that would be offered later in the week by mr. conyers and mr. rohrabacher -- mr. rohrabacher. they propose that the first to file patent system that is being promoted to harmonize our system with other countries would not go into effect until the grace period which is the critical

part of the patent system actually is fixed and harmonized and i think, i don't know whether we can -- if the manager's amendment is passed, the fatal defect of defining the prior art is disclosures, i don't believe can be fully remedied by this amendment, although i think the amendment is a good one and i intend to support it. so i think it's very important that the manager's amendment be defeated. i would hope that if that happens that we might have a chance to step back and to fully examine where we are in terms of the prior user rights and the grace period. because as the patent commissioner had said, this is the gold standard, the united states has had the gold standard in patents with this grace period. it would be a shame, not just for the congress but for our

country and our future as innovators to lose this genius part of our patent system. and i would reserve the balance of my time. the chair: the gentlewoman reserves the balance of her time. the gentleman from texas is recognized. mr. smith: i yield 2 1/2 minutes to the gentleman from virginia, mr. goodlatte. the chair: the gentleman from georgia voiced for 2 1/2 minutes. mr. goodlatte: thank you, madam chairman. the gentlewoman has expressed concern about the fee diversion in the manager's amendment. i think it's a good provision and will for the first time end fee diversion at the patent and trademark office by statute. it accomplishes both our overarching policy goals and maintains congressional oversight. for the first time, we're establishing a reserve fund that will collect all p.t.o.

fees. it's been expressed on the other side of the the aisle that maybe with the authority to set fees there'll be an abuse in the patent office but it can't be abused very much because the fees will be subject to appropriations here in the congress they can't spend them on other things, can't divert them put they can put them in escrow and require the p.t.o. to come in and justify those frees. there'll be no incentive to have excess fees if there can't be excess expenditures because of congressional oversight. with the inclusion of this provision, we have ahoured that all funds collected by the p.t.o. will remain available to them and not be diverted to any other use. ending fee diversion has been an important goal for all of us and as we crafted legislation our ultimate policy goal was to ensure that perform t.o. funds were not diverted for other uses such as earmarks or other agencies. working with leadership and

other agencies we accomplished a provision that accomplishes our goal through a p.t.o. reserve fund. this was carefully brokered by leadership to ensure it aligned with house rules and did not include mandatory spending that would have resulted in a score. just a few months ago, including a provision like this one would have been unheard of and nothing like this has been considered by previous congresses. all fees collected will be deposited into the p.t.o. fund and the funds shall be made available until expended only for obligation and expenditure by the office this ensures that the appropriations and judiciary committees will continue to have oversight over the p.t.o. though p.t.o. remains within the appropriations process, the appropriators no longer have an incentive to divert fees. in other words, because excess fees are made available to the

p.t.o. there will be no scoring advantage to the committee to decrease the appropriations and this will not impact their 302b allocation for commerce appropriations. the chair: the gentleman's time has expired. ms. lofgren: may i inquire how much time remains? the chair: the gentlelady has 5 seconds remaining. ms. lofgren: i will use those 15 seconds to say a few things. the legislation can be used to undo a case won in the court and that other section a giveaway to the banks. there are some good things in this but overall it does more harm than good. i yield back. the chair: the gentleman from texas has two and a half minutes remaining. mr. smith: i yield myself the balance of my time. the chair: the chair has a correction.

the gentleman has three and a half minutes remaining. mr. smith: i yield myself the balance mauve time. the chair: the gentleman is recognized. mr. smith: in closing, i want to thank the patent principals who devoted so much time, intellect, and energy on this prompt. we have workeding to on the goal of patent reform for six years. while some of us still have differences over individual items, i want members to know i appreciate their contributions to the project. this includes, among many others, mr. goodlatte, mr. watt, mr. issa, mr. berman. in the senate we've worked closely with senators leahy, grass lee, kyl, hatch and others. i want to thank them as well. also we would not be at this point tonight without the support of commerce secretary lott and the p.t.o. director. our country needs this bill. we can't thrive in the 21st century using a 20th century

patent system. at a time when the economy remains fragile and unemployment is too high, we must support the p.t.o. which is considered part of a pro-growth, job-creating agenda. this will catapult us into a new era of choice. i urge my colleagues to support h.r. 1249 and i yield back the balance of my time. the chair: the gentleman yields back. all time for general debate has expired. pursuant to the rule, the amendment in the nature of a substitute printed in the bill shall be considered as an original bill for the purpose of amendment under the five-minute rule and shall be considered read. no amendment to the committee amendment is in order except those printed in part b of house report 112-111. each such amendment may be offered only in the order printed in the report by a

member designated in the report, shall be considered read, shall be debatable for the time specified in the report equally divided and controlled by the proponent and an opponent, shall not be subject to amendment and shall not be subject to demand for division of the question. it is now in order to consider amendment number 1 printed in part b of house report 112-111. for what purpose does the gentleman from texas seek recognition? >> i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number 1 printed in part b of house report 112-111 offered by mr. smith of texas. the chair: pursuant to house resolution 316, the gentleman from texas, mr. smith, and a member opposed, each will control five minutes. the chair recognizes the gentleman from texas. mr. smith: i yield myself such time as i may consume.

the chair: the gentleman is recognized. mr. smith: the manager's amendment consists of numerous technical ediths and other improvements to the bill. some highlights include the poll lowing provisions, expansion and clarification of rights urn the patent act, institutions of higher learning qualify as microentity fees. consolidation of numerous p.t.o. reporting requirements, inclusion of amendment language that forebids the patenting of inventions encome possessing a human organization. this has been part of the laws for years. and deletion of a provision that provides special treatment of one company that wants additional patent term protection from the p.t.o. these and other changes smooth

out a few rough edges and improve the overall bill. i reserve the balance of my time. the chair: the gentleman reserves. for what purpose does the gentleman from north carolina rise? >> madam chair, i claim time in opposition to the amendment. choim the gentleman is recognized for five minutes. mr. watt: i yield the gentleman from wisconsin, mr. sensenbrenner, two minutes. the chair: the gentleman is recognized for two minutes. mr. sensenbrenner: madam chair this manager's amendment is substantive. it contains amendments that should not be buried in a manager's amendment and shown defeated. first of all, it does maintain the fee diversion. it maintains the fee diversion because of an alleged lock box. we've heard about this before. and i have in my hand the congressional record of june 23, 2000, where the chairman at the time of the state justice

commerce subcommittee stated that the fees yen rated by the patent office are not to be used by any other agency or any other purpose. they remain in that account to be used in succeeding years. we are not siphoning off patent office fees for other expenditures. well, guess what. it happened. and it's happened in the last 10 to 12 years to the tune of $1 billion and this is exactly the same promise that they're making now. fool us once, shame on them, fool us twice, shame on us. now this change relative to the reported bill, to what is in the manager's amendment, is the thing that is subject to the waiver of cut-go to the tune of $717 million over the last -- over the next five years. the proponents of this amendment say this is a mere technical waiver of cut-go. $717 million is no mere

technical waiver of cut-go. if you believe in cut-go, you've got to vote down the manager's amendment where this change was protected by the waiver granted for the rules committee. the amendment is substantive. it ought to be defeated. i yield back the balance of my time. the chair: the gentleman yields back. for what purpose does the gentleman from texas rise? mr. smith: i am the last speaker on this side and i'm prepared to close. the chair: the gentleman from north carolina is recognized. mr. watt: thank you, madam chair. i yield myself the balance of the time. let me first say i agree with mr. sensenbrenner, the rules committee says that this is a technical amendment, would make technical ediths and a few necessary changes to more substantive issues. this is a very substantive manager's amendment.

there's no question about that. there are many good parts to this bill and a broad coalition of people supported the bill which was reported out of committee. but the one and only necessary part of the bill is the ability to give the patent and trademark office its full funding. that was the whole purpose for which we started you have that process. it was -- this whole reform process was conceived to address poor quality patents and to reduce the backlog of patent applications which now exceed 700,000 back logs of patent applications. and the reason it exceeds 700,000 is because the patent and trademark office has not

had the money because their fees that they have been charging have been diverted to the general fund. without a clear path to access its own collection of fee the p.t.o. cannot properly plan or implement the other changes in the bill and fulfill this primary function of reducing the backlog and examining patent applications. the compromise that this manager's amendment proposes has been described by a patent news blog as, it says, still loosely, that's the appropriators, holding the football that it will never let charlie brown have. that's really what we see here. this is a mirage, a promise

that they are going to do something because if they just did it in the bill the way we reported the bill out of the committee, you wouldn't need the subterfuge. there's no reason to be doing this the senate reported it out clean, no diversion, 95-4. they voted it out of the senate. and i don't even know why we're here debating this at this point. if we believe that the whole -- that the one primary purpose of patent reform is to deal with the fee diversion, then we need to deal with that first and that's exactly what we did in the judiciary committee. i don't know why i'm here

defending what we on a broad, bipartisan basis reported out of our committee. it ought to be the chairman of the committee that's defending what we reported out of the committee. yet, we are here instead of defending what we reported out of the committee, the manager's amendment waters it down and makes it ineffective and that's not what we should be doing here. they say they got these letters of support but the letters came supporting what came out of the committee. not the manager's amendment the manager's amendment is going to dedestroy what came out of the committee. it is inconsistent with what came out of the committee. so we've got to defeat the manager's amendment and go back to the bill that came out of

the judiciary committee and that's what i'm advocating. the chair: the gentleman's time has expire. the gentleman from texas is recognized. mr. smith: i yield myself the balance of my time. the chair: the gentleman is recognized. mr. smith: let me address some of the criticisms that have been made about the manager's amendment. there are some who want to make more changes to the business method patent protection in the bill. this topic is a primary reason the judiciary committee launched patent reform back in 2005. the response to a number of poor quality business method patents issued over the last decade, the bill creates a transitional program within p.t.o. to evaluate the patents use egg the best prior art available. bad patents will be weeded out but good ones will become gold plated based on their enhanced review. . the language has drawn support from industries and

inventors. some colleagues have complained during this debate about the treatment of p.t.o. funding in the manager's amendment. the bill reported would allow the p.t.o. to keep the revenue it raised. this is treated as mandatory spending and scored and because of concerns, we worked with them to develop a compromise that eliminates fee diversion while allowing them to have oversight. the manager's amendment accomplishes this goal. but it means that the mandatory spending provisions become discretionary spending under the reserve fund. because this is contrary, we need a waiver for consideration of h.r. 1249. i want to emphasize that the bill includes user fees paid by

filers in return for services. this isn't the same thing as using tax revenue from the general treasury to fund the agency. i'm not sure that the cut-as-you-go rules apply. there is no impact on the deficit. the manager's amendment is constitutionally sound and improves the base text of the bill and incorporates a funding agreement approved by the leadership to get this bill to the floor. it is important to pass it and then move on to other amendments. i urge my colleagues to vote aye on the amendment and i yield back. the chair: the gentleman yields back the balance of his time. the question is on the amendment offered by the gentleman from texas. those in favor say aye. those opposed, no. in the opinion of the chair the noes have it. the amendment is not agreed to. mr. smith: i ask for a recorded

vote. the chair: pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the gentleman from texas will be postponed. the gentleman from texas is recognized. mr. smith: i move that the committee do now rise. the chair: those in favor say aye. those opposed, no. . the ayes have it. the motion is adopted. accordingly, the committee rises. mr. speaker, the committee of the whole house on the state of the union having had under consideration h.r. 1249 directs me to report that it has come to no resolution thereon. the speaker pro tempore: the chairman reports that the committee has had under consideration h.r. 1249 and has

come to no resolution thereon. the chair lays before the house the following personal requests. the clerk: leaves of absence requested for mr. gingrey of georgia from 3:30 today and for the balance of the week. the speaker pro tempore: without objection. the request is granted.

the speaker pro tempore: under the speaker's announced policy january 5, 2011, the gentleman from indiana, mr. burton, is recognized for half of the time before 10:00 p.m. as the designee of the majority leader. the gentleman from indiana. mr. burton: thank you, mr. speaker. i ask unanimous consent that i might revise and extend my remarks. the speaker pro tempore: without objection, so ordered. mr. burton: i'm not go to go take all the time that's alkited for my special order tonight but i did want to talk about this, because -- excuse me -- i did

want to talk about the problem that we're facing in libya right now. the president of the united states has the authority under the constitution to be the commander in chief in the event that we have to go into a military conflict. what the president does not have the right to do is to take us into a military conflict without consulting of the congress of the united states unless there is an imminent threat on the united states or attack on the united states. the constitution is pretty clear on this subject. unfortunately during the nixon administration, there was some question whether or not president nixon compete d miss authority and we passed the war powers act. and it was designed to clarify very clearly for president nixon

and all future presidents the authority granted them under the constitution in the event there was to be a conflict. the president vetoed that bill because he thought that was an infringement, i'm talking about president nixon, because he thought that was an infringement. the congress overwhelmingly overrode the president's veto. there has been a lot of questions from my colleagues about the constitutionality about the war powers act. some of my other body said it's not not constitutional. the fact of the matter is, it has never been tested in court and never gone to the u.s. supreme court and as a result, the war powers act is the law of the land. it's the law of the united states of america. and it is intended ks as i said

before, to clarify the constitutional powers of the president of the united states. now the president of the united states, mr. obama, decided we ought to go into libya for humanitarian purposes. there is nothing in the constitution that gives him the authority to do that unless he has the expressed approval and support of the congress of the united states. when president bush was the president and he went into iraq, he first consulted with the congress. when he went into afghanistan, he first consulted with congress. president obama said because of the time elements and the time concerns about the humanitarian problems in libya, he had to act expeditiously and did not have the time to consult with congress. during that time, he consulted with the french, united

nationses nato and arab league, but didn't have time to talk to the congress of the united states. that was a red herring and he chose to move of his own choosing and put the united states at war again. they say it's not a war, but it is a war and they say it's a nato operation, but if you look at the facts, you find that the united states is carrying the burden of this war. let me give you these figures and they are a couple of weeks old. first of all, of the number of personnel that's been involved in the libyan conflict, there is almost 13,000 military personnel involved, of that, 8,500 of them are american military. that's over 2/3. when you talk about the number of aircraft involved, there is a total of 309, but 153 of those

aircraft are the united states aircraft. when you talk about the number of military actions taken by aircraft, there has been 5,857 and over 2,000 of those are with american pilots and american planes. 45%, 40%. and the number of cruise missiles that have been fired, the total is 246 and of the 246, over 90% are americans, 228. so the president has taken us into war in libya for humanitarian purposes, he said, without consulting with the congress of the united states, which is a direct violation of the constitution of the united states and the war powers act and we have spent well over $1 billion in conducting this war. and they say it's nato's war and

with heard that our nato allies are running short on ammunition, other military equipment and asking the united states to shoulder more of our burden. one of my colleagues from virginia, who sits in the chair tonight, brought up today that many of the count tries in europe, i believe it was virginia, many of the countries in nato haven't been paying their fair share of the nato burden and has been falling on the united states to carry out the military operations. that isn't right. this isn't a nato war, this is an american war ant president has taken us into this conflict without any consulting with the congress of the united states. now we talked about this in our conference and i won't go into the details because i think some of that if not classified and shouldn't be talked about in the public domain, but we need to

send a strong message to the president that we don't want him to do this again. many believe we ought to give him a time line to withdraw forces from libya and those are the people flying the military aircraft, ships offshore, the classified security people that are inside libya, they said there are no boots on the ground, i guarantee you there are intelligence officers on the ground. and so -- and the cruise missiles that are costing over $1 million per copy, we shouldn't be paying for those with taxpayers' money to the tune of -- i don't know how much, but $over 1 billion, at a time when this country is $1.4 trillion short to pay for the country's expenses and over $14 trillion in debt. this is not the time during the

history of the united states that we ought to be looking for a war. now there is no question probably that there is humanitarian problems in libya, but there are problems in ivory coast and syria and many other countries. and if you are looking for a war of opportunity, the president can look for a lot of places. but the congress of the united states, i do not believe, would have given him the authority to go into libya unless it was a direct threat to the united states. what did he do? he did it without consulting with congress, not the senate, not the house, not with any of us. many people in the congress feel like we can't withdraw because we'll be leaving our allies, the french and the english and others in nato there to carry the ball. but one of my colleagues said, when we take the oath of

allegiance to the constitution, we don't take it to nato or any other country. it's to the constitution of the united states. and the constitution says that the president does not have the authority to declare war and go into a combat situation without consulting with congress. and i'm very confident, madam speaker, that all of the people in this country would say, the president should not have done that and didn't have the authority to do that. i know tomorrow or friday, we are going to have some legislation on the floor that will say very clearly to the president that not only he shouldn't have done that, that it wasn't constitutional, but he shouldn't do it again and that's the thing i'm concerned about. the legislation we're going to have on the floor will confront the president on his ability or his authority to go ahead and do what he did in alibya, but doesn't say anything about

future expeditions he wants to take. and i hope the debate that we make it clear to the white house and to the president and to anybody at the white house that may be listening to this special order tonight, we do not want the president and if i were talking to him, mr. ppt, we don't want you to take us into a military conflict without consulting with the american people and the congress because we have the right to be involved in the decision-making process. once the war is started, you are the commander in chief. but you do not have the authority, mr. president, if i were talking to him, under the constitution of the war powers act. and we need to make that clear to him so he doesn't do it again. there are problems right now in syria and there are a lot of people are saying there are

humanitarian tragedies taking place, but it's not an attack on the united states and the congress of the united states should be involved in the decision-making process if we were to do something like go into syria. i hope the president and the white house are getting this message tonight. and they are saying that is dan burton talking on the floor. i have talked to my colleagues on both sides of the aisle and they do not agree with what the president has done and overwhelmingly in the senate, i don't believe they support what the president has done in libya and i think very clearly, they don't want this to happen again. i believe most of the members of both the house and the senate would like to see us out of libya as quickly as possible. and with that, madam speaker, i would like to say i have an op ed that i wrote that was in the "wall street journal" or letter to the editor that i would like

to submit to the record and submit the statistical data that i mentioned as well. with that, i yield back the balance of my time. the speaker pro tempore: the gentleman yields back. . . the chair recognizes the gentleman for a motion. mr. burton: i move that the house do now adjourn. the speaker pro tempore: the question is on the motion to adjourn. those in favor say aye.

we will have live coverage of the house when they return tomorrow at 10:00 a.m. here on c-span. coming up on c-span, president obama talked about u.s. strategy in afghanistan. that reserve chairman ben bernanke talk to reporters about the economy and monetary policy. medicare paltry two public trustees discuss the health of the medicare program.

>> president obama announced plans tonight to pull 10,000 military personnel out of afghanistan by the end of this year with 30,000 more troops to leave by next summer. from the east room, this is 15 minutes. >> good evening. nearly 10 years ago, america suffered the worst attack on our shores since pearl harbor. this mass murder was planned by osama bin laden and his al qaeda network in afghanistan. it signaled a new threat to our security, one in which the targets were not only soldiers on the battlefield, but innocent men, women, and children going about their daily lives. in the days that followed, our nation was united as we struck at al qaeda and routed the taliban in afghanistan. then our focus shifted. a second war was launched in iraq. we spent enormous blood and treasure to support a new government there.

by the time i took office, the war in afghanistan had entered its seventh year. but al qaeda's leaders had escaped to pakistan and were plotting new attacks. the taliban had regrouped and got on the offensive. without a new strategy and decisive action, our military commanders warned that we could face a resurgent al qaeda and a taliban taking over large parts of afghanistan. for this reason, and one of the most difficult decisions i have made as president, i ordered an additional 30,000 american troops into afghanistan. when i announced this surge at west point, we set clear objectives to refocus on al qaeda, to reverse the taliban's momentum, and to train afghan security forces to defend their own country. i also made it clear that our commitment would not be open-

ended, that we would begin to withdraw our forces this july. tonight, i can tell you that we are fulfilling that commitment thanks to our extraordinary men and women in uniform and our many coalition partners. we are meeting our goals. as a result, starting next month we will be able to remove 10,000 of our troops from afghanistan by the end of this year. we will bring home a total of 33,000 troops by next summer, fully recovering the surge. after this initial reduction, our troops will continue coming home at a steady pace as afghan security forces move into the lead. our mission will change from combat to support. by 2014, this process of transition will be complete and the afghan people will be responsible for their own security. we are starting this drawdown from a position of strength. al qaeda is under more pressure than any time since 9/11. together with the pakastanis, we have taken out half of the

al qaeda leadership. we have killed osama bin laden, the only leader that al qaeda had ever known. this was a victory for all who have served since 9/11. one soldier summed it up well. the message he said is, "we do not forget." we will be held accountable no matter how long it takes. the information that we recovered from bin laden's compound shows al qaeda under enormous strain. bin laden expressed that al qaeda had been unable to replace senior terrorists that had been killed. al qaeda has failed in its effort to portray america as a nation at war with islam, draining widespread report. al qaeda remains dangerous and we must remain vigilant, but we have put al qaeda on a path to defeat.

we will not relent until the job is done. in afghanistan, we have inflicted serious losses on the taliban and taken many of their strongholds. our allies also increased their commitments, which helped to stabilize more of the country. afghan security forces have grown by over 100,000 troops. in some provinces, we have already started transferring to the afghan people. afghans are fighting and dying for their country. they are establishing local police forces, opening markets and schools, creating new opportunities for women and girls, and trying to turn the page on decades of war. of course, huge challenges remain. this is the beginning, but not the end of our effort to wind down this war. we will have to do the hard work of keeping the gains that we have made while we draw down our forces and transition the responsibility for security to the afghan government. next may, in chicago, we will host a summit with our nato

allies and partners to create the next phase of this transition. we do know that peace cannot come to a land that has known so much war without a political plan. as we strengthen the afghan government and security forces, america will join initiatives that reconcile the afghan people, including the taliban. our position on these talks are clear. they must be led by the afghan government and those who want to be part of a peaceful afghanistan must break from al qaeda, abandon violence, and abide by the afghan constitution. but, in part because of our military efforts, we have reason to believe that progress can be made. the goal that we seek is achievable and can be expressed simply -- no safe haven from which al qaeda or its affiliates can launch attacks against our homeland or our allies. we will not try to make

afghanistan a perfect place. we will not police its streets or patrol its mountains indefinitely. that is the responsibility of the afghan government, which must step up its ability to protect its people and move from an economy shaped by war to one that can sustain a lasting peace. what we can do and will do is build a partnership with the afghan people that endures, one that ensures we will be able to continue to target terrorists and support a sovereign afghan government. of course, our efforts must also address terrorist safe havens in pakistan. no country is more in danger from the presence of violent extremists. we will press pakistan to secure a more peaceful future for this war-torn region. we will work with the pakastani government to move out the cancer of violent extremists and we will insist that it keeps its commitments. there should be no doubt that

so long as i am president, the united states will never tolerate a safe haven for those who aim to kill us. they cannot escape the justice they deserve. my fellow americans, this has been a difficult decade for our country. we have learned anew the cost of war -- a cost that has been paid by the nearly 4005 americans that have given their lives in iraq and the 1500 that have done so in afghanistan. men and women did not live to enjoy the freedom that they have supported. some have been wounded. some have lost limbs on the battlefield. some still battle the demons that followed them home. but tonight, we take comfort in knowing that the tide of war is receding. fewer of our sons and daughters are serving in harm's way. we ended our combat mission in iraq with 100,000 american troops already out of that

country. even as there will be dark days ahead in afghanistan, the light for a secure peace can be seen in the distance. these long wars will come to a responsible end. as they do, we must learn their lessons. already this decade of war has caused many to question the nature of america's engagement around the world. some would have america retreat from the responsibility as an anchor of global security and embrace the isolationism that ignores the threats that we face. others would have america overextend, confronting every evil that can be found abroad. we must chart a more centered course. like generations before, we must embrace america's singular role, but we must be as pragmatic as we are passionate. when threatened, we must respond with force. but when that force can be targeted, we need not deploy

large armies overseas. when there is a sense of being slaughtered and global security in danger, we do not have to choose between standing idly by or acting on our own. instead, we must rally international action, which we are doing in libya, where we do not have a single soldier on the ground, but are supporting allies in protecting the libyan people and giving them the chance to determine their own destiny. in all that we do, we must remember that what sets america apart is not solely our power -- it is the principles upon which our union was founded. we are a nation that brings our enemies to justice while adhering to the rule of law and respecting the rights of all of our citizens. we protect our own freedom and prosperity by extending it to others. we stand not for empire building, but for self- determination. that is why we have a stake in

the democratic aspirations that are now washing across the arab world. we will support those revolutions with fidelity to our ideals, with the power of our example and with an unwavering belief that all human beings deserve to live with freedom and dignity. above all, we are a nation whose strength abroad has been anchored in opportunity for our citizens here at home. over the last decade, we'll spend $1 trillion on war in a time of rising debt and hard economic times. now we must invest in america's greatest resource -- our people. we must unleash innovation that creates new jobs and industry while living within our means. we must rebuild our infrastructure and find new and cleaner sources of energy. most of all, after a decade of passion and debate, we must recapture the common purpose that we shared at the beginning of this time of war. for our nation draws strength

from our differences and when our union is strong, no hill is too steep, no horizon is beyond our reach. america, it is time to focus on nation-building here at home. in this effort, we draw inspiration from our fellow americans who sacrificed so much on our behalf. to our troops, our veterans, and their families, i speak for all americans when i say we will keep our sacred trust to you and provide you with the care, benefits, and opportunity that you deserve. i met some of these patriotic americans a while back. i spoke to the 101st airborne who turned the tide in afghanistan. i spoke to the team who took out osama bin laden. standing before a model of bin laden's compound, the navy seals paid tribute to those who had been lost -- brothers and sisters in arms whose names are

now written at bases where our troops were overseas and on headstones where their memories will not be forgotten. this officer, like so many others i have met on bases in baghdad, walter reed, and bethesda naval hospital, spoke with humility about how his unit worked together as one, depending on each other, and trusting one another. that is a lesson worth remembering. we are all a part of one american family. we have known disagreements and divisions. we are bound together by the creed that is written in our founding documents and the conviction that the united states of america can achieve whatever it sets out to accomplish. now, let us finish the work at hand. let us responsibly end these wars and reclaim the american

dream that is the center of our story. with confidence in our cause, faith in our fellow citizens, and hope in our hearts, let us go about the work of extending the promise of america to this generation and the next. may god bless our troops and may god bless the united states of america. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> to learn more about the administration's strategy in afghanistan, up tomorrow from secretary of state hillary clinton. she will testify before the senate foreign relations committee. coverage begins at -- begins at 10:00 a.m. eastern on c-span3.

>> this weekend, book tv and american history tv look at savannah, ga., with the events on c-span2, including the home or.writer flanner o'conn also, a tour of urban slavery sites. on american history tv on c- span3, we visit the site of a plantation and export civil war in savannah. c-span's local content vehicle in savannah, ga., this weekend on c-span2 and c-span3. >> falling eight two-day meeting, ben bernanke held a

press conference where he repeated his prediction that economic growth would pick up in 2012. this press conference is only the second ever held by a federal reserve chairman. mr. bernanke plans to take questions from reporters four times a year. this is just under one hour. >> my goal is to reflect the consensus in the committee will taking note of the burst -- diversity of views. my remarks are my own interpretations and my own responsibility. as indicated in the policy statement released early this afternoon, we decided to keep the target range for the fund rate at 0.1%.

the committee continues to anticipate that economic conditions are likely to want exceptionally low levels for the federal funds rate for extended period. the committee's plant purchases of treasury securities will be completed by the end of this month. the committee will continue to reinvest principal payments from its securities holdings going forward. in conjunction with to date but the meeting, the participants submitted projections for economic growth, the unemployment rate, and the inflation rate for the years 2011 through 2013 at over the long run. these are conditional on the participants' individual assessments of the monetary policy needed to best promote the committee's objectives. i will focus of the information shown in the figures that had been distributed. in each figure, the dark area denotes the central tendencies of our current projections while

the lighter shade area reflects the full projections. to the right of each figure, or participant assessments under a corporate monetary policy and assuming no other shop to the economy. the longer run projections for output growth at a central tendency of 2.5% to 2.8% and loan run projections for the unemployment rate that the central tendency of 5.2% to 5.6%. these projections may be interpreted as indicating participants current estimates of the economies in normal growth and its normal unemployment rate over the longer run respectively. it should be noted that these estimates are inherently uncertain and subject to revision. bobrun rates of economic growth and unemployment are determined largely by non monetary factors that may evolve over time and often cannot be directly measured. the central tendency of the long

run projections for inflation as measured by the price index for consumption expenditures is 1.7% to 2.0%. since the outlook is determined entirely by monetary policy, these projections can be interpreted as indicating that the inflation rate to be consistent with the federal reserve mandate of fostering maximum employment and stable prices. in a sense, the mandate shows inflation rate to be 2% or a bit less. i now turn to the contours of the committee but the economic outlook. as indicated in the policy statement, the economic recovery appears to be proceeding at a moderate place, but slowly -- but more slowly than anticipated. for example, the unemployment rate has risen by 0.3% since march. new claims for unemployment insurance had been somewhat higher.

this pace partly reflects factors that are likely to be temporary. the consumer purchasing power has been damped by higher food and energy prices and the aftermath of the tsunami an earthquake in japan has been associated with disruptions in global supply chains, especially in the oil sector. some moderation of gasoline prices are in process. consequently, as shown in the first figure, the committee expects the pace of economic recovery will pick up over coming quarters. specifically, participants a jet for output growth in tennessee of 2.7% to 2.9% for this year. -- tendency of 2.7% to 2.9% for this year. participants have also responded

to the slowing by marking down the growth projections for 2011 and 2012 by half a percentage point lower than previous positions. -- previous projections. 2013 is essentially the same as april projections. eshelman in the second figure, the unemployment rate is expected to resume its gradual decline. in particular, the unemployment rate is projected to edge down over the coming months to 8.6% over the fourth quarter of this year. it is projected at 7.0% in the first quarter of 2014. we expect the unemployment rate to continue to decline, but the pace of progress remains frustratingly slow. inflation has moved up in recent

months, reflecting higher prices for some commodities. prices for motor vehicles have risen notably as a result of the recent supply chain destructions. however, as the effects dissipate, the committee anticipates inflation will subside in coming quarters to levels at or below its consistent rate as shown in the figure entitled "inflation." the economic outlook provides important policy context. the committee's policy strategy will foster both aspects of our dual mandate. promoting the economic recovery so that the unemployment rate returns to its normal levels and ensuring that inflation is

consistent with our mandates. at 9.1%, the current unemployment rate remains elevated. the inflation rate, which picked up in recent months, is expected to decide -- decline. the ongoing labour market slag and reduced inflation outlook are key reasons for the decision to remain a high degree of monetary policy in accommodation -- monetary policy of accommodation. thank you. i will be glad to take your questions. >> mr. chairman, short-term interest rates will be remained at an exceptionally low level for an extended period.

does that data is also applied for the fed's securities? will they be maintained at a very high level for an extended period? >> we have not made any such commitments. it is true that when we began to runllow the portfolio off rather than reinvesting, that would be a first step in a sitting from our highly accommodative policies, but we have not yet chosen to make any particular commitment about the timeframe. we will look at the outlook on and try to assess the appropriate time to take that step. >> if i may follow up -- why did guidance on one policy tool, but not give dots on another policy tool when the fed has talked about these two policies working together? >> that is a good question. it is something we have on the table and something we've

thought about. at this point, we not taken that step. >> mr. chairman, the committee lowered this year's central tennessee forecast, yet the statement of the committee respects the revision forecast as temporary factors. i did see the statement suggests they are likely to be temporary picked it -- temporary. are the more permanent factors? >> as you point out, the temporary factors or, in part, the reason for the slowdown. in other words, part of the slowdown is temporary import of it may be longer lasting. we do believe that growth is going to pick up going into 2012.

it will be a somewhat slower pace than we anticipated in april. we do not have a precise reading on why this slower pace of growth is persisting. one way to think about it is that maybe some of the head winds that have been concerning us like weakness in the financial sector, problems in the housing sector, balance sheets and delivering issues -- some of these may be stronger in more persistent than we thought. i think it is inappropriate to attribute a slowdown partly to these identifiable temporary factors, but to the dollar is the possibility that some of the slowdown is due to slack -- due to factors that will be

permanent. >> mr. chairman, could you describe to what extent the situation in greece and europe was discussed at the meeting and what policy conclusions were reached? also, could you tell us whether or not, in response to the recent slowdown, there was a discussion about further easing? >> with respect to greece, that is obviously very important. it is a very difficult situation. we have been in close communication with our colleagues in europe. obviously not part of negotiations, but we have been kept well informed. we had a call of the weekend, for example. -- we had a g7 call over the weekend, for example.

if there were a failure to resolve the situation, it would pose threats to the european financial system, the global financial system, and to european unity, i would conjecture as well. we did discuss it. it is one of several potential financial risks we are facing now. but, again, we are mostly just falling the situation closely and making sure that as best we can our own institutions are well positioned were lifted to sovereign debt and so-called -- to sovereign debt. with respect to additional asset purchases, we have not taken any action. we will be reviewing the outlook going forward. it will be a committee decision. the point i would make in terms of where we are today versus

august of last year when i began to talk about asset purchases is that at that time inflation was very low and falling. many indicators suggested that deflationary was a trivial risk. i think the securities purchases have been very successful in eliminating inflation risk. i do not think people appreciate that inflation can be a very pernicious situation and can have very long-lasting effects on economic growth. in addition, growth in payrolls has actually picked up. in the four months before the jackson hole speech in august, there was then $80,000 a month payroll increase. so far in 2011, including the weak payroll report in may, the average is closer to $80,000.

there has been improvement, albeit not as strong as we would like. as of last august, we were missing significantly on both sides of our mandate. inflation was too low and falling and unemployment look like it was beginning to rise again. in that case, the case for monetary action was pretty clear in my mind. i think we are in a different position today. we are not where we would like to be, certainly, but closer to the dual mandate objectives than we were at that time. again, the situation was at a different stage in last august. we'll continue to act as needed. >> would budget cuts, which may begin at the end of this year, helped or hindered the economy?

what is fiscal policy like in the 2012 growth forecast? >> the effect of fiscal cuts on the economy depends very much on the timing. i have advocated that the negotiations about the budget focus on the longer-term -- say 10 years -- or even longer if your taken into account a timeout -- entitlement reform, for example. we can help the economy by reducing the risk that interest rates might rise suddenly. we may help increased confidence in the part of households and businesses. it is desirable that we take strong action to lower our budget deficit over the longer term. in doing that, i think it would be best not to, in light of the weakness of the recovery, to have sharp consolidation in the

near term. that does not do much for the longer-term budget situation, but is a negative for growth. my answer is that it depends very much on the timing. i hope the congressional negotiators will take a longer- term view as they discussed the issue. >> if i could follow up on what he just said. there seems to be a growing view in the country that the deficit is the problem with jobs and that immediate cuts in the deficit would grow the economy and immediately create jobs. many economists disagree with that. do you want to go further and talk about that issue, whether you agree with that view that it would be taking risks? >> i do not think the sharp, immediate cuts in the deficit would create more jobs. i think in the very short run that we are seeing already a certain amount of fiscal drag

coming from state and local governments as well as from the west wall of previous federal stimulus. in the very short run, i think the fiscal tightening is, at best, neutral, and probably somewhat negative for job creation. i think what people should understand is that our budgetary problems are very long run in nature. the projections made by the cbo, for example, talk about where our jet to deep -- debt to gdp ratio will be in 2025 and so on. that does not mean we should wait to act. the sooner we act, the better. the most efficient way to address our fiscal problems, and i think this is important, is to take a longer run perspective, not to put this on cuts heavily in the near term.

by taking a long run perspective and making a federal plan for reducing future deficits will lower interest rates, or at least prevent them from rising, and we will increase confidence. that could be very constructive. but due entirely bogus on the near term, i do not think that is the optimum way to proceed. -- but to focus entirely on the near-term, i do not think that is the optimum way to proceed. >> mr. chairman, do you believe that the fmoc as an authority to set 2% inflation targets you elaborate? are you considering doing it? are you considering going to congress to ask them to do it? >> as you know, i guess that a long time -- i had been a longtime proponent of inflation

targets. i think it would help anchor inflation expectations and make it easier to reach our inflation objectives. it is not inconsistent with our employment objectives. keeping inflation expectations low and stable gives the fed more leeway to respond to the economy. i think it is something that is worth considering. in terms of all forties, i would just say that -- in terms of o authority, the european central bank is a mandate for price stability. they set their own definition of that. they use input from economists and others. i do not think there is a real barrier to setting a target, however, it is very important that we first communicate to the

public what we are doing. without sufficient explanation, people make that we are somehow abandoning our employment targets. we need to make sure it is understood both of the public and by congress that having a target would not mean that we are abandoning our mandate. also, you asked about progress. under any circumstances it would be important to take the pulse of congress. we may have the legal authority to do this, but we need the administration and congress to make that step. we will continue to periodically discuss this issue. it has been part of our ongoing discussions, which include the press conference as one innovation, for example. we will continue to discuss this as appropriate. we will be consulting about it.

>> what is your assessment of the anti of the united states economy if there is a default by one or more european nations? what steps has the fed taken? have you examined the impact on derivative holdings outside the financial system? >> to answer your second question first, we have been very assiduous in examining the exposures of financial institutions to the so-called peripheral countries. the answer is that the banks that we regulate are not significantly exposed to those countries directly, at least. they have significant exposure to european banks in not rural countries. -- non-peripheral countries.

the numbers published do not fully account for a wide variety of hedges. we have asked the banks to do stress test. let's get all their positions at all their hedges -- what would be the effect on their capital if greece defaulted? the answer is that the effects are very small. it is also the case that we do not oversee the money market mutual funds. we have been keeping a close eye on the situation. there again, the situation is this similar in some sense. the money market mutual funds do not have direct exposure to the peripheral countries that are currently struggling with debt problems.

they do have substantial exposure to european banks in the so-called core countries. to the extent there will be a direct impact on the core european banks, that poses some concern to money-market mutual bonds. there is a reason why the federal reserve and other regulators continue to look at ways to strengthen money-market mutual funds. in terms of the impact of the problem in greece on the united states, the direct exposures are pretty small. we are doing all we can to monitor those exposures. however, as we saw in a small case last spring, a disorderly default in one of those countries would no doubt lower financial markets globally. it would have a big impact on

credit spreads, on stock prices, and so on. in that respect, i think the cutbacks will be quite -- effects would be quite significant in the united states. >> mr. chairman, to talk further about banks, as you note global regulators are meeting this week to finalize a proposal. there are some that are arguing that regulators are going to far too fast. i am wonder, for regulators, where is the line where you go too far and you do part credit lending and, inevitably, hurt the economy? >> i am will be attending that meeting. i will contribute to that discussion. it has only been two years since

we had the worst financial crisis, certainly, since the great depression and possibly in the history of the united states. the failure and near failure of large financial institutions was a major contributor to that crisis. since we cannot know exactly what threats will come in the future, the best all-purpose way of strengthening the balance sheets of banks and other financial institutions is by capital. i am very supportive of increased capital to help ensure that these banks will be stable and able to land in the event of another crisis, which i hope we never see. as for the surcharge, i think it is appropriate to have additional capital requirements for the largest and most systemically important institutions. after all, because their

failure would have effects on the financial system, we need to take steps to make sure they will be very unlikely to fail. in addition, it provides some up -- it provides a more level playing field because by having more equity requirements, the larger institutions avoid some of the funding advantages that would otherwise accrue to firms that are too big to fail. it is important to do that. we will be discussing with our colleagues internationally about the appropriateness of firms and the appropriate criteria and what amount of capital should be. in choosing the amount of capital, we will certainly be trying to lay off and balance on the one hand, the need for extra

safety for systemically important firms against the impact on lending and so on. i would note that systemically important firms are only part of the banking system to the extent some of that lending may get to other institutions. in terms of going too far, it is very difficult to make a broad based assessment of the overall impact of policy rules and regulations, but i would like to make clear that by law and by internal practices, the fed reserve has cost-benefit analysis for every role that we write. we published those. we are looking for the cost benefit for these regulations. moreover, we have worked with the federal -- we have worked with the basel committee to do analysis of the effect of capital requirements on one hand on the probability of a

crisis, and on the other hand, because of lending a projected growth. those studies have been published. if you look at them you will see that we believe that the capital which has been imposed so far with saddam vacantly reduced the threat of a massive financial -- would significantly reduce the threat of a massive financial crisis. >> mr. chairman, you expect that headline and core inflation would be close to your objective in 2012 while unemployment remains high. does that mean you think the medium-term trade-off between inflation and growth has gotten worse? furthermore, can i ask how the unexpected rise in core inflation has changed your

expectation of the output gap? >> to address the latter question first, that is a possibility. as you saw from the projections we just put out, the committee -- every member of the committee sees the long run unemployment rate somewhere around 5.5% basically. that would suggest that we still believe the output gap is quite large. with respect to core inflation, some of the effects there are also temporary. to name two examples -- the supply chain destruction brought about by the japanese disaster led to a significant increase in automobile prices last month. as these problems are resolved,

and they appear to be very much on the way to being resolved, we assume that all other prices will come back down and centers will be restored as competition increases and cost are reduced. that is one example. another would be the fact that energy prices -- things like air fares, for example, which are very sensitive to the cost of jet fuel, are also part of the court. you can't imagine that as the price of oil declines, we should seek a balanced decline also in the core measures of inflation. given that there is still a large output gap, given that inflation expectations remained well anchored, given that some

of the temporary factors affecting inflation are likely to recede, it is reasonable to think that core inflation will fall back towards mandate- consistent levels. that being said, i think it is the case, if you look at the projections that we have, marked up a little bit in the near term for core projections. >> mr. chairman, what is the extended. right now for exceptionally "fred -- what is the stated. right now for exceptionally low fed fund rates? under what conditions would be extended. be extended even longer? -- under what conditions would be extended period be extended

even longer? >> we do not know exactly how long. i think the thrust of extended period is we believe we are two or three meetings away from taking any further action. i emphasize "at least." depending on how the economy evolves and inflation and unemployment, it could be significantly longer. it will depend on how the economic outlook changes. if we do get both improved job creation and inflation close to our mandate-consistent levels, that would be a sign that we need to consider an exit process. we are not there at this point. >> what about-conditions? for example, the situation in

europe -- the contagion situation? >> if the economy worsens and inflation remains relatively low, then we would not begin to exit and, therefore, would not change the language. the expected language of keeping rates low or longer -- we have not chosen so for to give an explicit timeframe. it is our intention to continue to monitor the economy, revise our outlook. we just revise our outlook most significantly since april. we'll make a judgment based on the incoming data. we do not want to commit ourselves to a fixed time frame. >> mr. chairman, craig george from bloomberg news.

to get to 2013 where we have above trend growth, unemployment falling, and inflation at a nice level, what with your appropriate policy be to get there? would it be an early, gradual exit? or no exit? >> i do not think it would be constructive for me to give you a tentative projection because, obviously, as i have indicated, there is simply no alternative but to watch the incoming data and to make judgments both in terms of when the exit should begin, which at this point it will depend on incoming data, but also what the slope of tightening would be. how quickly we would tighten. we all have estimates in our

minds, but it is a very far cry from saying this is what is going to happen. in a sense, the fmoc has to forecast its own behavior in the same way it forecast the economy. that forecast unchanged. given developments in the economy, we might end up doing something different. >> if i understand correctly, unlike her predecessor, you are bringing your own forecast to the meeting. how did you fall in the saddle tennessee? were you among the three that were excluded in the height -- how did you fall in the central tendency? were you among the three that were excluded? what did this do you get by

bringing your own forecast? -- what benefits do you get by bringing your own forecast? without getting into what congress should or should not do, what would be the benefits or costs of going back to a 3% point change? >> on your first question, i am a member of the fmoc. i have submitted my own forecast. i think i would categorize myself as being pretty consistent with most of my colleagues. i certainly am not taking an outsized -- extreme view in any way. in particular, i do personally believe that the slowdown is at least partly temporary. we will seek greater growth

going forward. at the same time, i do think that given that we cannot explain the entire slowdown, the best guess would be that the near term might be less than we anticipated. on tax policy, i think the main point i would like to make -- as you know, i am reluctant to get into specifics on tax and spending policy -- the main point i would like to make is that we need to seriously and urgently address the overall fiscal situation by taking a long run perspective to do that. exactly how that is done is the responsibility of congress because there are different trade-offs and different choices. of course, those choices also reflect on what you think the government should do, how much resources the government should

command to taxes, and so on. i do not generally make recommendations about specifics, but i do think in my role as someone who's interested in financial stability that addressing the medium to long- term deficit problem is very urgent. >> looking at your unemployment projections it seems you expect weak job growth going forward and a return to normal in the long run. does this mean you do not expect there's a structural issue here and, if not, can you give us a time frame of when we can return to normal? >> as the projections show, we expect growth in the second half of this year and next year to be faster than it has been so far in 2011. as a result, we would expect to see healthier job creation

numbers. if our forecast is correct, we will see payroll numbers improving relatively soon. in terms of the unemployment rate, though, given that growth is not much above the long-term potential rate of growth -- we have estimates of 2.5% to 2.8% -- that it takes growth faster than potential to bring down unemployment. since we are not getting back, we project unemployment to come down very painfully and very slowly. at some point, if growth picks up as we anticipate, jobs numbers will start getting better. we are still some years away from full employment in the sense of 5.5%. that is, of course, very frustrating. it means that many people will be out of work for an extended

time. that can have significant long- term consequences that concern me very much. >> mr. chairman, given your response just now and given the fed's believe that inflation is transitory, white with the fed not consider taking more actions to stimulate growth? if you consider that, would bond purchases be york preference -- be you preference? >> there are a couple of considerations. as i indicated before, one is that the current outlook is different than what we were facing in august of last year. we no longer have an inflation risk.

inflation at the moment is above target. we expected to fall, but we are no longer in any deflationary situation. notwithstanding the disappointing news recently, the labor market has been performing better than it was last year. on top of that, we have an awful lot of uncertainty about how much of the slowdown is temporary and how much is permanent. that wouldit would be useful ing policy decisions. we will continue to look at the outlook and acted appropriately as the news comes in and the projections change. we do have a number of ways of acting. none of them are without risk for costs. we could do more securities purchases or structure them in different ways. we could cut the interest on

excess reserves that we paid to banks. this was suggested by an earlier question. several earlier questions, questions about giving guidance on the balance sheet or giving a fixed date to define an extended period. we could ease further if needed. these ways are not tested and they have their own costs three we did prepare to take additional action if conditions warrant it. >> will go over to steve back there. -- we will go over to steve back there. >> mr. chairman, i am with a japanese newspaper. during the japanese, you said --

there is a suggestion that [unintelligible] own lost decade. is qe2 ending? [unintelligible] are there are [unintelligible] we should be reminded about? thank you. >> i am more simba that the two central bankers and i was 10 years ago. it is important to understand i and my comments both in my comment, my published comment and my speech in 2002 about inflation. my main point was a determined central bank can always do something about deflation.

inflation is a monetary phenomenon and the central bank can always create money. i argued and i think it is well understood that deflation can be a debilitating factor in growth and employment in an economy. so we acted on that advice in the united states in august and some timber of last year. we could infer from tips prices and inflation indexed bond prices that investors saw something on the order of a one- third chance of outright deflation going forward. there was significant risk there. the securities purchases that we did were intended in part to end that risk of deflation. i think it is widely agreed that

we succeeded in ending that deflation risk. also our policies were constructive on the employment side. this is a bit more countersue but we did take actions as needed cannot even though we were -- with dressed deflation so that was the thrust of my remarks 10 years ago. and we have been consistent with that approach. >> do you and her colleagues have a statistical trigger of any sort, a particular level of unemployment or inflation at which you began the process? when it makes sense to announce it and if not, why not? >> it is impossible to create a trigger because we have 17 independent members of the fomc.

each has his or her own view on the look on the efficacy of monetary policy and on the risks to inflation and unemployment. we do not have any such formula. we have staff produce various scenarios which give some indication, given their projections of where the most likely outcomes, the most likely points for the beginning of an exit would be. as i said earlier, when i was asked about my own projections, those are very tentative and depend on a lot happening and the forecast evolving as expected. to change as new information comes in.

vitz, ap.kratize, a you had said second round of purchases would these assets and make housing more affordable. you have seen housing become more affordable and you have seen rates declined you have seen underlying fundamentals, week starts in sales and prices. many economists have pushed back any and all economic forecasts for the sector for any meaningful rebound. what could be done for that sector as far as to some -- stimulate growth? >> the housing sector is important to the overall recovery. we paid a lot of attention to that. we did as you point out, we did succeed in lowering the the

mortgage rates so those who can get credit together with the low prices of houses are able to buy much more house than they could have a year -- few years ago. there are problems including the fact that credit standards for mortgages have tightened quite considerably. so that roughly the bottom third of people who might have qualified for a prime market in terms of fico scores a few years ago cannot qualify today. i -- that is an important problem. a lot of uncertainty about employment, about economic recovery and that is affecting people's willingness to make a commitment to buy a house. there are a number of fundamental factors which are slowing the housing market down and they do present difficult challenges.

the fed is trying to address this in a number of ways. our monetary policy is intended to promote employment and income gains which will help housing demand. as regulators, we have issued cease and desist orders to servicers to improve servicing practices and we work with our regulated banks to ask them to do modifications where appropriate and to manage their reo real-estate in an economy supportive way. the fed reserve has also been involved in getting input to other agencies which have responsibilities for housing. we have provided advice to the treasury on their modification programs. i am head of the oversight board

t.a.r.p. so in that context i am kept well reform. the reserve is doing what it can. otherwise, i would like to seek further efforts first of all to modify loans where appropriate and where not appropriate to speed the process of foreclosure and the disposition of the foreclosed homes in order to clear the market. to get these homes out of the pipeline and allow people to operate in a market where they are more confident that prices will be stable rather than falling. it is interesting now. house prices are declining overall.

all that is concentrated in distressed properties. houses which are not being sold on a distressed basis much have much more stable prices than those that are being sold under stress basis. if we can reduce the current number, maybe 40% of home sales which are on a distressed basis, that would do a lot to stabilizing the market and helping give people confidence they can buy and not be buying into a falling market. >> thank you very much. >> thank you very much.

>> tonight, a house hearing on the fiscal health of the medicare pro gram. president obama discusses his plan to cut triples and ed bernanke talked to reporters about the economy and monetary policy. tomorrow, house members react to the president's plan to reduce troop levels in afghanistan. talk to marcy captor, steve king, and keith ellison. "washington journal" begins at 7:00 a.m. eastern on c-span. c-span has launched a new easy to navigate web site for politics and the 2012 presidential race with the latest events from the campaign trail, information on the candidates cannot twitter

feeds, and updates and links to c-span media partners in the early primary and caucus states. visit us at c-span.org/ campaign2012. the story of the court through the eyes of the justices themselves. interviews with current and retired justices. this includes an interview with the newest supreme court justice elena kagan. c-span's the supreme court, available now wherever e-books are sold. public trusties blend the worsening of the program on the economy but said congress needs to enact further changes in order to ensure long- term solvency. at this house ways and means subcommittee hearing, republicans and democrats argue about the best way to keep

medicare offering. this hearing is two hours. it is too -- important understand the health of the program to make sure that it is solvent and available to future generations of americans. the 2011 trusty's report makes it clear that medicare's financial outlook is bleak. the medicare trustees estimate that the medicare hospital insurance trust fund would be bankrupt in 2024. five years earlier, it was

estimated in last year's report even though the report points a very troubling financial picture, the reality is likely much worse. the independent actuaries at the center for medicare and medicaid services felt the need to publish an alternative scenario because of the high likelihood that the trustees' report, which is based on current law, under state's future medicare spending. the medicare actuaries alternative scenario assumes congress will prevent a scheduled cut in provider payments such that medicare spending as a percentage of gross domestic product would be nearly twice as high as the spending called for under current law. the trustees' report and the alternative scenario reinforced the need for a prompt attention to medicare pose a severe

financial problems. republicans recognize the seriousness of this situation and have demonstrated their commitment to addressing medicare's financial demise pre we put forth a plan to save medicare, congressional democrats, and president obama have not. my hope is that this hearing will help the nation come to grips with the extent of the financial problems facing medicare. we cannot wish it away or ignored as some have chosen to do or demagogue it away. medicare is fast going broke and no amount of speechmaking or positioning for political gain is going to change that fact. some may not like the plan we have offered but the critics have the responsibility of proposing solutions. i also call on the president to

step forward and play a leading role while the 2011 trustees' report issued a funding morning that the general revenue contribution to medicare is financing is excessive, the president has failed to recommend improvements in response to this trigger. there will always be the next election and the temptation to put politics above responsibility and problem- solving but as medicare trustees warned, the time to act is short and growing shorter. insuring the financial viability of medicare is one of congress's most important responsibilities. today's witnesses will inform us of the extent of medicare's financial difficulties as we execute this responsibility.

before i recognize the ranking member for the purposes of an opening statement, i ask unanimous consent that all members written statements be included in the record without objection. so ordered. i recognize ranking member start for five minutes for the purpose of his opening statement. >> thank you, chairman, for holding this hearing and monitoring medicare solvency. it is important responsibility and we welcome the opportunity to discuss this with our public trustees today. the report shows the medicare program has been improved by enactment of the affordable care act. beneficiaries are also enjoying the benefits as a result of a lot and without the law, insolvency would be projected at five years. eight years less than the 2024 date reported by the trustees. it is important to look at the report in historical context

since we have been projecting medicare solvency, those projections are -- vary widely. the program was expected to last two years. at the end of the clinton administration, it had a robust 25 years of solvency. in 45 years, whether solvency projections are two years or 25, we have never allowed medicare to become insolvent, and why? congress has always acted to make changes to the program to avoid that outcome. that is our job and i think we have done a pretty well. i also note that no private health insurance company and we know our colleagues on the other side of the aisle would prefer that medicare be handed over to them, none of those companies are measured with regard to the projected insolvency -- solvency. they use quarter by quarter with the market. my republican colleagues will

focus on the solvency date having served five years from last year's projection of 2029. we know that this slip is due to the economic recovery being so slow, which directly affects medicare's standing. am not sure why the republicans are focused on the issue of medicare solvency of all. they have already voted to end medicare several times. the republican position is clear. republicans do not believe it is the role of the federal government to guarantee health benefits to senior citizens and people with disabilities. republicans would prefer to repeal the health reform law and end the delivery system reforms, reforms that the trustees' report highlight and showing real promise for controlling medicare spending growth. even more in the future, republicans instead want to

provide medicare beneficiaries with a voucher to purchase more expensive private insurance that may or may not be affordable, or, cover the benefits they need. there is no doubt that and under funded voucher would save the government money. medicare becomes a lot cheaper when you destroy the program. the message to take from this year's trustees' report is the affordable care act significantly improved medicare's financial standing. there is always more to be done and we must work together to protect and improve medicare. not to end its guaranteed benefits for senior citizens today and tomorrow. with that, i yield back. my friend from california, i look forward to the testimony and discussion to come. >> thank you. today, we're joined by two witnesses. both the tomm served as public trustees for the medicare program.

the witnesses will report on the dire financial status of the medicare program as outlined in the most recent trustees' report. in addition to serving as public trustees, both of our witnesses are nationally recognized experts in the field of federal fiscal policy and the federal budget. our witnesses are charles blahouse, former deputy director of the national economic council. and robert reichour. you are recognized for five minutes. >> thank you. it is a great honor to appear before you today to discuss the findings of the 2011 medicare trustees' report .

looke . every year there is a great amount of interest in the predictions for the solvency of part a funds and that attention is appropriate. it is important to remember, however, this is one component of overall medicare financing. on the fmi side, contributions, premiums, these factors are

established each year so it is expected to match costs. when there are financial strains which there are, they are manifested in a different way. we do not show -- we show rising general pressures. let me review the projections. we project currently that i never you're going for tomicah annual hospital expenditures will exceed program and come in all future years and the consequence would be akin to a diminution of the trust fund to the point where it is exhausted in 2024. as has been noted, the date is five years earlier than was projected in a previous report. at that point of depletion, projected revenues are sufficient to fund 90% of expenditures and that would decline from that point forward to by midcentury, three-quarters of expected expenditures.

that would be able point and afterwards, it will drift up a little bit. over 75 years, the so-called long range valuation period over which h.i. actuarial balance is measured, that is done as part of the payroll and we show a projected deficit over 75 years. last year's report showed 0.66%. this is one component. on the smi side, we see rising costs. costs were up in 2010 and we see them rising fairly rapidly. going to 23% of gdp. medicare costs are expected to rise rapidly to reach 5.6% of gdp in 2035 and increasing thereafter to more than 6% of gdp. i have a couple of caveats about

those numbers. before get to those, one additional point. this year's report also issues a medicare funding morning. there is a provision the law requires us to stay. when we project that at any time over the next seven years, there will be a year where if the gap between program outlays and dedicated revenues, is more than 45% of program outlays, and that is the case for 2011 and that warning has been issued in this report for the sixth consecutive year. the caveat about the numbers. there are a number of places where it is stated explicitly that actual costs and practice are likely to be higher than what we show and the reasons are various. the most obvious of them is the fact that under current law, there would be a 29% reduction of payments in early 2012. historically, congress and the administration worked to override those reductions that

have been called for by the sustainable great -- growth rate formula. that will continue to be the case. members of this subcommittee no better than anyone there is a vigorous ongoing debate as to whether or not the cost saving provisions of the affordable care act will be a sustainably implemented over the long term. we as trustees are not in a position to arbitrate on that and to predict the political economy of the affordable care act over the long term. all we can do is show current law as it is written. what the medicare actuary does is he publishes an illustrator of alternative scenario in which it is shown that the consequence of physician payment reductions being overwritten and the adjustments being phased out over time. under that scenario, total costs are higher than in the may report. 10.7% of gdp in 2085. i know i am out of time.

one final point. that speaks to political uncertainty but it is important for the subcommittee to know that medicare projections are uncertain even if the politics are certain. there is a tremendous amount of variations of projections according to different assumptions about inflation. that is a difficult variable to predict over the long term. the medicare program faces real challenges and it will best serve the interest of the public of these corrections are made at the earliest possible time. thank you. >> thank you. now, you're recognized for five minutes. >> i appreciate the opportunity to appear before you to discuss the 2011 medicare trustees' report. i will focus my comments on

changes that have occurred between the 2010 and 2011 reports and don the inherent uncertainty that -- and the inherent uncertainty around health care costs in the public and private sector. as you know, the trustees projections of financial health change for a variety of reasons. there might be legislation that affects them. there is almost always a failure of the base year actual amounts to equal what was projected the previous year for that year. there are changes in economic and demographic assumptions, and there are continual refinement and improvements in the methodologies used by the actuaries to make the projections. the media and the public, as my colleague pointed out, look

largely at the date at which the trust fund becomes exhausted to make a judgment about whether the changes have been significant or not from one year to the next. as has been mentioned, the 2011 report projects that the medicare trust fund will be depleted in 2024, which is five years earlier than was projected in 2010. it is worth noting that is still seven years later than was projected in the 2009 report which was the last one issued before the affordable care act was enacted eight years longer than the actuaries' latest estimates for the date of depletion were before the care