areas up to 30% of people that have those jobs are currently unemployed. there are no easy or nice answers to the housing crisis. banks moved to reject government initiatives have encouraged it. even with assistance, some homeowners will have no choice but to enter for closure, and we for iran -- for closure. we must must face that reality that there will not be lasting improvements in the housing market until the backlog of foreclosures is cleared and existing inventory is reduced.

though their actions over the last two decades -- through their actions, politicians have proven they can really mess up the housing business. we need their help right now. governments should be smarter this time around and avoid the temptation to endlessly prop up those who sadly will never be able to afford the home of they now live in. instead of delaying the day of reckoning, even further, our policy makers should let the market take its corrective course. the sooner that happens, the faster this key section of our economy will recover and start building and hiring month again. -- once again. very much related to that is the subject and the fourth issue of infrastructure. one way to put some of these construction workers back on the job is by investing in infrastructure. last year, the chamber released a groundbreaking study proving that investments in infrastructure can be directly linked to stronger economic

growth. i am not talking about wasteful stimulus projects driven by politicians. i am talking about the kind of thoughtful, strategically planned improvements that expand our capacity to grow our economy and compete in the world markets. congress should act now to reauthorize the coarse surface transportation, aviation, and water resource programs. they all create jobs. with adequate funding so that state, communities, and the private sector can plan, execute, and hire. they cannot do that with an endless string of short-term extensions of these programs. congress, the administration, and the states need to address the rules, the disincentives and other impediments that have locked away potentially $190

billion in private capital that could be invested in infrastructure. unleash that money, and you can create a lot of jobs right now. while i fully understand that high gas prices are a hardship for american families, we must also boost public investments at infrastructure without adding to the deficit. the gas tax, which is a user fee -- you drive on the road, you buy the fuel, you pay the tax. this user fee has not been increased since 1993, 18 years ago. let's not forget that gas mileage for cars and trucks has increased substantially since then, which means that as fuel efficiency increases, receipts to the highway trust fund decrease.

a truck that drive all over this country has more than double the mpg in had 18 years ago. and there are more of them. finally, we are paying about 40 percent of what we used to pay to repair and upgrade roads and half bridges and transit. it does not sound very sensible, does it? the result, are rapidly crumbling infrastructure with less and less money to rebuild it. under these circumstances, it is not unreasonable to suggest that we face in a modest increase in the gas tax over time. we talked about housing and infrastructure. these things are related because of jobs. let's talk about domestic energy. we should also produce more energy of all types, use it at home, and sell it abroad.

we have plenty of it. people did not think so for a long time, but we have a lot of it, allowing american industry to go get it would not cost the government a sense. the clashes at -- still would not cause the government's a cent. fact, it will increase government revenues, create jobs, and hence our national security, and release us from the grip of some unfriendly governments. recently i wrote a letter to the president, outlining specific steps he could take to move the administration in that direction. i noted that the u.s. department of energy has estimated that the united states have in excess of one trillion barrels of oil off our shores along. -- alone. we also have a huge natural-gas resources. we have already experienced a national-three natural-gas renaissance in this country. increased domestic production

has driven natural gas prices down, and that has brought some manufacturing back to america, and i believe it could sharply -- could bring most of the chemical companies that moved to the middle east or africa to get low-priced national -- natural gas to come back here to the united states. let's keep things moving in a positive direction. by some estimates, increased access to federal energy resources could create an additional $150 billion in federal and state revenue and add more than 500,000 jobs in this country in a relatively short time. we must also continue to build the energy infrastructure in order to deliver affordable and reliable supplies of fuel and power, which will also create a lot of jobs. that is why the ministration should allow the construction

of the keystone pipeline connecting canada and the united states refineries in texas. that one project alone would create 250,000 jobs and involve $20 billion in investment in the united states. this is not a complicated decision. horowitz the sixth issue -- the sixth issue we should look at is the question of regulatory uncertainty and reform. you have heard me mention the need to remove regulatory impediments and address uncertainties and delays in getting projects approved. in our listening sessions around the country, and in the harris survey, the regulatory burden and the uncertainty surrounding these new regulations were repeatedly cited as a major reason not to expand our payroll. i don't think our friend from

maryland is going to expand his, either, with an $800,000 increase in his unemployment expenses. can you blame these businesses? these are smart people. they do not know what is going to hit them next. that is what worries them the most. no new jobs. in addition to dealing with 170,000 regulations already on the books, that me say up front, many of them needed. there are hundreds of major new rules and the pipeline generated by the health care law, the dodd-frank finance law, the labor department changes in how companies are going to have to operate, and especially what the epa is doing while nobody else is looking to drive up the cost of doing what may be important, but to do it in zero way that is not want to help us create jobs. we are not against all

regulations and we can see the need for a lot of new ones, but the combined weight of all these regulatory activity is something we have never seen before in this country. it is unjustified and uncalled for in a free society and is killing american jobs. we need to fundamentally rethink our regulatory system. for one thing, congress has ceded to much authority to an unelected fourth branch of this government, the regulatory agencies. before undo major regulation takes effect, the congress ought to be required to have an up or down vote. i am not talking about every regulation that has ever passed, but if it costs $500 billion, the people that are putting someone else to do their dirty work ought to have to vote up or down with their names.

there should be a stronger burden of proof placed on the regulators to show that the rules they are proposing are sound, justified, and reasonable. in addition, one major factor hobbling our recovery is the inability to build anything anywhere on a timely basis. by reforming the process, we can start generating new economic activity now, faster than we could under the old system. how'd we do it? first, let's limit most internal reduced to six months. that is ample time for a thorough review of most projects. if experts do not believe that a project will have any significant environmental impact, that's speed it through. if your review is required and the state has already done a

successful review, why did it twice? when the reviews involve more than one government entity, the administration should require the designation of a lead agency so this thing can get done quickly. as noted in a preliminary recommendation of the council, but business and job creators need is some speed and clarity. if you want slow job creation, leaving it alone. if you want fast job creation, let's fix it. tell them yes or no, but give them a timely answer. we then come to a serious question that is holding many companies, large and small, domestic and international, back and and and from putting more money in this economy. and andthat immediate challenge is the debt ceiling and

deficits. it is the question of what this does to affect our ability to create jobs. i am not -- i am not going to make a comment that some may not like. they may not believe or want to hear, but congress needs to not raise the debt ceiling and it must do so without delay. it is an unfortunate reality, but it must be done. failure to do so would have grave consequences for main street businesses and for every family in this country. it would drive up interest rates. it would drive the market down. the dollar and our economy down, and it would take today's economic uncertainty and expand it to destructive levels. investors will turn away from the united states and take their job-creating capital with them.

we are calling upon the leaders of both parties to make tough choices and come to closure. they need to agree on a plan now to raise the debt ceiling, and also agree on a plan that controls our deficit and debt level going forward. this requires first and foremost, major spending cuts and entitlement reforms. by following the approach as i have suggested, the government can also generate a lot of new revenue, not by raising tax rates, but by spurring growth, creating more taxpayers and prudently developing of our natural resources. let me recap. we can spur growth and create jobs by expanding trade, tourism, infrastructure, and energy, by reforming regulations and the permitting

process, and by raising the debt levels while also cutting government spending to reduce uncertainty and put our nation back on the road to fiscal responsibility. these are important and urgent priorities, but we must also embrace a broader long-term agenda to ensure of america's growth, its competitiveness, and its prosperity. time does not permit me, and your patience will not allow me to discuss all of the elements of this broader agenda, but clearly we need to develop and attracted the world's best talent. we must maintain our unsurpassed leadership in higher education while reforming schools and strengthening our vocational and technical schools. we need comprehensive

immigration reform that is humane, efficient, and economically smart. we need to carefully examine our work force needs at all skill levels and adjust our visa and immigration programs accordingly. we need to make easier for the world's best and brightest to study and train in the united states and in be allowed to stay here. this is important. if companies and institutions cannot find the talent in america, they will have to send the work to where the talent resides. our nation must also remain the global leader in science, research, and innovation. that is one of the reasons we need those very smart people. to do so, we need the strongest, most balanced, and most effective patent system in the world. there is some very good

legislation pending right now, an excellent start, and we have to get this done. we must have strong intellectual property protection. the cornerstone of the american economy and the catalyst for innovation. intellectual property is protected war in the united states and elsewhere, and the money, people, and jobs will come here. alongside talent, there is a need for capital. to create new industries and future jobs, we have the most attractive, transparent, competitive, and barbara capital they attacked capital -- vibrant capital market in the world, historically. these markets breathed life and success in to ideas and innovations and reasonable risk

of american onto burners and businesses can be successful. i can assure you that the chamber is working every day on efforts to fix our schools, to reform immigration and visa rules, to strengthen patents and intellectual property rights, and of course, our legal system, and repair the excesse'' of the dodd-frank bill while working to effectively improve our capital markets. the same must be said for healthcare, where the number of exploding regulations and organizations needs to be dealt with. we still must find genuine solutions to all of these costs, separate out the regulations that are really needed from the ones that are causing us not to create jobs. ladies and gentlemen, nothing is more important to america, to the american dream, and creating american jobs. that is what it says right on

the front of this building. despite all the bad economic use what -- is we have had -- all the bad economic news we have had, we cannot get discouraged. we must not indulge in despair. we can create american jobs it will remember who we are and what made our nation so successful in the past. it is not about bigger government, dividing up an existing economic pie. it is about a free enterprise system that creates a bigger pie, with more opportunities for all our systems. government does have a role to play, and we need them to make sure that the rules are clear and fair. today in addition to fixing these fundamental, the most important role the government can play is to remove the impediments and uncertainty that have slowed over grow and

-- our growth and shackle our job creators. by unleashing economic growth and freeing our job creators to do what they do best, we can and will put americans back to work. these are clearly challenging times, but there is no problem facing us that does not have a solution. the answers clearly are not quick or easy, but there are answers and they are almost always made in america. we have so much going for us. we have strong demographics, abundant national resources. the world's most productive workers and businesses, an unquenchable thirst for entrepreneurship, and a long history of picking ourselves up when people think we are down. we talked to a young man who created his first company at the ripe old age of 13. enrico went on to create two

more businesses and today he is the co-founder of the company that specializes in the lighting efficiency. he is still a few years short of his 25th birthday. that is the spirit of entrepreneurship that makes america successful. those were the ages of the people that are celebrated in this room that led to the founding of this country and this great economy. that is the spirit of enterprise that makes america's successful and unique. as long as america welcomes and encourages october north, as -- encourages entrepreneurs, as long as we continue to stand up for the principles of free enterprise and limited government, and as long as we will reward rather than punish the dreamers, the doers, the risk takers, and those who have the most significant success,

we will always come out on top. something to think of, but a long road to get there. thank you so much for coming. thank you for your patience, and please listen carefully to those that are here today and then go out and put on the heat. it heat is simple, let's do now, let's do it in an ordinary -- orderly way, and let's not wait for someone else to do it to us. thank you very much. >> the sign behind me, dream big, is as appropriate one that we can think of as we begin to discuss these great optimists. they truly are, the great optimists in america.

what we will talk about today and what tom has talked about, what our survey has shown, is that there is a lot of uncertainty out there. a lot of people believe that the american economy is on the wrong track, that the policies they come out of washington and other places that are the wrong way to go. the one thing you hear from the people up here today and the one thing we heard as we did a listening session, multiple listening sessions all over the country, and in every state, was this -- when you talk to small businesses and the people who are living the american dream, they are optimistic about their future and about their company. it is a pleasure for me to moderate this panel and talk a little bit about what we found as we work through uphold that is the second quarterly poll but we have done here at the chamber -- that we have done

here at the chamber. how will introduce the three panelists and then to a discussion. dan is the president and ceo of the missouri chamber of commerce. he oversees the state's largest business association, representing 3000 employers and over florida 25,000 employees. dan has been a great advocate on behalf of the business community in the show me state. he has pushed pro-business, pro-free enterprise solutions in jefferson city and all over the state of missouri. next we have suggested that johnson, who comes to us from bronx, new york. -- jessica johnson, who comes to us from the bronx, new york. she is from a security company. her story is a little different. she will talk about the challenges that face turned businesses, but jessica has been successful in actually doubling the size of for business in

terms of contracts and revenue. jessica is a graduate of the goldman sachs 10,000 small businesses institute and zero is very strong and mentoring -- and believes very strongly and mentoring and access to capital. finally, the panelists who will follow me is carol sue haney. she is at harris interactive. carol manages qualitative and quantitative research in the public sector as well as providing thought leadership in the social media and research base. harris interactive is one of the largest market research firms and carol will kickoff our panel by giving a short presentation on the result of our poll. as i said, the sec that poll that we did of a last two quarters. we surveyed 1400 small

businesses are around the country to check their pulse. compared to the first quarter, i'll give you a top line on this, there is a high degree of uncertainty. there is a strong belief that the american economy is on the wrong track. but when i began this conversation, these are optimists to their court. carol will allow for some interesting observations. with that, carol. >> i know what you did a survey. this was the second quarter at the end of june, so this is hot off the presses. we did this study on behalf of the national chamber of commerce.

this survey is quarterly, an online survey gathering information about the environment and our relates to small business. we also gathered be haverhill does this about hiring, decision making, and business forecasting. we exclusively surveyed small business owners and executives. dehere wa we interviewed a dozen felon to this -- those who fell into this. we interviewed across commerce areas in the united states. businesses were the annual income is $25 million or less are considered small businesses. look opinions at the current business environment. three different levels, the u.s. economy, the respondents local economy, and the respondent's own business.

we ask whether the u.s. economy was headed in the right direction or seriously off on the wrong track? 84% of respondents indicated the u.s. economy is on the wrong track. slightly more optimistic about their own local economies, 54% say their local economy is on the wrong track. that is a three-point decrease from last quarter. on the positive side, over 60% said their own businesses are on the right track. as you might expect. the sentiment of the wrong track is dominated by economic uncertainty. economic uncertainty is ranked as the most important challenge facing small business owners. 49% ranking economic uncertainty as one of their top three choices. in decreasing order, they also feel challenged by the national

debt, the new health care law, and the impact of regulations. the number of challenges that respondents had to choose from was 14 across a range of challenges. there are some seasonality is in the reporting spirit in the first quarter, the category of high taxes was higher on the list as one of the more important challenges. however, economic uncertainty remained at the same level for both quarters. next, details on that uncertainty. we had to measurement points. uncertainty about the future and threats to business. when we asked which issues in washington made the most fun furs -- uncertain about the future of their business, 46% said that the federal debt and deficit is causing uncertainty. 45% since the regulations are causing the most insurgent. when choosing from regulations,

taxation, and litigation, 43% of all respondents think that regulation is the greatest threat to their businesses. followed by 35% think taxes pose the greatest threat to their businesses, with 80% -- 18% saying it falls outside of these categories. are the business is best days ahead or behind them? 38% were unsure. this is a drop of over 10 percentage points. when asked about america's best days, on may 20% believe that america's best days are ahead of us. when thinking about what small businesses across america needs right now, fewer than 15% say that they believe washington could offer a helping hand. the vast majority say that

washington should get out of the way. 79%. when respondents are asked which of two actions from washington would help their washing -- their business more, 85% say that they would rather watch to provide more certainty than offer more assistance. no surprise. hiring is at a standstill. 64% of all respondents not hiring over the next year and only 19% are planning to hire. from a choice of seven factors, respondents said that economic uncertainty was the greatest obstacle to hiring more employees. 55% of respondents chose it as one of their top two. by the sales followed. on the ups -- lack of sales followed. a marked improvement of 29

respondents said that they lost employees last year. went holes -- 80% of small- business owners say that debt and deficit potentially poses a threat to their business, either immediately or in the long term. 19% do not consider the current debt situation there risk. nearly four out of five business owners believe that federal government regulations are at least somewhat unreasonable. from last quarter survey, this is increased about 4%. this opinion is basically staying steady with a slight uptick in dissatisfaction. i should say four percentage

points. we did not ask which regulations were problematic, but we saw the most dissatisfaction from respondents within health care, manufacturing, and financial- services sectors. one couple in regulations to taxes, 85% of business owners say that they are somewhat or very worried about the impact of these three on their business. drilling down into the impact of these obstacles to hiring more rigid hiring more employees, one male disagree scale, if deeper 6 -- 56% agree that taxes and regulation from washington make it harder for their businesses to hire more employees. three-quarters of all respondents who said the reason health care law makes it harder to hire more employees.

to recap, economic uncertainty is the headliner in this outlook survey. the pessimistic view of the u.s. economy negatively affects the small business out loud. most small businesses, almost 80%, are planning to not hire new employees in the next year. the top three obstacles for future hiring include economic uncertainty, lack of sales, and uncertainty on plans from washington. although not the top obstacle, almost 80% agree there regulation and legislation make it hard to hire employees, and 75% also see the recent health care law as an obstacle as where. -- as well. many believe that they should get out of the ways of offering a helping hand. thank you very much.

i look forward to the upcoming panel discussion. [applause] >> thank you, carol. one of the things that we talk about a lot, and dan, maybe you can shed some light on this, number one, what you see when you talk to your members in missouri, and then a little bit about the access to capital issues? we have seen recent citing from the fdic to talk about the number of loans over the last year, decreasing to small businesses in the neighborhood of 9%. nationally, this is something that they continues to be an overhang for small businesses to overcome. we would love to have your perspective on that. >> when i arrived here, i met carol and read your polls, i

read the data, and a few days ago when i got it. this is a layout. this exactly what we're seeing in missouri. every time you come out when your head of the curve on what is she might be talking about, we were hearing the word uncertainty in the last 18 months, i think that uncertainty has evolved into something that is more of a lack of confidence. you see problems recurring and no success, no resolution of these issues. look at the budget, the deficit, etc. it is a lack of confidence in the system out there and that uncertainty is and what are they going to do to me next. tom alluded to it as well. for small businesses, get out of my pocket and get out of my way. i know what i am going to do here. with the question of financing, there is a hyper conservatism on

the part of the lending institutions, whether due to the regulatory environment or just cautiousness. the same kind of fear of stepping out remains to be debated. it is inverted right now. if you do not really need money, it is there for you. but if you need money to make that next that, the paperwork, the time, what you have to put up as collateral -- [no audio] is going to be a success and you better be able to verify it or else the financing just is not there, even in venture-capital. it is dry. and at a time when we do not need that, i think that perhaps

the resolution of the debt ceiling or some sort of progress moving ahead might help. but when you look at our members and just like in your businesses or your household, you had a budget. we've not had one as a nation in two years. that breeds that lack of confidence and that ill feeling toward the political process, whether they have a r or a d behind their name. >> jessica, you have an interesting story behind how you got into the business. you inherited the business. talk about the situation that you found yourself and and how you were able to be successful. >> the one word that would describe the situation when i came into the business was definitely uncertainty. my brother and i lost my father after he battled cancer for few months back in 2008. we thought that we would have several months to learn the inner workings of the business

with them and to get the business back on track. we had no idea of what this dire situation johnson security was then. we were losing clients. we had clients in significant our readers. we were losing employees. if we had some employees so strapped for cash that they will work full time for us while they were working full time for other employers. how you manage someone that is working 80 plus hours a week. we also found that are filled in was falling into disrepair. and the clients and potential clients were taking longer to award contracts. it was not familiar territory for business. next year with celebrated our 50th year in business, and in 2008 with only 16 employees, and less than $300,000 in revenues, it was very dire times.

and i needed help, so i reached out to our local chamber, to the sba, to the small business development sectors and was fortunate to come across the 10,000 small businesses initiatives, which was under the directions of goldman sachs. we work with one of the local community colleges and provided with business council services, business support services, and networking opportunities with other small-business owners. it also showed his alternative routes to financing and help us to stabilize our operations until it could reach the point where we are now. we've seen mediocre -- meteoric increase since joining the initiative. we've been able to put that back into play in our business. >> carol, we talked about the

issues and we're different things right. -- where different things r ank. i think that small businesses, the debate in washington over the debt and deficit and where we go in the country has really extremely move that issue up with regard to however one that is to small businesses who are going to spend their time saying, where do i go to get customers? how do i increase my revenue? how do i keep my employees and keep them happy? and yet we now have regulation, debt, and deficit ranking ahead of lack of sales and revenue. to me, that is a remarkable thing. if you could comment on that. >> absolutely. it is the uncertainty, the economic uncertainty that we're seeing almost 50% taking that as

the top concern. one of the things that you're talking about was lack of credit. lack of credit is in the top-10. we reported only on in the presentation on the top five. but lack of credit is within the top-10. it is something that small businesses are concerned about. also that lack of credit coupled with all the other things, debt and deficit, that is all getting right up together with economic uncertainty. >> everybody watches when there is a fight in a hockey game. you may not see the passing that goes on before ago, but when the -- when they dropped the glove, everyone will watch that. every week we have rounds of renewal calls. bill was asking for real stories

of what is going on out there. this 1 sunset a lot. it has a lot themes in carroll survey, not the growth of your company, i wish. here is from a box company that employs about 150 people in st. louis. we think now of government leaders continued their self- centered power ways and do not come together cent, we will not have to worry as life -- about life as we know it. i keep hearing that businesses are making record profits and not hiring people. they continue developed by the group that makes jobs and its results for the economy. this needs to stop. it hurts many thing, drive wedges and the relationships with our employees, which is that service, quality, and productivity. this adds to the decline of business competitiveness and dissatisfaction in the workplace. i only know business people that are losing everything and

closing their doors or are fighting to survive as we are. we have been battling hard since 2008. it went through pain and restructuring to get back to a literal bottom line. it has fallen off again invade. another of this team -- it has fallen off again in may. enough of this. time to get back to work. what is going on in the media, they are looking for that conflict that they can report on. that only exacerbates, i think, some of these trends you're seeing of uncertainty, dissatisfaction. and i was handed a protest letter when i walked in here on jeffrey immelt. let's get real. the people producing jobs do not want to hear about who said what at a press conference today. they want results and that is why this side show in washington is getting to them right now. >> let's follow that for a moment.

you talk about the state, because the states have typically always been laboratories for the types of innovation that is necessary. sometimes it is not the washington solution, sometimes it is in the states. from where you sit, take a look at some other states where you see things that governments doing things helpful to the small business community. >> one thing we're doing in missouri. we had done some good things with pork reform and some reasonable economic development incentives. -- tort reform in some reasonable economic development incentives. with building a hub american airlines pulling out. we have a brand new airline -- runway goes unused. they have facilities vacated by

boeing. all the infrastructure, better than chicago. things like that. we're really pulled together as a state and as a city and a region, if this thing is successful, it will be great for the airport and st. louis and missouri, but it will be great for the midwest. we lost that 100 years ago or so when we did not do that for the railroads and chicago got it. we do not want to miss this opportunity now. it is a rare occasion in missouri where we have a history of shooting ourselves in the foot and reloading. people trying to come together. we will know in six weeks whether this work for not. when we got into it, and i sold our board on it, a heavy financial contribution and heavy time commitments, but it is the thing we're trying to do, dream big and show some vision like true leaders can and look down the field and see

where that opportunity is. if we are an air cargo hub with china, brazil will come and others. back cluster around development, it will be wonderful for the future. you look at the map -- we're right in the middle of the country for it what i tried to tell the missouri senate and the missouri house and the missouri governor, no one can take that location away from you. we can thrive as a logistics and distribution center. we can be that for the continent. it is better rare coming together of business, labor, both parties, state, even the federal government -- we had great support from our bipartisan congressional delegation. that does not happen too often and hopefully we can drive that home. >> that is great. jessica, as you look it your business, and you have been able to come into a challenging situation and do very well in it, but as you look at the

implementation of a number of these big legislative issues, whether it be in the financial- services realm or health care, and the other challenges that exist -- where do you see the biggest challenges and then where do you see your broker? -- your growth? >> the biggest challenges is finding that time, resources, and talent to manage their regulations that apply to your business and industry. there is an amount of regulation for firms and for equipment as well as for guards. learning what those regulations were and in making certain that we were compliant, that was one set of challenges. another large area of regulation that challenges us us all the time is unemployment insurance. anybody that has employees and

our service is our employees, we spend a lot of time and resources dealing with unemployment issues. one particular area where we see increased areas and have been successful is with osha, under the department of labour. most of our work is in requires credit -- is during construction jobs. they have to have the 10-hour osha construction training. as a security personnel, i would not think about that. it is not my field. so we are forced to decide, i'd do we bear the burden of the cost for the osha training, which can start at $100, and when most of our candidates, they have been unemployed. they can barely pay their cellphones. let alone $100 to take a class. they do not have the money. do we bear that cost or do we have to screen foreign increase number of people to make sure that we have people that have

that training so that we can send them to a job site and compete for those contracts that are there? those are a couple of examples of the regulatory challenges that we face. the understanding what regulations that are applicable to your firm and industry are and finding the time and resources. outside of payroll, the majority of my time is spent on insurance, which is required, on unemployment, and on accounting to make sure that we are compliant with the tax code. it is a necessary evil but it is making sure that you deal with it. >> it is certainly as the survey showed regulation. there are important, good regulations, but the strong sentiment among people that we talk to suggest that there is

too much of it. what have you seen among larger businesses -- increase productivity, better earnings, pretty strong stock market generally, and a lot of those gains have not come from increasing the number of workers. carole, i direct this to you but then open it up. is there worry when we ask these small business owners and they say, we are not planning to hire, 64% say we're not planning to hire any additional people. and i do not mean to beat super leading, but are they saying, we're going to grind out increase productivity because we are taking the same approach that the larger guys are? >> 64% say that they are not

going to hire new workers. 15% are letting workers go. 80%e talking about nearly of small businesses that will not be doing any hiring this upcoming year or do not have it within their plans. that is really significant and they are going to have to squeeze out of there in current employee base. -- there is a reorganization for you dear -- you do hear some stories like this one. congratulations to you in your success. you do hear about some people growing, but in general there is a pullback. cautiousness out there that for reasons that we already cited, the people that would be hiring are not getting around that obstacle. i guess it is more reorganization and rethinking your structure right now and making the best of it.

we have seen an uptick in firms are merging, things like that. it is a combination like that that they are on the sideline still. >> there many more times when we were conservative about hiring, offering employees over time instead of taking the risk of hiring new employees. we found we could not continue to afford to do that. it made more sense for us to hiring new employees and if we have to pay unemployment, what will that cost as opposed to burning out our employees, not getting the service that we want to get, or potentially losing decline because we do not have the manpower to service them. >> people doing more with less, trying to get by to get to the next level. >> energy prices, we have not talked about energy prices. between quarter 1 and 1/4 to, it decrease in terms of its importance -- q1 and q2, it

decreased in terms of december 1. how susceptible are small businesses to those increases? >> small businesses still reported within their top-10. it is not as important, but it is still in the top 10 of the largest challenges facing small- business is today. i would also say that there's a seasonality that comes with energy prices and how it affects businesses. because of the quarterly setting, we look at that across four quarters and we get a better idea of whether it would fall. i think it is no. 8 right now,

and it might go up given the next quarter. >> st. louis, missouri has four headquarters of coal companies, peabody been a large as, archers, patriots, and i'm blanking on the 43 they located there because across the mississippi river are some of the largest coal deposits in the it has a high sulphur content which led to problems with the clean air act. now we get it from the base and in wyoming. i cannot get around taking a shot here. my former boss, the senator, i used to call the united states the saudi arabia of cold, but we have made it so ridiculously uncompetitive to be able to use their resourced of fuel what we do. over 50% of our electricity come c fromoal today. it is not going to change that

might prove we are all for alternative issues, but missouri is heavy in automotive and defense, and many use energy to manufacture. we have one nuclear power plant. when it was built in the late 1970's, they built to pads, one for the current one, one for the next nuclear plant. we have been debating in missouri, capital for three years now, and here is what it comes down to, especially in the acute times that we have been through. those employers are looking at their energy costs next quarter. if there energy spikes at an aluminum smelter are at the takoma plan, or pick your manufacturer, you are going to take it. you are not going to like the results. if you're looking at the stock price, that will hurt you there. we had the unwelcome brawl

between members, the utility companies and some who want to build this nuclear facility, which building and a cooler facility for any state in the union right now would be a construction jobs boom four years. for years. there is a great debate on energy policy, but this area truly requires looking into the future and saying, what is best in this case for missouri and five, 10, 25 years and not just what your fuel costs will be to run your smelter in three years. this is a great question. i'm not so sure that it hits the smaller employer, depending on the nature of what you do, but you get a smaller section were they do not like to see our brothers shooting at each other too often.

>> the majority of our employees are in the field. the increase in fuel prices does not impact our bottom line as much as it may other small businesses. it does have an impact in our employees been able to get back and forth to work. we did have a number of employees, maybe two or three, over the past quarter who have resigned because they simply could not afford to make the trek between their home and the project sites. fortunately for us, with the increase in fuel prices, that means that there is generally an increase in demand for security for public utilities and other energy providers. we have been getting on additional projects with the local utilities and energy companies. hopefully they will lead to additional jobs and the people who left might come back and say it is close enough to home, now like to deal with the energy cost. >> looking at both sides of the opportunity and the downside. >> as the data point, where

there is uncertainty around what is going on at the national level, we as small business owners are more optimistic about what is going on with their businesses and the local front. we have to take a look at what it means for our businesses, for us as family members, for our employees as well as for our communities. >> i think that we're just about out of time. we have media here, opinion leaders, we of representatives of government, and so i guess i would close it out by asking the three of you to -- what is it that you want them to hear from the perspective a small business, the prospect of representing small business, and from the perspective of anything we have not talked about relating to small business -- just throw it out there. >> there is a great amount of uncertainty, and as a small- business owner, in terms of regulation it would be helpful

if our politicians can figure out a way to stay out of our way. we know what it is that we do and we know how to do it well. we can create the jobs it will impact the nation as well as our local communities. thank you. >> i have to follow that? [laughter] i just say back off. these ideas being considered dangerously, i'll throw out a few things that might get tough out there. card check was the first threat, the health care bill, we still do not know what that is going to do. some of the regulations and some of these other things happening are really schering your job producers. tom said earlier. we're going to go where the talent is. the employers will migrate to where they can find it very the one thing we have not touched on today is education.

33% plus of the kids going to the university of missouri or the university of maryland or virginia -- pick the school -- are going to need remedial math or remedial reading. that is unacceptable. junior colleges, it is up almost half. when you have to pay for that education have, that is a built- in inefficiency.

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[captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute] otherwise would not have qualified for a mortgage. in the name of consumer protection, far fewer of these loans are issued in the future. this would also hit banks when shareholders are being punished. the bill couldn't come at a worse time. it will shrink credit which will mean fewer borrowers.

from november, twen. they were talking about how they were performing in november, 2007. the "wall street journal" criticizing others for having subprime loans. disrespectful of people's privacy. these criticisms the "wall street journal" made back then are being repeated now. there is an overwhelming consensus that securitization, without risk -- the consensus, read michael lewis in "the big short." it is very clear that it was the

ability to make risk appear to disappear. to get it out of your sight. fool's gold. the solution to that puzzle came in a technique known as securitization. the economists talking about the dangers that might be in exchange-traded funds says this has echoes of the sprime housing crisis. mortgages using securities for bonds was intended to reduce borrowing costs. as i said, i want to make a few things clear. it is not subject to risk retention or to be an exception, not the rule. the notion that you cannot have

mortgages without securitization and you can't have securitization if you have risk retention, it is clearly wrong. first of all, before television we did not have securitization and we had a pretty healthy housing market in america. i agree that securitization is a pretty important tool but the notion that people who make these loans should have a 5% interest in the loans that guarantees them against making loans that don't have a chance to be repaid, that is an impediment. if it is, then we have a serious problem. i've been told by some, well, it is a problem if you have two kinds of loans. a by fur indicated market. -- bifurcated market. the notion that holding 5%. before 1996, you held 100%.

we can't do that. why is 5% so much of a -- -- we don't have any capital. if you don't have any capital, don't lend it. don't lend money you don't have. these subprime loans are wonderful. you're going to drive low-income people out of the market. i ran into it for much of this decade. the motion for many people in the low income brackets, decent rental housing is preferable to put them into situations has a hard one to overcome. it is one area of the bill i think may need some work. one area of housing is an important thing that i hope to continue. you have the funding. people understand those.

i think the public will clearly fight back against those. you have this effort to undermine the rules on derivatives. my republican colleagues have legislation to postpone any new derivative regulation including speculation until october 2012. recently several publications noted the fear that american financial institution consulted credit default swaps on debt. we don't know how much that is because the bill hasn't yet gone into effect and people are still trying to postpone it eeverpb further and that uncertainty is in and of itself a problem. the spokesman for the republicans on this has been kingston. and he said before the house a couple of times, speculation has no impact on energy prices. by the way, there was a big argument about that among economists.

20 years ago, it was a tougher argument to make. what happened is information technology greatly increased liquidity. there is now a consensus within the financial pages, people talk about the impact of speculation. it is a given. the republicans are trying to keep the cftc from doing anything. we have this attack on risk retention. i believe that is the single most important piece of this bill. by the way, you know, of course the response when we used to say there was a problem, did you know what is supposed to be the substitute for risk retention, the ratings agencies. they were the ones -- you didn't need to have the lender worried about this because you could go ask the rating agencies. the oracle of delphi. now ratings agencies are open to it and the people who told us

that subprime loans were good with telling us backed by the european union is not good. that's one of the things i wanted to address now. it does involve me. 40% is too high. the mortgage bankers, they don't like a down payment environment. they are against debt-to-income ratio and against loan-to-value ratio but said we should find out how much money the people are making before we make the loans. why? if it is not relevant what that income is to debt, you're securitizing 100% of the risk. i don't want to say that risk restenks the only thing. the bill that they were opposing

in 2007 passed the house and not the senate at that point was incorporated into the bill and the fears that subprime mortgages won't be given. i hope they turn out to be accurate on that for once. on the question of risk protection, we now have no unregulated mortgage lenders. they are going to be subjected to regulation. those who pointed out correctly that regulation can never replace the market shouldn't be vocketting that we do away with risk protection. it is a market-based incentive. it is put you're money on the lined everything will be ok. that's when i talk more and more and disagree -- not 20%. i think there needs to be a down payment requirement and some other marketors. loans made without risk should

be the exception and not the rule. i'm doing away with the exception, not the rule. with that, i'll be happy to respond to any questions. it is the one-year anniversary of -- what would you say are the three most important outcomes from your perspective? >> i'm always puzzled by the three most and single most. nobody ever -- until i'm asked by the media. i will say there are several important pieces. i think -- i've just touched on them. risk retention. derivatives. a combination. loans -- the loans made without any consideration or without -- without adequate consideration of risk.

they were the bullets. the guns were the derivatives. both sides of the derivatives. on the positive side and the credit default swaps on the negative side. we made loans we shouldn't have made and they are ricocheting all over the world. that was important. those are the two most important systematically. in terms of public good, we never said the bill would only deal with the things that caused the crisis. another one is we have ended the bailout situation. again, as a matter of fact, the acting controller of the currency -- some controversy, one of the most controversial

things, i don't think that got a lot of attention. i was reading on a plane yesterday. i was a little bit behind. he complained about the fact that we're not going to have publicly funded bailouts. he said on the last page, we need a banking system and there has to be a safety net and the public should be willing to pay for that. that sounds like putting us back into business. we had other people complain in some of their testimony that a former treasury aide wrote an article saying we took away power -- when we made it -- to spend money, public money, to take care of a financial institution. spend some money to pay off some of its debt. you saw what the fdic just did. i think that was very important

too. >> i just want to remind you to state your name and organization before you ask the question. >> mr. frank, how is it after dodd/frank passed ux they don't know the exsuppose your that houses have after -- >> it had not gone fully into effect. we passed the law a year ago. there is rule making. you don't go just like that. that's what i talked about. funds to the s.e.c. that's what i was talking about. if they had been fully funded in february or march, we would be further along.

that is -- if the republicans had their way, -- before october, 2012. we hope to be able to get that one the next couple of months. that's precisely what the bill will do once it is fully in effect. >> what is -- >> absolutely. i think in order of fairness. the people i represent in massachusetts bar the same share of the burden for whatever financial cost there is but if you -- vay don't get very much of the benefit. the housing price, to have no recognition in policy makes no sense. yes, we want to ban -- but if

you don't have loan limits that pay attention to median house prices then you don't get it. forever. i'm making the argument. the second argument, this is a bad time from the stimulus standpoint. the secretary of treasury -- a while ago, oh, it is terrible. people can get houses at such and such price. people are talking about -- now the stories are how terrible it will be. there is no right answer. this is a very bad time to be cutting back on housing. the point i want to make is the equity of it. the treat the whole country as if it was one -- let's put it this way. if the level is too low, in one place. you get an unfairness to those people. and the same level can't be right for the whole country.

for san francisco and mississippi. you know, the federal government does take it living in some cases. it is especially a bad time economically to do that but it is also an equity matter. >> what troubles do you think administration will have in apointing a new commissioner to the cftc and is there an urgency? >> absolutely. would like to move on position limits. hasn't had three votes to do it now. the hurdle he will encounter is the extra constitutional use of the filibuster. the notion that a majority in the senate needed to pass a bill at 60 is a recent thing in american history. as a matter of fact, if you read

the constitution, the constitution clearly assumes that it will majority rule will govern in the senate. there is a principle that lawyers have that is often misstated. it is the existence of the statement of an exception. who -- the existence of a rule. people say something that is wrong and they say they were not wrong but they were because if you say something can't happen and it happens then it happened. if you say something as an exception -- if you say you can't do something on sunday, the aassumption is you can do it every other day of the week. if you read the constitution, there were several places where it says in the senate you need more than a majority. 2/3 to convict of an impeachment. you need 2/3 for a treaty. you need 2/3 to -- the fact that the constitution said you need

2/3 in those cases means that you need a majority in every other case. any court interpreting any law would say that. but they have now grafted on to this, this requirement. now you them announcing they will use the confirmation power not to say this appointee is not good or that appointee is not good. that may be the problem with the ftc. the republicans who have announced they will not confirm people land sfob the president uses the -- people and if the president uses the -- >> you said 20% is too high. what do you want to see? >> i would say down in the low

single numbers. the only thing too, i would say, there are other factors, debt-to-income. i think you can have a minimum of say, 4%, 5% and then take other factors into account. i understand if it is 4%. some people won't be able to buy houses. we have a serious problem with income and inequality in this country. we need to address it more. we need to look at that before we look at any debt limit deal. i would say a minimum of 4% to 5%. >> there are people who argue that -- by the way, the bill that came out of the house

originally did not have an exception. i thought an exception was a good idea but then people having gotten that, try to boot strap it and say that is a bad idea. that will be a bifurcated market. we can live with an exception. but if people are not convinced that an exception, a bifurcated market is -- then there is no exception. i agree with her in general. she has been aimportant guide to us. i'm prepared to -- an exception. if that can't be done, then we will go back to the way it used to be in america in 1984.

>> what happens if the republicans -- the dodd/frank rules. how much furthera long would we be if the democrats kept control of the house? >> a year ago, we -- i'm not happy that they are taking their time but if they had been fully funded in january, the democrats -- i think we would have had a supplemental -- we're talking about $200 million within the context of the wars in iraq and afghanistan. not a huge amount of money. by the way, when people wonder why -- what's happening to the s.e.c. and the f.t.c. are

exhibits a and before. we would have been much further along. i think you should not hold off on it. i got some cost-benefit analysis on infrastructure in afghanistan and some of the other things that they are for. i think it is a reasonable thing to do. as long as the cost includes, of course, the financial crisis of -- and the lost revenue and jobs and turmoil. that's the cost. the cost is the terrible crisis we had. although -- i notice that alan sloan has come out with a thorough analysis that is going to be printed in "fortune" about how much money we made over the intervention, the combination of the tarp and the federal reserve and made about $100 billion for the federal government.

>> [inaudible] just as a related question, you talked about the bailout being over. if -- are we really to believe that -- >> i will not comment on any financial institution. you get to be chairman or you're a ranking member and you have more nevertheless but you have got to shut up some. my first couple of weeks, i talked like a normal person. here i am affecting the market. so obviously i don't want to talk about citi. i will say this.

the reason i say bailout is this. if you mean the kind of intervention that kepting a going, or that kept -- a.i.g. going or kept bear stearns or preserved what was involved, no. no. the law is very clear. if anyone's financial institution whose demise would have broader consequences failed, that's where the debt panels come into place. that i.n.s. institution dissolved. its shareholders are wiped out. its executives are fired. they might well have to pay back some of their last two years of salary. the i.n.s. is over. then the question -- the institution is over. if it paid none of its debts, would that have effects that

reverberate throughout the economy in a negative way? if so, institutions have the power to pick and choose and pay as little as as is necessary to avoid further damage. what hank paulson asked for in the spring of 2008, more than three years ago. he predicted, and this was the case. he had a choice when lehman and a.i.g. -- as he -- as he read the law at the time. he even paid all the debt and none of the debt. both were bad situations. so yes, there is an ability on the part of financial institutions, the fdic, to make some payment of some of the debt. they can pay part of the debt. every penny which must be recovered by the financial

institutions. unless there is a change in the statute who advance money to keep one of those institutions going would be committing a federal crime. i think people are prepared to commit federal crimes on behalf of -- no. the other one is the federal reserve. we have been criticized. what's going to happen? the fed is now going to be able to set up a facility for institutions that are solvent but illiquid to come and adequately collateral as i and get some liquidity but it has to be available to the whole institution. so the answer is yes. that's why -- some people saying that is a disadvantage for us. the control of currency. the public has to be willing to pay, acknowledging that a lot of the public won't pay. so no, there will not be any effort to keep a failed

institution alive. i haven't heard anybody say -- the answer is no. they will get a result. i hope the senate will soon -- then the president. i was critical they didn't nominate quicker. we worked very hard to make sure that the insurance industry was dealt with in a reasonable way. no federal regulation -- no federal officials can determine insurance. we got a solution that was acceptable to the state insurance commissions and to have a couple of people including a voting representative, that is going to be very helpful. i think that is temporary.

i also believe we were careful -- the size of the loan doesn't do it. the question is volatility. leverage. nobody wants to be systematically significant. >> none of the bills passed the house and ssts committee to become law -- services committee to become law. do you think it has led to weaker regulations? >> no, i think the biblical -- i think the impact they have had unfortunately has been on the financial situation. they have had an impact by

having the s.e.c. and the cftc underfunded and that is -- but nobody is taking that legislation very seriously. it may have helped make the program better. one of the programs they specifically tried to repeal, which is one of the ones i'm proudest of, providing assistance to people who are having mortgage problems, not because they made bad mortgage deals, but because they have been unemployed for a long time in this economy. they want to repeal that. it just got implemented. if you look at the programs they tried to get rid of, they got better and stronger, some of them, since they tried to get rid of them. the only impact they have had is -- the other one by the way, on the financial services committee, is -- and we have had a serious psychological

phenomenon, apparently, there are cases, we're going from the minority to the majority, has a severefect on your recommend. because a year ago, the republicans knew exactly what to do about fannie mae and freddie mac. that was over a year ago. today we haven't even had a hearing. republicans knew exactly what to do about fannie mae and fred when they were in the minority. but getting in the majority has somehow muddled their minds. we now have four republican approaches to fannie mae and freddie mac. we have four separate bills. one has not had any hearing or action. gary miller's bill and john campbell eats bill. i think the committee has been

pretty ineffective. >> right now, -- are you concerned they could make these bills law? >> no, because i don't think they are going to win the house, the senate and the presidency in 2012. you also would need the -- they would need to get the white house and i don't think so. plus i also believe they are more ready to do this, if this is again a case, they are not in the minority in the house but i think they are bluffing. i don't think they are ready to pass a law that says the cftc can't deal with speculation. i don't think they are ready to abolish the cftc and put it all to the banks.

i think they have a situation now, the analogy, with fannie mae and fred, they have the luxury of telling their ideological strongest supporters. the home builders and the mortgage lenders and bankers know they can't do it. still like the guy in the bar, his friends were holding a bat. his friends said -- now they are saying obama won't let them do it. >> what do you hope will be the impact? what are the consequences of -- >> we're talking about the director. i don't think it has to be senate-confirmed. i think an appointment does it.

if you're not going to confirm anybody, you can't object when people act that way. people are still -- but seeing this opposition to the risk retention, i think a good director of the cfpb will mean that a -- much fewer bad mortgages will be issued. i think that will be very helpful. i think consumers will find they are treated much more -- the credit card act that wed. a few people said it has had a good effect. no anythingtive effects that were predict. i think you'll see consumers much better protected in that regard. the community banks benefit because they are unregulated competitors will be regulated by the same rules that regulate them.

some of the bankers have been less antagonistic than people had expected. we have this terrible situation that, i don't know how it originally happened, the truth in lending act was assigned to the federal reserve. the settlement protection act, procedures act, it was a total mix-up. they were put together in a reasonable way. there will be bureaucracy. you read the testimony, what we did was to consolidate the retirements for the rules in the cfpb. they didn't exist. that is systematically important. no bad mortgages. better for consumers. >> i was wondering, you

mentioned -- where do you see the most -- from the financial industry and do you see any areas where they are having anyfect with the regulators? >> they sometimes oversell that. one specific example. i think they have a good case. the foreign subsidiary of the american institutions doing derivatives fitness. in a situation in which the other people in that country don't have to put margin requirements on. well, we have to make sure -- the only thing you can do is be well-capitalized. i think they are trying to make is that your the volcker rule is not done in a way -- i understand that the volcker rule, my own -- it is more or less. there are some activities. we're now banning not so much

the activity -- it can be a little bit tricky. beyond that, those are the two major ones that i have seen. oh, i take it back. there was a third one. actually the thing i have heard the most about personally is one of the concerns that we have ended the notion of a public bailout. nobody wants to be -- some people are automatically going to be systematically important. there are banks with over 50 billion in assets. goldman sachs, wells fargo. bank of america. you have mutual funds. any institution about which there is some ambiguity as to whether or not important, they asked you to be covered, they said no.

has anyone asked you not to be covered? i take -- i'm concerned by that. being named systemically important. >> what is the concern -- >> would like to keep doing what they wanted them to do. that one is sort of binary. the activity that the volcker rule tells them not to do with activities they could do if they were doing them for customers but not their own account. you can't just do it for customers. you to have a certain margin. i think that is reasonable. look at the amendment that they are doing. -- amount that they are doing.

it is not a fine line between prohibited activities and permitted activities. it is on whose behalf are you engaging on those activities? even those who haven't been there understand. people understand that the statute gives them the ability to do that. >> you mentioned at the beginning -- some regulations. could you speak a little bit about that? >> talking about a resolution regime that looks a lot like ours. we're hoping that our resolution regime is the model. i think america has moved ahead but in a way that we think other

people will join. those are two examples where i believe you're going to see this. now it is interesting. they didn't mention it exactly in the article but the european union is now going to have a union-wide consumer law. i think that is -- they were talking about uniform commercial code as a model. i had this conversation myself and i know secretary geithner did. one has to do with resolution in multinational financial institutions. the general who was the host country will have the right to have it prevail if an american institution has to be resolved. -- dissolved.

if you are going to dissolve an american institution, the foreign branches would be covered -- that has to be worked out. that has to be that accommodation. it is not going to be all that easy. but the notion, again, americans in the forefront. we are the first nation to say hey, if you get in trouble, you're dead. we will then worry about your mess and we may have to minimize the mess you left behind, but if that cost us any money, it is coming from the companies. it is not coming from the taxpayer. we think that model is an attractive one. then there is the question of derivatives. incentives -- i see a huge difference. when i became the chairman in 2006, there was this concern that all the i.p.o.s were going

overseas. mayor bloomberg was concerned. there was this notion that other countries could benefit by attracting our financial services. and then the bottom fell out. and some of these other countries were badly damaged by practices that happened in america. german banks were badly hit because of loose practices in the american mortgage markets. what you now have and i'm very struck by the difference. i -- my choice of public policy has been more domestic. trying to cut military spending, etc., working on the world bank and i.m.f. to make them more socially responsible. i've done a lot of international stuff. working with the e.u. i met with the japanese and canadian and others, european union on this. by last year, the year 2009, things have shifted drastically from countries thinking what can

we do together so none of us get hit with all of this crap. that's why i'm encouraged. >> one more question. >> you talked about appointments and insurance-related positions. the director of the federal insurance office just took office last month. do you see any concerns with how -- insurance-related issues -- >> the question was was i worried about them taking too much time? i asked them to slow down and -- until we had an insurance representative.

the commissioner should be feeling good. the three appointees have all been insurance commissioners. by the way, on the -- the guy from missouri, the insurance commissioner. he -- i agreed with him when he testified. i think he has been restricted too much in what he can share with his colleagues. he is a representative. i said at the hearing, i thought they were being too restrictive there. but now we have three very good appointees. i would hope he would get -- and the answer, would like it to move faster. i wish i could eat more and not gain weight. i wish a lot of things. in this case, no harm, no foul. no decisions were made adverse or favorable to the insurance

industry by those appointees. we set out to disrupt the financial model that has been disastrous. we believe it is a very pro market model. i'm concerned i by that. -- by that. nobody has pointed out any great problems. this is a pro-market model in the derivatives area. putting people on -- that is pro market. we had no price fixing in here. all of that is moving forward. complicated by the fact that they were not funded well. and that the appointment -- when the nobel prize-winning economist is brutally rejected by the senate, that is part of the reason for the slowdown in the process. much of the blame goes to the senate -- but to go back to your question, they have appointed three good apointees in the

insurance area and no bad things happened as a result of the delay and i think it will go good going forward. >> thank you, everyone. we have actually gone over our time. i hope you had questions answered and thank you for coming. >> up next, thomas friedman

talks about u.s. debt and the 2012 elections. on this morning's "washington journal" we'll get an update. at 10:00 a.m., live house coverage. this morning, the british house of commons will investigate allegations of illegal phone hacking by rupert murdoch's news corp. the company's "news of the world" newspaper shut down last weekend over the controversy. the home affairs committee will question senior police officials about investigations that some royal police officers took bribes for providing information that was used by reporters. live coverage from london begins at 6:30 a.m. eastern on c-span 2. >> now available, c-span's congressional directory. a complete guide to the first

session of the 112th congress. inside, new and returning house and senate members with contact information, including 2013 arsdz, district maps and committee assignments. information on the white house. supreme court justices and governors. order online at c-span.org/shop. >> next, new york times foreign affairs columnist thomas friedman on the challenges facing the united states. he spoke at thes a espn institute's ideas festival at the end of june. this is an hour and 10 minutes.

[laughter] i will say a couple of nice words about tom. unnecessary though they may be. ever since you went from beirut to jerusalem decades ago, has been the clearest thinker about where our country is going, where our world is going. my question to you, tom, is you're a foreign policy dude. what are you doing writing a book -- your next book on american domestic policy. >> first of all, it is great to be here with you.

it is wonderful to be here at the ideas pennsylvania. it is just a-- festival. it is just amazing what you have built here. i'm honored to be here. thank you all for coming out at this early hour. i have a book coming out in september. september 5, written with a friend of mine, michael. michael is the foreign policy professor at johns hopkins. one or two foreign policy guys writing a book about america. the book came about by accident. we had been in conversations about foreign policy. we noticed something that over the last two years, we were starting out talking about the world and we would end up talking about america. we eventually came to the conclusion that america, its health, vitality and vigor are its fate. the book we have swrin called "that used to be us: how america

lost its way in the world it invented and how we found our way back". >> when does it come out? >> november 5. the title was given to us by barack obama. you may recall or may not recall, he noted that china is building high-speed rail. they have the fastest super computer. that used to be us, said the president. i heard that and sniffed it out and made it the title of the book. if you see something, say something. so the first chapter of the book is called if you see something, say something. it is the homeland security model. our point is the biggest homeland securities issue now is the health, vitality, vigor of our country. the basic theme of the chapter is that the american dream is now in place. the future prospects and possibility of the american dream is now in play.

what people don't really appreciate fully is how important the american dream is. not only for the stability of our own country, the notion that each generation will be able to do better than the previous generation has been such a bedrock engine for pulling and holding together this incredible mix of cultures, identities and immigrants. and what people don't also fully appreciate is how important that american dream is for the stability of the world because the united states provides a huge amount of global governance, whether it is patrolling the sea lanes in asia or existing on the right rule s of global economic treaties. we provide a huge amount of global governance. i'm not ashamed to say, i think that we are the tent pole that holds up the world. if we go weak, if that tent pole

buckles, your kids won't just grow up in a different america, they will grow up in a different world. >> what really sparked us to write the book, i was at the world economic forum. i was at the -- about three hours south of beijing. the conference was held in a convention center that people in washington, d.c. would be a tourist site. new and beautiful. my friend was and i were at this conference together. i came home from that meeting. when you go to the website about

the conference, it says this conference hall, construction began in september of 2009 and it was completed in may of 2010. i was walking around my room saying september, october, november, december. that is eight months. so i got home and i called michael and i was just telling him about my trip. his wife got on the phone and said have you been to the metro lately? we live in beth easy day and we both take it to work. i knew what she meant. they had been repairing the two sclearts in the metro for six months. i interviewed the people repairing it. there are exactly 21 steps in the metro. that contrast is just so

overpowering. then i started researching about the bethesda metro. there is a great letter. someone described the sound of the sclearts. -- escalators. it becomes a two-way staircase. it creates a huge human traffic jam to get off the metro. we're sort of getting used it. i thought yeah, that is the problem. we're sort of getting used to it. that is the kind overp decline we're in now. we're in the worst kind of decline of all. a slow, gradual decline where it never reaches a point of criticality where people just put down all of their political nonsense and say this is code

red. we have to do something about it. we try to stay in the opening chapter, this book is not about china at all. all the answers are actually in america. but the points we are trying to make is that china today is getting 90% -- what is considered to be a vastly superior political system. we are only getting 50%. we argue that -- >> let me stop there on the political system. our system is superior. explain that. >> well, if you think about the world we're going into. let me back up and make one point. let me try to answer that. it is an important question. i think we face four great challenges as a country. the first is adopting to the i.t. revolution.

the second is adopting to our globalization. those actually merge. they are one challenge, basically. they are fundamentally an education challenge. the second challenge we face is what i call all the energy, all the entitlement debt and deficit issues. the last is energy and climate. i think those are the four great challenges that we face today. so what all of those challenges have in common is that they have reached a point of criticality. where the only way to address them is with collective action. you cannot address those problems without a -- if you're talking about a deficit and entitlement, it requires a simpson-bowles action. you cannot have an effective education policy without collective action and precisely what we have lost right now is the ability to act collectively. >> right.

>> so i would say that the broad framework and so i can get to your question, i think that where we are today is that we have made -- there are two fundamental errors. first of all, we made the most dangerous mistake a country or species can make. we misread our environment and we misread our environment at the end of the cold war. we interpreted the end of the cold war as a great victory. when in fact it was the onset of the biggest challenge i would argue our country has ever faced. we just created 2 billion people just like us. they want the american dream. only with huge pent-up aspirations. they are like a champagne bottle and the cork just came off. we thought we won. we needed to be tying our shoes and redoubling our effort.

then we come pounded that mistake by deciding they were going to devote the whole decade to basically chasing the losers from globalization, al qaeda, rather than the winners. that's sorts of the framework of what has been going on. to answer your question, it gets to -- i mean, to me, maybe the third huge mistake we made, in the air force, they teach fighter pilots something called ooda. if your oodaloop is faster than his, you're going to blow pim out of the sky. in this sense -- him out of the sky. ours got really slow. and it really hit me going to singapore, to work on the book, i interviewed a singapore economist. he said we live in a hut with no doors and no windows.

we feel every change of temperature. we feel every change of breeze. you americans are living in a brick house with central heating. you feel nothing. and why is that important? so you go to the debate we're having now, walter, and the republicans say i cut you -- 900 billion. i see you 10 trillion and i raise you 3 billion. that's the debate we're having now. without anybody standing back and saying well, excuse me, what world are we living in? what are the big trends in the world and therefore where do we need to -- you can grow without a plan. we have proven that. if you cut without a plan, you can hit a big artery. you can blow a huge artery and that's the scariest thing going on right now. we are having a debate about cutting without any plan of

where we're going and the point we tried to make in the book is i am not a -- i'm not about april 15. i'm about july 4. july 4 is now at stake. i'm not after american solvency. i'm after preserving american greatness. that is not the discussion we're having. >> we entered the debt and deficit crisis eight or nine months ago, the president appointed a commission that was courageous and did what he asked them. the simpson-bowles commission as that mentioned. it gave pretty good blueprint that you could have built upon. what kept our system from just embracing that and moving with it? >> i would say two things. two things are standing in the way. i think we suffered a real