in her memoir, she recalled, i was lucky enough to have these four children, and they were terribly interesting. at least to meet. i was a den mother. i was a sunday school teacher. i was an interior decorator and peacemaker and zookeeper. she loved her children. susan told me she had gone to visit her mother on her birthday. her mother sang her happy birthday. i like to think that today on gerald ford's birthday she is singing to him in heaven. mrs. ford knew how to serve up a pretty good meal. her has been decided to challenge charlie hallock for

minority leader. it was intense. they scheduled a 6:00 p.m. meeting, but congressman ford refused to say. no, i'm going home, he said. betty made the potroast. she was fierce about defending their importance. she knew how hard women worked in the home. in a way many can relate to, there were times when she wondered what else she could contibrute. she had danced at carnegie hall. she had dreams and talents of her own that went beyond being beautiful. she said, "sometime, i felt like a nobody.

like i was being left behind." betty ford had so much to give the world. so many contributions to make. so many lives she has changed for the better and saved by her example and efforts. her ownonly became woman, she showed a lot of others how to do the same. when ford was president, and they wanted to know the first lady's opinion . when the visiting prime minister confessed at a white house dinner that he did not know how to dance, he got lessons from betty ford. when your husband lost his voice at the end of the 1976 campaign and was unable to read his concession speech, it was the first lady who stepped forward to read it. looking back, she spoke of

living a page of history. betty filled that page with style, class and courage. she had not expected her life to be part of history, much less the trial of her life, and yet, when americans remember betty ford, many will think first about how she dealt with illness and how she brought things out into the open where they could be faced and conquered. there are today uncounted thousands of women who have survived breast cancer. and you can draw a line back to betty ford. the same can be said of many who struggled against the hurt and desolation of addiction as she did. he once said, "i'm not out to rescue anyone who does not want to be risky. i'm grateful to my husband for

coming to my rescue." accepting help is tougher than giving help. mrs. ford became a witness to the possibilities of recovery. she not only found the best treatment, should build something grant and permanent for others and be paired her husband's legacy is a time of healing. her legacy is a place of healing. they taught so much, that gracious couple from grand rapids who said their vows in this church. betty ford, dressed in blue satin, walked through those doors with her handsome boy friend jerry, into a future beyond anything they imagined. the walk together for so long. and they lived in the faith that promises reunion.

their story has come to an end. now we say farewell to both of them, but for the rest of our days, we will cherish all that was and be thankful that we knew and loved betty and jerry ford. -- gerry ford. >> to be remembered with joy, betty ford once wrote, has to b a kind of immortality.

in her 93 years, mrs. ford imparted more than her share of joy. her sense of fun was never sharper than when cutting through the gloom of self absorption or disappointment. not long after leaving the white house in january, 1977, she and the president found themselves on a plane bound for houston and a dinner honoring the legendary coach, vince lombardi. it was the exactly -- it was exactly the sort of road show event that congress men and vice president for had graced thousands of times over 30 well- traveled years. and yet, it was different. for tonight, he was coming as a citizen, and hon. title for sure, but one that he would gladly have postponed in exchange for the four years in the oval office. off as they neared their destination, gerald ford involved in some very

uncharacteristic brooding. he had expected the group's invitation while still residing at 1600 pennsylvania avenue. he hoped his audience would not feel let down, he said, hearing from in your ex-president. mrs. ford, exhibiting some of the and what offering reassurance, "don't worry, hunnicutt ma is me they're coming to see -- don't worry, honey, it is needed are coming to see any way." [laughter] instantly, his doubts dissolved in laughter. how many times that scene must have repeated itself since the crisp fall day in 1948 when elizabeth plumber walked down the aisle of grace episcopal church with grand rapids most eligible bachelor. of aridegroom's idea honeymoon combinable revolt ball game with an outdoor political rally addressed by michigan's

favorite son, thomas e. dewey. [laughter] listening to a bunch of politicians declaim on a frosty evening in october in michigan was not an experience the new bride would remember with joy, but it was good practice for a life defined by the unexpected. at the time, betty ford could hardly imagine that while governor dewey would never live in the white house, she would. once there, she quickly established herself as the first lady unlike her predecessors. not content to make history, she became one of those rare figures to make a difference, and lasting difference in our public culture and in our private lives. in time, her name would enter the language, less for her activities in the president's house then for her contributions after she left. more than a liberated woman,

betty ford was herself a great liberator. next to the family in which she took fierce, and vowed of pride, perhaps her greatest accomplishment -- unbounded pride, perhaps her greatest accomplishment was living beyond crippling labels. she was a trailblazer, he sent a schoolteacher, and a seventh avenue model. she was the feminist next door. a free spirit with a dress code. [laughter] above all, she was a wife and mother. if you have any doubt on that score, just ask mike, jack, steve, or susan. during his years on capitol hill, it was congressman ford's have it to work saturdays at the capitol. often, he brought along one or more of his children. the congressman directed them to

a nearby battery of manual typewriters. write your mother a letter, he told them. tell her what a wonderful mother she is and how much you love her. all this week, americans have been sending their own expressions of love and gratitude to mrs. ford. the technology may be different, but the emotions are timeless. millions who never met her felt as if they knew that before. millions more wished they could. -- if they knew betty ford. millions more wish they could they took inspiration from her to confront their own demons. in 1974, the fords of grand rapids and alexandria first attracted the public's interest. many assumed the family to be cut from the cost of the 1950's sitcom. after all, hadn't and early

profile of then congressman for's wife singled out this one time cubs scout den mother for her taste in "quiet suits and slightly more talkative hats. of more labels. more limits. bible forrd's living august 9, 1974, the day's recommended first proclaimed, "i will keep a muzzle on my mouth." it was advice she conspicuously ignored. [laughter] for by then, this lady like a revolutionary -- this lady-like revolutionary, once mistaken for june cleaver, found her voice. she had a history making an appearance on the mary tyler moore show. if nothing else, it showed how far mrs. ford and the rest of us had traveled from "father's nose solve -- "father knows best."

many pored over her 60 minutes interview in which she candidly confessed to booze, premier of sex, and youthful and drug abuse. when i read your -- one irate viewer wrote in protest to remind mrs. ford of white margaret truman -- of what margaret truman was called the second harvest individuajob in . if "you are not an individual who has only to answer to the family unit, the social negron and a loss of her timidity, state, and nation -- social neighborhood and the law's tough community, state and nation. because of your husband's position, you are expected and required to be perfect." [laughter] it is quite obvious you were never put in your place and told by your husband that in this great country of ours you must

retain at all times a position of the queen, mother of the year, high school from sweetheart, grandmother of the year, church leader, teacher, nurse, and counselor to american women and girls. there you have it. the tyranny of perfection. betty ford helped to liberate us from that as well. as first lady, she opened a conversation on subjects once banned from the dinner table and around a water color -- the water cooler. she confided and vojvodina's while struggling to reconcile her personal -- confided emptiness while struggling to recognize her personal needs as a political wife. she acknowledged seeking professional counseling. if she distinguished vulnerability from weakness. and she transformed the role of first lady for a country that

had come along way. for women's health, american history is divided into two unequal time frames, before betty, and after betty. once a lethal silence had enveloped the subject of breast cancer like a london fog. before 1974 polite euphemisms found their way into newspaper obituaries, "victims died from a wasting illness." there were no 1800 numbers to call, no support groups, no self exams. women visiting the doctor's office have never asked -- were never asked, have you had a mammogram? betty ford broke the silence. not for the last time if she became the face not of a disease, but of recovery. if and even as she inspired other women to emulate her example, so mrs. ford's sense of

humor and perspective helped improve the quality of life for millions of cancer survivors. again, she was an agent of liberation, this time releasing women and men, too, from private cells of secrecy, shame, and feel. greater still was the stigma attached to alcohol and drug abuse, especially for women, whose illness was often confused with moral failings. from the start, mrs. ford insisted that any treatment facility that bore her name must also reflect her special sensitivity toward women and their needs. she wanted it to be affordable, with charges kept low enough, as she put it, that a " -- a schoolteacher in nashville, tenn. for go there for treatment. she insisted that families be a part of this solution, just as hers had been. with the help of her friend, neighbor, and fellow patient,

firestone, she mastered the not so gentle art of fund-raising to create and sustain her vision. one day, long before ground was broken, she was part of a group whisked off to las vegas on a private plane to see frank sinatra performed in concert. on the way back, mrs. ford told her captive audience all about the unbilled treatment center. of course, she did not stop there. unfortunately, there was nothing readily available on which her fellow passengers could ride out a pledge. ever resourceful, that he found a substitute for pledge cards, and so it came to pass that the first major donations for the betty ford center were written on cocktail napkins on frank sinatra of's plane. [laughter] her physical recovery was matched by her spiritual growth. initially, she resisted putting her name on the new facility. what if she fell off the wagon,

she asked. later, she went out of the way to disclaim personal responsibility for what everyone else regarded as her most tangible legacy. a higher power was responsible for the betty ford center, she insisted. she was merely an instrument to be used in carrying out his plan. no one was more proud of her accomplishments than her husband. the first one to join the center's advisory board, where he introduced himself to newcomers by announcing, i am a former president, she is the current one. when he was on the road, not a day went by that did not begin and end with a call to the woman he called "my lovely bride." for him, she would always be the glamorous young dancer he had swept off her feet half a century ago. mrs. ford, the more practical of the two, embarked on plastic surgery. for a simple reason, she said,

she wanted to look like her white house portrait. [laughter] they had always loved new york, and on a theatre visit in 1977, they fell hard for "a chorus line." a frank, funny, poignant tale of aspiring dancers. they were especially fond of the show's great emotional and some, "what i did for love." it could have been written with betty ford in mind. just think of all that she did for love, devoting six decades of her life to a man who read -- who adored her in return, sharing her sorrows, and rejoicing in her triumphs. it was for love that she nurtured four children, according to ballgames and school plays, helping them over the hurdles of adolescence, life in the white house, life after the white house, parenting, and

grandparents in. for love, she revelled in her extended family and the grandchildren and great- grandchildren who enjoyed nothing more than being in joyous proximity to their beloved gigi. but that is not all that the ford did for love. mining possibility from her own pain, she vanished -- vanisheshe it easier for countless others to follow suit when dealing with addiction. the leadership she provided all entitle her to rank alongside other great champions of women's rights. in her last years, she would doubt the feminist credo, and ( -- the feminist credo first conveyed by her 19th century counterpart, elizabeth cady stanton.

when the pleasures of use our past, children grown up, married, and gone from of a hurry and bustle of life in a measure over, when the hands of weary and active service, when the old armchair at the fireside are the chosen resorts, and men and women must fall back on their resources, more than once in reserve -- on their resources. more than once in recent years mrs. ford asked her children, "when are you going to let me go be with my boyfriend?" today, her choice is granted. parting is all we know of heaven, wrote emily dickinson, and all we need our help -- are held. in the immediate aftermath of the president's funeral, friends have questions mrs. ford's insistence on making the long, physically demanding walk to the

graveside. it was a walk along the base of the -- banks of the river that she had often taken with her husband. january 3, 2007, was the last time, she realized, that she would make it on her own. it was the least she could do to honor his memory. soon, we will retraced her steps for ourselves. completing the journey begun so long ago by an ambitious war veteran and his elegant bride. hours are 0 is exceeded by our joy, for we know -- our sorrow is succeeded by howard shore, for we know the story does not end in a grand rapids hillside. even as we take leave of her physical presence, we take part knowing that if ford is where she wants to become a reunited with the love of her life, and radiant in the glory of her

ultimate homecoming. >> next, the national governor'' association session on border security. then a conversation with governor peter shumlin. then a joint hearing on the tax code and the economy. >> i am interested in what i call disappearing america. america that may not be here in 25 years. >> for it 30 years, she has traveled the u.s. document in the country to work camera lens, every photograph donated and available at the library of congress. follow her story sunday night on "q&a". it is a prelude to monday's debut of c-span's original

documentary, "the library of congress." >> the national governors' association meeting is taking place in salt lake city, this weekend. the governors here from the u.s. customs and border protection deputy commissioner as well as the president for the center for national policy. it is an hour and 35 minutes. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> the meeting of the national

governors association special committee on stock -- on homeland security and public safety is called to order. i want to thank you for joining us today. good afternoon to you all. the books were sent to governors in advance, and included the agenda, speakers, biographies, and background information. to my left is heather, the

director for the nga special committee on homeland security and public safety. please see her if you need copies of any of the material or any other assistance. heather is available to brief you on homeland security, homeland defense, and other pape -- public safety issues. the proceedings of this committee are open to the press and all meeting attendees. as a consideration, please take a moment to ensure that your cellphone and all electronic devices are silenced. today's meeting is split into two panels for the purpose of discussion of two very important issues. the first, the united states custom and border protection strategies and operations, to secure our borders. and the resiliency of our citizens and communities in the wake of disaster. our first panel will first focus on the department of

homeland security is efforts to secure the border. let me begin by saying that each day over 58,000 customers and border protection officials, including border patrol agents, place their lives on the line to secure nearly 7,000 miles of the united states land border with mexico and canada. and 95,000 miles of coastline. these men and women not only provide for our safety and security, but they also work to protect our jobs, our economy, and our livelihood. with the 10th anniversary of september 11 rapidly approaching, we are focusing on how far we have come since the tragic day. we are no doubt safer than what we work, but we are certainly not free from threats.

many have fought constantly to enter our borders with the sole purpose of attacking us. on a given day cvp apprehends nearly 1300 illegal entrants are caught at official ports of entry. or 600 persons have been denied entry and over 11,000 pounds of goods have been seized. more than 80 fraudulent documents at approximately $400,000 in counterfeit currency. the men and women of cvp are the first line of -- against thieves -- first line of defense ieves and threats.

despite the dedication of border control and other cvp personnel, my own state of arizona is concerned with the security of our national border and the impact of illegal border crossing and smuggling on our communities, economy, and overall safety. we have seen with our own eyes some of the violence across the border move north into arizona, such as with the death of border patrol agent brian terry. i believe my concerns regarding the safety and security of americans are very similar to those throughout the southwest and elsewhere across our country. i love our law-abiding neighbors in mexico and countries further south. buti want the u.s. to be as secure as is reasonable from harm that can come from international lawbreakers and criminals that pose a constant and serious threat to the well-

being of our nation. the president recently agreed to extend the commitment of the national guard troops along our border, but more has to be done to protect our communities. if i look forward to discussing this with our first panelist, deputy commissioner david aguilar of the united states custom and border protection. on our second panel this afternoon, we are focused on community resiliency. and how quick communities and individuals can recover after disaster strikes. this is especially important as natural disasters and other emergencies seem to occur with increasing frequency, causing massive damage. from the tornadoes in alabama to the floods in missouri to the wild fires in my home state of arizona, it is clear that our communities will never be able to prevent disasters from

occurring. while the federal government is able to resist -- assist in the recovery efforts, we must remember that response and recovery must be led by officials of the local level. it is up to the citizens and local communities to determine what they need and where it needs to go. i look forward to hearing from dr. flynn at the center for national policy and how we can foster our communities and our citizens can play more active role in disaster response and recovery efforts. before introducing our speakers this afternoon, i would like to turn to my co-chair, governor o'malley of maryland's, for the opening remarks. >> thank you very much for that great summation of what we will talk about today. there will be ever -- other governors at the overlapping

meetings that we have here at the nga in the beautiful state of utah. when there are other people here that are part of this important conversation. i want to thank you, governor burk, for making sure that this committee continued. -- governor brewer, for making sure this committee continued. this was created some years ago and there was some discussion about holding it back into -- how many are there? three or four committees. there are multiple committed -- committees that have the effect of dealing with legislature during the sessions. but i want to thank you, governor brewer for making sure we continue this. when an emergency happens, especially large-scale emergency, the people look to us to make sure that public

safety is guarded and protected, that we have recovered and we are prepared. whether that is in response to incursions across the border, or terrorist attacks, or hurricanes or the like. i want to thank you for keeping this committee going. we also have general -- the general from washington state who is with us, as well as the director of public safety in utah, and betsy martin from the department of homeland security. we also have governor fortuna, who was with us last time from puerto rico. a place that keeps one eye on the hurricane allen. -- hurricane alley every single year. governor, thank you for being part of this conversation. i am from the city of baltimore, maryland, where we have been doing a homeland security since 1814. we have always placed a premium on being prepared, being

resilient, not sitting back and assuming that our national government can protect us. we believe that the security of our city or our state is one of our most important responsibilities that we have as citizens. as we come up on this 10-year anniversary of 9/11, this is an opportunity not only to remember all of those feelings that we had 10 years ago when our country was attacked from all -- was attacked, but also to reflect on what we have accomplished to make our homeland more secure in the meantime. but we should also ask ourselves what more we can do now to help the county, state, country become more prepared. -- become more resilience. since the day of 9/11, a lot of progress has been made on making communications more interoperable for all of our first responders.

the successful mission in pakistan recently that seal team 6 completed in bringing justice to osama bin laden. but there is so much more that we need to do in bringing response, prepared this, -- dness, prevention. we would like to prevent every homicide from ever happening. but every unit has prevention as well as apprehension because there is no way to ultimately prevent some of these bad actors from getting through. but the most important defense we have is one another. and we are a citizenry that is taking action. i will turn it over to you to talk about border security. >> thank you, governor o'malley. let's turn to our first panelist.

we are very pleased to have deputy commissioner david aguilar from the department of homeland security. he also serves as chief operating officer, overseeing 57,000 employees, and managing and operations budget of more than $11 billion. prior to this position, mr. aguilar served for more than 30 years with border patrol and was named chief of the border patrol in july of 2004. as chief, he has had over 20,000 border patrol agents across the country under his command. and he oversaw activities between the port of entry on our northern and southern borders. in march, 2004, mr. aguilar was designated the border security integrator for the execution of

the arizona border control initiative. the same year, mr. aguilar was also elected president of the southern arizona executive association. thank you for being with us here today. we are very interested in your comments. >> thank you, governor. i must say that as a young man being raised in south texas as an individual actually raised on the border of our great united states and one who has spent over 33 years serving our country and protecting the border of the united states, it is, indeed an honor to be here today to speak to the governors of these great united states about the state of the borders and what is occurring along our nation's borders. the fact that it became dhs is something very personal for us. it is because of the attacks we suffered on the horrendous day of 9/11.

we have come a long way. as governor o'malley said,we have had some tremendous achievements and successes that we can all be proud of. but even with osama bin laden being there, we still have -- being dead, we still have four vulnerabilities, threats, and risks that our nation will continue to face on an ongoing basis. that is why it is critically important that we maintain the focus, the vigilance, and the efforts to protect our country. and that is what the men and women of our u.s. customs border protection today in and day out -- do day in and day out along our northern border, southern border, and maritime borders. i will speak briefly to how we carry out these operations, how they contrast to what we did before 9/11, and the value of what we do every day in protecting this great nation. one of the things i think it's critically important for all of us to understand is that the theory of a thought, or theory of approach to protecting our nation changed dramatically on

9/11. on 9/11, we woke to those horrendous visuals that we had on our television sets. we were devastated by what we saw. but all of us that were concerned to then, and continue to be concerned now with border security, were even more concerned and devastated about what we did not know, we did not know well and had to do to better protect our country. if some of the things we did in the immediate was what we called pushing out the borders, something that had not been done in the past. to the effect that we have now become managers of information, managers of intelligence that is -- managers of criticality that we can use to protect our country. programs such aspartnerships in trade against terrorism that is a private-public partnership between the ford global supply

chain that brings trade to our borders, to ensure that at any opportunity -- every opportunity we keep bad actors from coming to bear on our global supply chain. programs such as our customs csi, customs security initiative -- container security initiative, where we have officers deployed at 80 -- 86 different ports of entry where they will screen 85% of the containerized cargo before it even leaves the port of that nation. we have over 247 last point of departure throughout the world. there are more people, more cargo and transportation abilities targeting the united states. at the time we have targeting capabilities that will take information intelligence and all other kinds of flow that we

have amounts the international -- amongst the international intelligence community to basically target any actor that is coming toward our country. in its simplest form, what's cvp and dhs do is keep bad people and bad capabilities from coming into our country. we do this by operating in our ports of entry with over 21,000 customers and border patrol officers that on a daily basis inspect close to 1 million people coming into this country. about 700,000 of them come through our land border ports of entry. about 250,000 come through the airports. we have over 50,000 containers a day that come into this country. through our maritime ports of entry. every one of those containers,

every one of those persons coming into this country are basically screened by way of watch list and information and intelligence that we have in order to ensure screening of the people coming into this country, the containers coming into this country, to mitigate the risk of anything bad coming into our united states. we do this by way of partnerships with other governments. if we do this by ensuring that our people were trained up to the best levels that we have and we do this by building relationships throughout the world. in addition to what we do in the air environment and the

maritime and armand, we have now -- environment, we have now doubled our security at ports of entry. we now have over 20,000 border patrol agents patrolling our borders between the port of entry. this coming year -- this year, we will get another 1000 border patrol agents between ports of entry. in the last four or five years we have also added a tremendous amount of infrastructure to our borders between the ports. we have built over 650 miles of fence, border barriers, that is a tremendous asset to our southern border. we have added a tremendous amount of technology that we continue to add on an ongoing basis, technology that gives us the ability to detect, identify, and classified any kind of border incursion between our ports of entry. this is the kind of capability that we did not have enough of right around the 9/11 timeframe.

but because of all the things that we have done, america is safer. it is a much more secure border. it is a stronger border. it is a more economically viable border because of the safety that we bring to our ports of entry. one of our biggest concerns is insuring the global supply chain is intact, continues to operate with fewer threats, and therefore, our partnerships with other countries are critically important. the outcome of what we have added and we have done, we have now basically ensured that our border communities are safer and that the crime rates along our nation's borders have fallen dramatically. in san diego, in tucson, in el paso, and in mcallen texas, a 17% decrease in violent crime in san diego.

22% decrease in tucson. 11% decrease in mcallen, texas. and a 36% decrease in violent crime in el paso. in el paso in the last 10 years since we increased our capabilities along the southern border, a passover is virtually next door to what has been called the most -- el paso is virtually next door to what has been called the most violent city in the world, lorez, mexico. over 3400 murders -- juarez, mexico. over 3400 murders in the last year in juarez. in el paso, only 10. and none of them related to any cartel or drug trafficking. that says a lot about the security of our border. by coincidence, there was in

"usa today" -- there was an excellent ride up recently, a 2.5 page write-up of our southern borders. it talks about the chief of police greg allen, the sheriff in el paso, the chief that i worked with when i worked in tucson, the chief of police in true love as such, calif. -- in chula vista, california. that is 7 miles from the border. all of them speak of the frustrations along the southern border. they speak about what has been put out on both sides. unfortunately, there's a tremendous amount of violence south of us in mexico. the government in mexico and our law enforcement partners are putting up very tremendous and heroic efforts in mexico to

do everything they can to basically, stem the violence that is occurring. by way of capacity building, partnerships, intelligence and information sharing, we are working closer than ever before, certainly, closer than what i have ever seen in my 33 years of service. of our borders are stable. are they completely safe? no. as governor o'malley said, everyone was that wears a badge, carries a gun, takes the oath of office, does so to prevent any crime happening against our citizens. but the reality is, we are a human race. we will continue to see acts of violence. but our job is to continue, and the relentless -- be relentless, to drive the violence down and protect our borders and make sure that our country is as safe as possible.

with that, governor, any questions that he might have i will have the -- be very happy to answer. >> thank you very much. that was very concise and a very good description of what we all believe, i think, of what is taking place in regard to our border. i do have a few questions i would like to ask, if i may, and then turn it over for a few minutes for the other governors if there are any other questions. and i do have some questions that i do not know, mr. aguilar, if you have answered or not. if you do not know the answer, you can give it to me in writing. i have talked in my earlier comments in regard to some of the apprehension data that has been compiled from the year

2010. what i would like to know is what kind of data we have now concerning 2011. i would like to know, basically, how many people have been apprehended for illegal entry into the u.s. on all our borders. >> absolutely. >> you might want to press that button. >> this one here? >> yes. >> that is a very good question i will place it in context by stating the following. the peak year of activity that we had for illegal border crossing incursions was fiscal year 2000. it was my first year as chief of the border patrol in arizona. in that year, it was a total of 1.6 million apprehensions of illegal crossings that the u.s. border patrol made.

this year, we are sitting at about 257,000 total. we are about two months out to the end of the fiscal year. that represents an 80% decline from the peak year of apprehension. almost 250 -- of those 257,000 that we have apprehended -- >> all orders? >> yes, south and north and the coastline. of those 257,000, most of those work in arizona. about 42% of those are apprehended in arizona. within arizona, there were problems -- approximately 4600 border patrol officers and about 1000 cvpo officers. placing that in context, and 80% decline from our peak. one of the things that i think is also of interest isthe

demographics of the people crossing or the following -- because i think it is of interest -- the criminal aliens crossing into the united states now, and i am focusing on arizona, in 2006 there was a total of about 7400 hard-core criminal aliens apprehended trying to come into the u.s. that had probably been deported from the u.s. before, had been involved in some kind of violent criminal activity. last year, the last full year that we have four vital crime statistics across the u.s., that number fell to about 2700. even those dangerous criminal activists, even those numbers are falling. as we began this year, we are experiencing a 40% reduction of -- 44% reduction of arizona specifically of illegal cross border incursions. across the entire border, a 31%

reduction of illegal cross border crossings. >> how many people have come across the southern border of arizona that are considered by the federal government to have terrorist ties and have been arrested? and how do we know which ones are not being apprehended? it's a very good question. -- >> a very good question. i think i spoke to this during my introductory presentation. one thing that is critically important is that the u.s. government has the capability of screening literally 100% of the people that are trying to come into this country legally through our ports of entry and our airports. if we keep out a lot of people, such as the ones you have

described, the ones that match the terrorist databases and that we have intelligence on, etc. as it relates to those coming into the country from special- interest countries -- not special interest aliens, but the countries -- we have apprehended about one-tenth of 1%. that is about 384. keep in mind, that includes the wall universe, elderly -- the whole universe, elderly individuals, young kids, all of those that make up the universe of special-interest countries. of the total number, it is less than one-tenth of 1%. of the mexicans -- those that -- other than mexicans, which includes anybody that we apprehend that come from other than mexico, about 13% are

mexicans. -- about 13% are classified as terrorists. that is the whole universe of the people originating from those countries that are special interest to us. >> it would not be classified as a terrorist? >> no, they would not. >> what is the number that would be classified as terrorists? is that something that you have, or do you need to get back to meet on that? orix i do not know if natarus has been apprehended coming true -- >> i do not know if a terrorist has been apprehended coming through arizona. i can check that and get back to you. but i feel very comfortable making that statement. >> you have all done a great job getting the southern border somewhat contained in texas and california. and it is on the way in arizona. that is our concern, that we are feeling the effects of all of the illegal immigration, and

the criminal element that is coming true. through.hroug we appreciate the fact that the amount of crime that is closer to the border has been declining. reports come back to me -- and i have not documented it, but i have also heard from other counties that it has risen. i would like your comments on that. >> the issue of criminal activity, i think the best thing we can do is put into context the negative statements that are made by some in the law-enforcement community. they feel about what they are putting forth is information that needs to be put out. i know most of these individuals. i have worked for these individuals over the years. i think the best thing we can

do is to put in context the statements of, not just one or two or three or four, but all of the law-enforcement community along the southwest border. when we talk about a couple of statements made by individuals that say that the border is out of control, or there is a spillover violence or things of that nature, we must put that in context with the ralph ogdens of the world, a highly respected sheriff, greg allen, a tremendous chief of police in el paso, texas. richard wiles, a sheriff in el paso. of lupe trevino and his fellow

sheriff's in south texas. they're basically saying it is a safe southern border. as to the issue of what is occurring in arizona, it is important that we note the following. if there are things that i would go to as baseline flows of illegal aliens that will continue to come into this country as long as they believe that they can cross illegally and gain employment in this country. they will continue to come. we will continue to apprehend and arrest every one of them. there is going to be a base line flow of individuals attempting to cross. in addition to that, and this is almost an embarrassing statement to make, but a very valid entry statement -- and a true statement that unfortunately and ironically, this nation has a thirst for our products. as long as that thirst for

narcotics is there, there will be a base flow of that coming into this country. as we speak today, customs and border protection has apprehended 2.6 million pounds of narcotics this fiscal year. between the ports of entry, the united states for control has apprehended over 1.8 million pounds of narcotics. >> how does that compare [unintelligible] >> compared to last year, it is pretty much even. as compared to 10 years ago, it has risen. the footnote there is that we are not having to dedicate from an enforcement perspective as much time on the illegal cross border incursions because illegal immigration has fallen. we are able to dedicate more time to the narcotics trafficking, and therefore, are apprehending more. the outcome of course, is that there is more cost to it and

things of that nature. i think is absolutely critical. arizona, we are actually calling it our last stand on the southwest border because we feel confident that we have hardened and reinforced and placed enough resources on the southwest border that if they try to come back in some of these other locations, we will have enough resources in place to basically hold the gains that we have made. we are currently trying to close down arizona for both illegal immigration and narcotics trafficking, recognizing that when we do -- not if, but when we do -- there will be a reaction around the coastlines. that is where we are working their farmland in pr, in fact, -- we are working there and in

puerto rico, in fact, working with our dog the partners -- dod partners in those places. >> mr. aguilar, i appreciate your comments of about sheriff of fynn and others -- sheriff ogden and others that they feel they do have the situation under control. crime has lessened, if you will. illegal alien crossings have lessened, which is a good thing. that does not mean it is under control. i know there has been a general accounting office that said that we have about -- anyone who has

read the newspaper or watch the news realizes things have improved. we are grateful that things have taken place, but somehow we need to get better operational control of the borders. we are grateful. we do not want these people coming across our border illegally. and we'll continue to do those kinds of things. trouble at your own risk. we have a problem. we need to get operational

control. when are we going to get our borders more secure? are we going to see our federal government bring us more? again, and we have the national guard here today. i'm covering my border. yeah, thank you. i believe that we are just not going to resist because we know that there is going to be spillover. if we see it. we know what happens and we know it is not believe the civil rights of the people coming because they want to come and work, but they are being harmed by the heat if nothing else, and we are the drug cartels, etc. we know that we are going to continue as you are going to

continue to try to get that control. do we see more technical, high- tech equipment coming to our borders? we need help. we need assistance. and people can say that is better than the figures and data sound wonderful. we need more help, more people, many more troops. we need are bordered secured -- our borders secured. >> and that is what we're working toward every day. something simpler and a cover because of the questions you pose. we have the largest civilian law enforcement air force in the world, 269 aerial platforms. over 130 of those are dedicated in arizona.

we have seven unmanned aerial systems. three of those are in arizona. we have the largest air fleet and number of pilots in arizona. we have the largest area incentives in arizona. we have a tremendous amount of technology that is coming. by the end of 2014, we will have all the technology that we need in order to cover the entire state of arizona. that is not to say that we do not cover a big portion of it right now. of a thousand new border patrol agents that are coming into service this year, the vast majority are going into arizona. but it is also critical to note that there are other activities occurring. our partnerships for mexico, for

example, working joint operations with our mexican partners, then in mexico and us on our side, over 60 of the state's law enforcement agents are now partners with us in an operation that incorporates other law enforcement agencies to ensure that we bring the greatest density of enforcement coverage in arizona. the national guard right now, we have 363 national guard troops on the drown the-ground. we have more, so it is a constant buildup of what we are doing in arizona. when we bring arizona under control, not if, we will do so as quickly as we can. something that i think critical here is the following -- this year because of a drop in activity levels that we have seen, we figure that we will end

up in the year with apprehensions somewhere between 106,100 18,000. but as 106,000 --106,000 and 118,000. throughout the state of california, we have apprehended over 57,840 cross border illegal aliens. coming across. i felt comfortable making the following statement, that in california, people are not complaining. that is not to say that the 57,840 is acceptable because we're still driving that number down. in arizona, 106,000 right now. what the proper number is? for me, it would be zero. but as the governor said

earlier, that is an impossibility. we're working towards that. we are working to ensure that what is crossing is being caught. and we cannot forget that the border is not the end. the border actually begins at the port of origin, the point of transit to the border, entry, egress on the border, and the final point of destination. the demographics of the aliens being apprehended in phoenix, for example, tell a tremendous story. last year, 42% of the alien apprehensions being made in phoenix by the phoenix law enforcement community, not by us and not by ice, were people that had crossed into the united states within three days, less than 30 days. that means that they were crossing immediately very 42% of them.

this year coming year to date, that figure has dropped to less than 20%. less than 20% of people being apprehended in phoenix crossed within 30 days and underpaid their rest of the people of been in the country for longer than a year. that means people are not crossing like they were before. it is all these things coming together that tell the tale of the status of our borders. one thing that you mentioned that is also important is how do we measure this. we have the term operational control. that was a very tactical term that the border control instituted to address the critical line, that line in the sand. it was necessary that we use it and it basically did what we needed to do in order to articulate the resources that we needed. but we're working on now, cdp, is a comprehensive and systematic border index that

will take into account a comprehensive measure and third- party indicators that would give a true measure of border security. it would go beyond the line and transcends the border in more homeland security measure, than just a border security measure. we hope to have something that will give us that have come by early next year. the last that out, by early next year. -- that outcome by early next year. >> i look forward to working with the beard now like to open it up to any governors that have questions or comments. the people of my state are not only concerned about the arizona border, but we aren't

fortune on a recipient of a very porous, open border that brings violence into our state. and therefore migrating not only into our state but out of our states into other parts of america. we certainly hope that we get it resolved. most of the people in arizona cannot understand why we can control other countries' borders and we cannot control hours. and why can we get it secured. i know there is no way that we can -- as i said earlier, that tucson sector, i have flown over it, i have driven it, i've seen the trail and apprehensions, i guess in the ones that have not been apprehended.

i have experiences of losing border patrol guards. being killed, the terrible effects that it is happening on our state and our country. i do look forward to seeing the day when it has been secured to the satisfaction of your agency and the satisfaction of the people of arizona and of america. i would open it up if there are any other questions. i did i see that. gov. stefano? >> i have a few things that i would like to clarify. to put some real perspective on the work in the accomplishments,

i like to commend you for the great accomplishments that are being achieved in securing our nation's borders. but with these numbers, do you have any scraps of how they relate to the actual numbers -- graphs of how they relate to the ash on numbers of people who attend and to go across the borders? i think you're talking here about the apprehensions, the numbers. can you put that in perspective with the numbers of attempted crossings and actual crossings? >> that is a very good question, not only weak, but there been many universities and institutions that have been attempting to identify what we referred to as the denominator. that number of people that are attempting to cross our borders

and we have a good grasp on the apprehensions. we do not have a good measure on those attending to cross. that is what we focus so much on measuring third-party indicators. in a situation where there exists all high-level an elevated level of cross border illegal activity, there are associated actions in crimes that occur. everything from law-enforcement high-speed pursuits to rapes, murders, to other crimes that are associated with elevated levels of cross border incursions. those are proxies' that we measure that will tell us the total number of people attempting to cross. we have been asked often what percentage of the people that we apprehend account for the total number. we do not have a means of measuring it.

we are working on that now all along with several high-level institutions that include universities. that is the criticality of those third-party indicators, with the communities in crimes that stellas, what are partners in law enforcement telos -- tell us. the social cost on the hospitals of the tribal nations on the borders were horrendous. they had to support those elevated levels of cross border activities. they have also fallen dramatically. we feel very comfortable in gauging that the flow has fallen dramatically also. >> a second question. we all know that americans have given up a great amount of liberty to feel secure, especially in the area of travel.

the concerns as a governor and as a travel is that the technology -- that we continue to move into, and i see here that one of the statements, i believe that you made, we are now 100% possible screening at the border. i think of a lot of americans concerned with the technology being deployed at the borders, that they are more invasive and all that. i would like to know if there is any real effort on the part of our department of homeland security and other security agencies towards making more research into equipment that is less invasive but perhaps just as effective or more effective.

it bothers me a lot that because of our desire to be secure, giving up more and more freedom and more and more of our liberty is something that i think we should be addressing for our nation. the last question i was going to say -- you are aware that american samoa is probably the only jurisdiction outside of your border jurisdiction or the customs jurisdiction. that brings its own problems because basically our border security falls on our own local capabilities. >> yes, sir. >> the areas where we do not have a lot of assistance, actually training our actual forces on the ground. my question their and my last

question -- will your agency open up your training regimen to our agencies to be able to train so that they are just as confident that being the u.s. jurisdiction and protecting that border and u.s. citizens in u.s. nationals they live and american samoa? i can tell you, the last incident that we have suspected anthrax to four days for a first response team for the united states to arrive. in four days, if that was an actual incidents, all 70,000 people could have been wiped out that easily. i as a governor and very concerned that we continue to find the right solutions for protecting those americans and u.s. nationals living in

american samoa. i think we can do just as good a job if we have the tools to do the job. one of those tools is training. we're not able to access it at the moment. >> absolutely in the last -- answer the last question first aired one of the things that dhs and cdp is involved in its capacity building, of not only places like american samoa but other nations throughout the world. we have officers deployed in afghanistan and iraq and several other countries throughout the world to do just that, to train and to build up that capacity. if your feelings are that we are not doing enough, please give me the information because we're very interested in that type of build up of capacity-building said that it will help protect your homeland and our homeland

also. we would very much -- we would be very much interested in that. on the screen and intrusiveness, one of the things you would be interested in is that everything and anything we do within dhs and certainly cdp is an entity within dhs, the civil rights and civil liberties, but we're -- that reviews every activity that we undertake, that we're planning to undertake, and that we are looking to move toward, to ensure that what which is that when we do take actions, we take into account the civil rights and civil liberties that are of the highest trenches of the secretary and all of us that have historically worked this type of effort. the amount of equipment out there is tremendous. it helps dramatically. but we're very sensitive to that intrusiveness to make sure we do

enough to get the job done but in short that the rights and liberties of our citizens are not in any way intend to. -- violated. >> thank you governors birth or and of maile, for putting this together. forrewer and o'malley, putting this together. i know that it is not an easy job. having said that, unlike their raise a couple of issues that affect not just puerto rico but the rest of the country as well. you mentioned advances in protecting the northern and southern borders. if i may, you left off the third border. i raised this issue with the president last month when he visited very this is the number one issue on my plate right now.

there may be a spillover effect, you mentioned. it has already commenced. we're working at very closely, not just with our federal partners, fbi, the u.s. attorney's office, on this, and the coast guard, but we need resources. the number of homicides related to the drug trafficking effort in the region has skyrocketed in the last year and a half. the dismantling of operations all the way from south america to the eastern seaboard has skyrocketed as well. we're working closely with the dominican republican and our partners in the u.s. virgin islands, but there is only so much that we can do. we just purchased new of equipment, so that we have three boats to compete with those

speedboats coming to our region. but it is truly out of hand. i am here to request greater assistance as i did with the president last month. we have moved to 100% continuing inspections and mechanisms. we've already started what the first of the companies that have operations in our main ports. we are already installing in the second company, and hopefully we will have 100% operational so that we can inspect. also those containers coming in from other states. why? we have already found in one of the four companies that handles cargo, american cargo, illegal drugs coming in, illegal arms

coming in. there is stuff coming in from the north as well. i must tell you that again this is truly getting out of hand. it is like a balloon, when you press one side, the air moves to another area. it is happened already. we certainly want success in the southern border, but the third border is important. the moment that the cargo is in puerto rico or the u.s. virgin islands, it is like arizona or maryland. we are part of a customs system. there is no need for visas or passports. this is actually the number one issue. this was the main issue i brought up what the president. it has gotten so out of hand

that in the last year, i directed the state national guard out there to assist the state police. it is that bad. all the resources that could be available, it is affecting us and the illegal trafficking of drugs. whatever could be done, i would appreciate it. >> thank you, governor. we recognize puerto rico as another border, the third border. one of the things i will take the opportunity to 94 is the assistance with your state and locals there. they are just so tremendous. they are always there and the relationships are outstanding. with a coast guard, but coastal border interdiction group, we do need more resources out there. we have a total of 30 aerial platforms dedicated to that part of the world. we have to a recapitalization project will add some more.

we will stay focused on that. [inaudible] >> i will try to be brief. thank you, governors, for this opportunity. commissioner, thank you for your very good word. [inaudible] >> it has been a great opportunity. >> you have done a great job answering the question. in wyoming, we are not a border state. but first to comment. in my previous life as u.s. attorney i served on the anti- terrorism committee and we got a chance to it you'd ariz.-mexico border -- view the arizona mexico border. we got to see people coming over

the border. one of the things that governor brewer has done is talk about the law enforcement issue. in wyoming, but trafficking and methamphetamine in wyoming came not from mexico. i think the country and the state had done a good job addressing precursors and the cooperation with the mexican law enforcement, i think we've made headway along those lines. but some time the messages get lost outside the illegal drug trade and the trafficking of drugs. there is also a human interest story here. in touring the desert, and governor brewer knows this, use a water bottles, diapers, baby carriers. it is an invitation for human suffering. but one of the cases prosecuted in wyoming was a young girl who brought across an older sister who was prostituted out in

wyoming. they were fearful for the people who brought them over that it they said anything to law enforcement, that they have these things happen to them. this really is a national interest in securing that border. xas, andwer and tax it does not necessarily a success because it can lead to some many abuses. i apologize to you by ms. this, but one of the interesting things when we toured that border, the issue as i recall was that it was roughly 50/50, and the tribe was very interested in having that open.

has that been dealt with? on top of that, help me, there is a porous to ride on the border, the refuge -- a forest right on the border, and you had the families in the tents in the middle of the night. commissioner, this was nine years ago, but how is that going on those two areas? >> when you're down there, i'll still probably the chief of the tucson border patrol. i think i remember you down there. both of those have worked out fairly well. i say that with the indian nation, because it is 78 miles of border and 25,000 tribal members of which 3500 live in the mexican side as mexican citizens.

there are three historical crossings that have been there since time immemorial. at the present time, the united states citizens nations members go back and forth. mexican citizens cannot yet use those crossings. we have come up to less than nation has come up with the western hemisphere travel initiative -- the nation has come up with the western hemisphere travel initiative. it gives them the ability to use a limited amount of travel documents that they can apply for, and used across there. now they have not -- we have signed a memo of understanding with them but they are not going to that point yet. when they got into that point, they will be across pacas for -- back-and-forth as citizens. this goes back to when that nation was split in the 1800's.

we operate in very remote areas and deploy up to 30 days at time. they live and operate out there during that time did this is part of the $6 million supplement that the congress gave us, building two additional ones which will bring us up to 10 for operating bases in that area, absolutely essential to our efforts. i think that you would be pleasantly surprised to see the difference from when you sought the last time to what that border is now. still a lot of work to do. >> are the shadow will is still -- and >> the shadow will still operate. they are currently working for ice. -- the shadow wolves still operate.

they are currently working for ice. >> thank you for being here today. we appreciated and i look forward to having further discussions. with that, i like to turn it over to my co-chair, governor introduce our next speaker. >> dr. flynn has published a book shortly after 9/11, and more recently the acclaimed "the edge of disaster -- rebuilding the resilience of nation." he has been working as president of the center for national policy and has been focusing that centers work on informing and advancing our national resilience. and is organizing a summit in washington, d.c. as we approach

the 10th anniversary of september 11 and those attacks. in addition to those accomplishments, he serves as a member of the bipartisan national security prepared news group cochaired by former 9/11 commissioners tontine and lee hamilton. -- tom keane and lee hamilton. he was an expert advisor to the u.s. commission on national security that we have come down as the heart-rudman commission -- hart-rudman commission. it made some precedent recommendations about the high likelihood of terrorist attacks on american soil and american deaths. dr. flynn has served on homeland security advisory council that baez's secretary napolitano of.

we served on the resilience task force which published its report and i had occasion to work with him on that report. as we get around this idea of resilience, after the attacks of september 11, everyone knew what it meant to respond. the response has gone on for 10 years, including most recently the successful operation in pakistan. we know that we're covering in the context of rebuilding in new york and recovering in new york. we have moved into discussing prevention in terms of the information sharing that you talked about, an ongoing process. nsa and building up that capacity. prepared and is in terms of individual protective equipment. resilience is a new turf. -- term. i am not sure if it is a

continuum as much as a continuing cycle. it is what he is one to talk about today, how we can build, redesign if you will, a free and open society that is better able to recover more quickly both economically, socially, in terms of transportation and everything else that it means to live in a free and open society after devastating attacks, whether natural or man-made. dr. flynn? >> thank you for your leadership of this committee. it is good to me with the other governors and alongside the commissioner who is doing tremendous jobs serving our nation. and the border patrol and now was deputy commissioner for customs border protection. i am a career coast guard officer and retired. i had the chance to serve on the hart-rudman commission that

produced a document january 2001 that the number one national security challenge will would be a catastrophic attack on the soil. we were not prepared for it. it was not a good day to see that come to fruition. it was a long career i spent with the coast guard and a continued work with the farm is like the homeland security. hollen state categorically that the frontlines of homeland security is not at our border. the front line is not what is happening with our brave men and women operating overseas. it is within our civil society. it is the greatest asset that we have. i like to put an explanation mark on that directly tied to 9/11. the only successful counter- terrorism measure against the

operation was not was conducted on united 93, the brave men and women who kept it from meeting its almost certain destination, the u.s. capitol building. the people of this sworn oaths to protect and defend this country were themselves on 9/11 protected by one thing alone, everyday americans aboard that plane who charge that cockpit and kept it from its destination. that is something that we need to recall. we have an obligation and government to play the role we play, let us not lose sight of the fact that we have this asset which is every day americans who are willing to step up its fast, it informed , if engaged, to support that mission. on september 11 after the terrorist -- after the towers came down, many went south and many discovered for the first

time in manhattan was an island. there were looking on new work carver and they could not go back. a colleague of mine did something very spontaneous. he called up on channel 16, the broadcast channel in a man tomorrow, and ask for any boat to help the people off the island. ferryboats, yachts, many other boats help to evacuate 500,000 people, all for the course of several hours. to that in the context, the great dunkirk evacuation of the british troops after being routed and rushed, celebrated by winston churchill as the break response of civil society, that was just over 200,000 people. we know that from world war ii,

the role of a civil society can be celebrated. the same thing happened on 9/11 and we do not know the story. this is what we need to invest in, going forward. of course we need to invest more at the borders and what we're doing overseas and so forth as we can. to track down and eliminate terrorist, but let's of -- let's put some numbers in the context here. since 9/11, we of spent in iraq and afghanistan close to $1 trillion. break that down, $275 million a day every single day for 10 years, which brings down to $11.5 million and ordered a total amount we have been spending annually on citizen court, a program to engage the american people to be better prepared within our society to work with law enforcement and public safety is $50 million a year.

roughly 75 minutes of warfighting. this is not to say that we will not spend and must spend as we can when we are confronted by war and investing in these things, are we investing enough in this great asset that we have, civil society and dealing with the dangers that confront us? the fact is that the terrorist threat is fundamentally changing over the last 10 years. this is increasingly well documented. the counter-terrorism director i lifted this as well. terrorists have simply gone to the small operations with a homegrown dimension. they are operating as long walls or arrest tuesday a freeze. wolves or twos or threes. they have not done a large scale

operations, but that does not mean that terrorism has gone away. it will come out and smaller forms. that causes problems that the federal level. without dedicated conspiracies, you do not have the smoke signals going off to help you intercept early on. it is much more difficult to prevent. especially the homegrown character creates real challenges. the frontline of terror prevention is going to be in our states and localities, with in everyday people. we know this with the near miss of the times square,. radar not on anybody's screen. he went to one of that most highly police areas in the analysis, drove past a squad car, parked his suv, and got out with the intent to ignited. the person who spotted it was a

t-shirt vendor operating on that corner who had better situational awareness, i would suggest, than any of the local policeman there you're looking for customers and squatters and you know your neighborhood. the fire department responded and they found it was at as matt explosives. but as it was a -- it was a hazmat explosive. the opportunity is to do something that i wish we had done 10 years ago and national level, again asked -- make an ask to the american people. i know we were all shocked and traumatized by the devastation of the day but we recall the unity and selflessness of this country in response to that tragedy.

the desire to help. and yet we did not give people meaningful things to do. people drive by running up to blood banks. i was talking to a young woman who was a very senior executive who bake cookies for three days to give the first responders. people wanted to help and they did it anyway that they could but we were not harnessing them. we tell them to shop and travel and we would take care of you. that is a promise we cannot deliver on in it is missing this core capacity. we must shift to building nascar rosy as -- a building national resilience. it would be tremendous if the governors asked the citizens, you have the credibility in washington does not have much of that these days, you can ask americans a basic question. where were you on 9/11 and what

were you willing to do and what would you be willing to do now? answer that question by asking them to do three things. first, be better prepared for the first 72 hours to look out for you and your family. that is the smart thing to do for you and your family but it takes the load off the very busy front-line players who have helped their citizens who really need the help. one in five americans cannot help themselves in times of dire emergency. there'll come a day or infirm. find that one and five per cent and offer to be their body. the will die out one at in 5% and offered to be there buddy. -- find that on ie in five person an offer to be there buddy.

point to ways in which they can offer -- volunteer. honor the tragedy of that day and tragic loss of life and the men and women in uniform making the sacrifice for the last two years by doing something. being better prepared as individuals, the more engaged to help out as good neighbors, the more able to volunteer and support the limited resources we will always have when confronted by emergencies. we also need to roll up our sleeves and figuring out what makes a community resilient, that along.oster in other parts of this great country, people hate getting knocked down and they get up and do not get knocked down. the gulf coast of mississippi is an extraordinary part of the country.

slammed by katrina, slammed by deepwater horizon, but that place is about as resilient as it gets when it comes to responding to as disaster and helping each other out. most of those people would not live anyplace else. how do we do it? it turns out we can identify the attributes of what makes the community better able to withstand up front a disaster that has a vision about how to respond and recover drawing on the total assets of that community, not just a government level, but what the private sector can bring to bear. you have to do this up front. you get engaged up front. you cannot call out afterwards and you often get those resources but we have to do it up front. there is an organization that has been working for a last quarter years to identify the

how to the community should have to become resilient. we should be able to assess how to be prepared for a fire. if we tiepin insurance, providing benefits for communities, because we know that when something happens, the cost will not be so great and we will recover quickly and losses will be mitigated. we know how to do this. we have to start doing it from the bottom up and we have to invest in doing it. that is something that can only happen if the state and local level. the federal level can be supported and the champion of the good things when it happens. it can create incentives. but i'm so thrilled to speak with the governors today because the leadership of this nation is going to happen at your level. i want the president up there and he talks about resilience, integrating it into our national

security strategy now. there is an office of resilience policy, but turning it into something real is going happen at the state and local level. it is something i think americans will respond to if asked, and let's use the 10th anniversary as a teachable moment to remember and reflect, but most importantly, to act to move forward. thank you very much. how be delighted to take any questions you might have. >> all very truthful and i might daresay inspiring. questions, thoughts? >> you have expressed it so very well on a sentiment that when we take time to conflict -- reflect on a post-9/11, the spirit in this country in trying to recapture that, one of the things that i worked on is that

as a country we seem to forget very easily, the complacency, not only in law enforcement but in the civilians and citizens. your suggestion of how we get people involved also combats that complacency. it is real. it is not something that just happened and will not happen again, as you pointed out. we need to be prepared for it now. great suggestions. certainly i will do my part in wyoming to move forward with that it is tremendous. we could quadruple law enforcement and every sort of group we have working on homeland security and is still would not be enough. we need the citizens involved in this. to avoid the complacency and build upon in that spirit that you spoke about, so thank you very much for the presentation. >> i know it is getting short,

but governor o'malley is working on this as well. we're calling it remembers, renewal, and resilience, and highlighting stories like the one i shared with you at the outset, where we see the strengths and civil society in a call for action. anything that can happen at a state level, and the anniversary as a powerful force of the emotion that is tied to them. the deep emotion i know we all are familiar with on 9/11 is the shop, but as i tried to highlight here, that unity was there as well. if you'd knowledge it will be there, we need to harness it by saying here is what you can do. children can interview their

parents. where were they on 9/11? what were they willing to do? what are they willing to do now? that would be a very powerful thing for a child -- for a parent to go through, especially with a child. highlighting the unity and selflessness is something that says, that is something i want to remember and act on. that is something again at the governor level and the mayors, others could really do this and bring good strength back to our society. >> dr. flynn, our time is growing short here. this is a big topic as we think about this. part of resilience involves better informed citizens.

the most important person and our republic is the citizen. part of it also involves the physical infrastructure as well. governors do best when we see best practices and best models. i wonder if you might talk more about the community regional resilience, talk about the exemplar is in motion. we do best with best practices. after the devastation of katrina and as horrible stories about people left behind in nursing homes that did not have generators, and in our state, we required as part of the licensing for nursing homes that they all have generators. any new school buildings had to be built to incorporate the

rolling generators that we were able to purchase for state homeland security grants. if this sold for to give the building served as a shelter. -- if the building served as a shelter. could you talk about this and the model that might be rising up from this grassroots that we might emulate for municipalities? and there's another thing that we have done that many of the governors -- i was not aware of it until a couple of years ago. to put in place these mutual aid contracts with private providers so that when we become overwhelmed with our state highway resources in our municipalities, we already have this web of mutual assistance, these contracts in place that are mayors can call up. i suppose that in essence is a sort of resiliency.

one of the models -- like are the models that you're hoping to bring home that we can emulate in our states? >> good to provide a bit of detail if you like to follow through. let me make a pitch for required generators at filling stations as well. that is where you get the diesel and other fuels from. people have run out of gas and the power is out of the filling station and i cannot recall the cars. the less they cannot refill the cars. -- they cannot refill the cars. what reasonable measures can be put in place up front to mitigate that disruption? should we have a few events, --

acute events, what can we do to recover? we want to protect the function of the infrastructure. how we ensure the continuity of a bridge? within that context, you say, was first put their risk, where are the vulnerability is, what a reasonable measures to invest in to protect that risk? what our institute has done is gone to communities light gulfport and memphis, and brought in information from people across the country, former governors, mayors, and emergency managers, leading thinkers, and essentially came up with a basic process which we wanted communities to go through. define itself. what is the community?

we need to focus on the finding that. then look at their risks that community will face. many communities have not done a good job of that. they may no flooding risks but they have not done as good job as they could. and mapping, yes. >> knowing what their vulnerabilities are. >> and that it is ok, what is the vision that we have for addressing that risk? that has to be laid out. and like you suggested, what of the lessons we can draw from nonprofits in the private sector? if the committee can get it back on their fate -- that the community can i get back on their feet, then others cannot. if a school opens up right away and people are evacuating, the

rush to get back because the kids have to get to the ball practices and back to class. they are spending money and they're back in the community helping you out. these are all tied together. the private sector should support that when they can. when the community is capable, can help respond. if the community can i get back on its feet in 30 days, one- third of small businesses will go belly up. they simply do not have the capital to get back started in the cannot borrow money. they will be a death to the community. investing, not just responding, but recovering quickly and thinking in those terms. if you use the school is your shelter, how would you get the kids back to school? what we're rolling out with crri, we are doing it in washington, five communities

annapolis will be one of them, is to go out and dry run this effort so that communities can say, we were hit hard, others can do it too. we spend a lot of time talking about homeland security as something that the federal government needs to do for us. there's a huge responsibility that the federal government has. have we ask what we can do for ourselves as much as we should? we know how to do this. every generation of americans, those here in the first place to those who landed in massachusetts, confronted adversity and overpayment. they bestowed to their children and grandchildren the optimism in shaping the future, not because they avoided risk but because they confronted an overpayment. that is what we need to nurture again. begin to live in very meaningful name -- ways.

-- we can begin to do it in very meaningful ways. we need to map that and know what those critical elements are. we need to see the enter dependency from one to another. i am afraid it does not happen at the national level. we do not see things with all level of regularity as at the local level. -- with the level of a grand hilarity as at the local level. -- granularity as at the local levels. >> it's good to honor the sacrifices of some many people to make our borders secure and in iraq and afghanistan, police departments by harnessing that american spirit so that we can become a more resilient nation. we will deal with this sort of

threat for the foreseeable future. for a couple of generations. you've summed it up very well. we need to confront the risk and overcome it. to that end, we will need to establish policy priorities for the number not -- national governors' association. we will begin work to consolidate, rabbis, and ultimately a line our policies -- consolidate, revise, and ultimately align our policies. it will help better inform our federal authorities of the issues but of our citizens of the thing that we can do is a free people to make our home and more secure. the executive committee has that. we have agreed to allow all

policies of consideration in the new process. once the new policy process is in place, the nga is not precluded from engaging on that issue. this is an ongoing process. i talked to governor hardiman, and they continue the special committee but just for another few years. hopefully we will fully secured the homeland in the next 12 months. [laughter] we forge ahead. are there any questions regarding the policy process? i'm prepared to ask them offline. hearing none, we are going to move consideration of the resolution, remembering the victims and honoring those who responded to the terrorist

attacks of september 11, the process of drafting this resolution began this past spring with a staff advisory committee of the special committee on homeland security in public safety, and the consensus was reached. in order to prepared for consideration today, nga does not often consider resolutions, but this is certainly one in which i think we can all agree, especially as we approach the teachable moment, the moment of reflection, and a moment to inspire greater action because of the sacrifices made on september 11. gov. brewer, is there how a motion to adopt it? all in favor signal by saying ate. the ates hasve it. this completes this meeting. i want to thank both of our test for testifying. you do tremendous work for our country. thank you very much.

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continues. host: this is the setup of the national governors association in salt lake city, utah. it started yesterday. joining us today to give us his perspective on that meeting as governor peter shumlin of vermont. thank you for your time. guest: great tbeith you. host: there is a story in "the new york times," talking about all the states looking at the debt talks as they inflate in washington, d.c. can you give your perspective from your state on these conversations? guest: all the governors and certainly we come in vermont, assume they will work this out. the white house has confidence they will get there. all i can tell you is we all have to balance our budgets and we have been making tough decisions to grow jobs with economic opportunities and i can tell you that vermont is the only state in the country that

has no constitutional requirement to balance our budget. whether we have a democratic or republican governors, we balance our budgets and we expect washington to do the same. we think they would work it out, and it would be a disaster for us, as we emerge from recession in vermont, to see the kind of devastation and economic impact that, i bieve, would put the brakes on theecovery if they do not work this out. it does not matter with state you're from. what the american people want is common sense, reasonableness, and compromise. we expect to get that here in the national governors association. host: another topic is the stated the economy and how it impacts individual states. what changes have states like yours made in light of the current economic conditions? guest: this has been a tough time to become a governor. we have more new governors elected since any time since 1923.

i inherited a huge budget deficit. a balanced it the old-fashioned way by making tough choices without raising broadbased taxes. i was proud to get that to my democratic legislature. i am convinced that we can make the infrastructure changes that are so necessary that we can grow jobs and raise the incomes of those who have jobs. here is my biggest challenge. i wake in the morning is the chief executive of vermont thinking i was elected governor at a time when people in vermont are making the same amount of money they were making 10 years ago. this is true across so much of america. yet when i go to the gas pump, it is $4. we are paying more at the grocery store. i have two kids in college. tuition is up. that is the reality. i asked as governor, water the things we can do to make the infrastructure changes that only government can do to grow jobs and raise incomes?

our unemplment rate is only 5.4%. unemployment is not my biggest challenge. my challenge is income growth. we have a three-point plan to get it done. we want vermont the first it real estate have broadband and self-service for every mile and a smart grade meter in every home by 2013. we need to compete for jobs and economic opportunities and was beacon be connected. second, we' going after health-care costs to be the first day in the country where health care is a right and not a privilege. we are trying to pass a single payer plan were health-care policy individual and is not a requirement of the employer, which i think will be a jobs creator. it will not be a fee-for-service program that will bankrupt us but a fee-for-service program we can afford. third, and finally, we're working to look at he

education, early childhood education, retraining the existing work force for 21st century jobs. but we think we can do those three things that with a great economic future. at least from the perspective of vermont, i am convinced that is removed from the economy powered by oil to other ways that we will see the economic expansion, economic opportunities, and i say this as a business person, that will be on rivaled when it comes to the industrial revolution and the tech bomb. the question for me, as a governor, is how depition vermont to get some sliver of that economic opportunity. had we build their buildings to be more efficient which will affect how and where we get our power. it will fect where we grow our food. i think he will see a renaissance in locally grown agricultureere removed food from farms to plates come to the

restaurant and to markets bigger than us to new york and boston feeding to -- it feeding people within 200 miles of vermont. i'm very optimistic about our future. host: we have a gutter -- governor shumlin until the end of the show. the numbers are on your screen, if you are a resident of vermont and want to speak your governor -- governor, the single payer health care plan in vermont, has it passed or not? guest: we are now pointing a board that well-designed the first system in the cotry. the legislature, we wanted to go

into effect in 2014 when the national bill will go into effect. we see the national bill as a bridge. president obama has said so many times, and he is right, that we believe the states can be laboratories for change. we're not saying that we have a perfectly right, but we want the states to make it even better. he very much nts to work with us and the administration have been in getting us e waivers and things we need this to work. we talk about single payer in the challenges for vermont. on average, vermont workers are making t same money that they were when decade ago. we were spending $2.50 billion on health care 10 years ago. today, $5 billion. we only have 625,000 people. by 2015, we will be spending $2,500 out of the pockets of every single living in vermont

ers from the same people making the same wage one decade ago. this is true for the nation. we're spending more money on health care in america for a less productive outcome, less healthy people. i'm convinced that vermont can sign a cost-containment system that works where we use our health care for making people hethy and getting at the insurance companies often are providers back and letting them do what they do best, providing medicine. most importantly, get the waste and abuse out of the system so that we can spend less for better quality care in a system where it is a right and not a privilege. host: first call from fairfax, va., and vermont residents, your number is -- john, from fairfax. you are wrong with the governor. -- you are on. caller: good morning.

i sent the presidento health care plan early on when he was asking for them. basically, it would be to set up health savings accounts for each baby before they are born with combined funds from the state, family, d the federal government. for right now, my idea is for vermont to allow nonprofit health-care centers to offer tourists and residents to support your community health care centers. host: you can respond, if you wish. guest: an interesting proposal. you can setup of the health care savings that you want, but if we can -- spending the money that we are in health care, we will bankrupt america and make a very tough to grow jobs and economic opportunity. we will see the rest of the

world continue to eat our lunch. let me give you an example. my biggest trading partner is canada. our biggest province trading partner isuebec. they are our neighbors and friends. when i go to talk to the premier, he will say, "gov., when we talk about companies locating in a vermont, new hampshire, quebec, we eat your lunch every single time." i asked him how. it is $8,00$10,000 per employe to provide health care and it is an obligation of the employer. it is notn canada. i think that i need to change that. there are so many reasons, onomic, and the basic issues are that all thus need health care and we have to have it. i have a lot of uninsured. if they really get sick, they will lose their economic

security, their ability to keep their home, keep their car. they know they are underinsured. we are paying more and more for insurance, getting less and less coverage and we're watching our small and large businesses be unable to compete in a global market. we need to convince the states to be a laboratory for that change and we need to stop nibbling on the edges and joined the developed world in passing a single payer health care plan that makes health care of basic human right. host: when will the details for the plan come out? guest: the goals in what we're doing now are putting together the smartest five people i can find help design this system. we want to steal ideas from other parts of the world and make sure that works for vermont. let me give you some specific examples. the plan will be publicly financed. you will have an insurance card.

it you come out to the counter and we will be the fit day in the country with a single pair. this is what ibm ds, general motors, ge. these big companies have a single pair closed plants. the person behind a counter will say we did $1,000 worth of work, and the green mountain health care plan covers $900. you have to cover $100 as your copiague. check cash or credit? you will not leave without paying for your health care anymore than you would walk out of a grocery store without paying for your groceries. that will save us eight or 9 cents on every $1. harvard lped design the plan for us and say that will save money right off the back. the alth care card will be tied your medical records so that we can see everything that has been done to you since you

were born and we can manage your care based upon at intermission. also contained in there will be all the tests and procedures done to you because reduplicate so many services in our current system that is highly inefficient. those low hanging deficiency but it will be the first step. the third and final step, the most difficult but the most expensive -- most important, is to move to fee-for-service program. the amount of work they do, and moved to an outcomes based payment system more providers get paid for keeping hlthy. i know that is a radical idea, but that is what most of the world does. this fee-for-service program have now will kill us in the smaller rural states first because we have a lot of medicaid and medicare patients. providers get reimbursed 40 cents on $1, so we are losing the small providers. the shop at the doctor's office and the sign is, "no longer

providing health care." there are a couple of reasons we have to get this done. to create jobs and economic opportunities, because we believe it is a human right, but third, we will not have a rural health care delivery system would not make significant changes. host: florida on the democratic line. go ahead. caller: this fellow seems like a very reasonable and sensible politician. nothing good is for you. i would like to ask a couple of quesons, though. why is it that the debt ceiling on the becomes a problem under a democratic president? my second question is how did grover norquist have such a grip ov the republican politicians? eyeleted might answer off of the

year. -- i will take my question of of air. guest: democrats have to be fiscally responsible. they're the ones that actually balanced budget. look at the surplus president clinton created. both times we have had significant deficits in my lifetime or under president reagan and president george bush. bush number two past on this mess. president obama is left trying to pick up the pieces. democrats understand that we cannot take care of the people who need us, seniors, are most vulnerable citizens. we cannot pay for the things we ed to do to have jobs in the 21st century. if we did not balance budgets and we did not pay our bills, this is what president obama is so badly trying to do. it is extraordinary to me that when we are facing one of these roughest times in american history produced over a number

of years, mostly under president bush that this group in washington and congress is saying that we're going to balance all the challenges that were created by the last president on the backs of the most abominable americans, but if you have a corporate jet, if you produce oil and make billions and billions of dollars, or if you are a millionaire making more money and paying lower taxes since any time since 1952 in america, the will not have any scan in the game. i support the president in saying that we want to make reforms, reduce spending, and balance the budget, but those who make the most need to pay a little, too. i think that is a reasonable position. host: rutledge, vt., on the republican line. caller: hello. i wanted to ask a question about the health-care system that you're proposing for the state.

there's lots of talk about how much it will cost, a lot of talk about the fact of vermont is one of the help the states in the union and that is one of the most ted state in the union. how will we pay for this? i have heard anything from 5% have an 11% peril taxes -- 5%- 11% payroll taxes. guest: if you think i am not paying a health-care tax, i did not know how you're looking at the economics of this. i have a small business, 18-20 employees. and this is how it works in vermont. we have three insurance companies. you get your bill. dear bill goes up anywhere between 12%-30% in one year. it is a costa cannot control. do you call the other providers and say, "iust got my bill from blue cross and it is up

30%. what are you doing? they say they are doing that. the next year, your bill comes 15%, 30%. we all look from the triangle and there is not a sustainable rate for anyone who is paying. if we can design the first cost containment system in the country, and i am convinced we can, we wl spend dollars on health care and figure out how to pay for. as a business person, if you said to me very simply the governor and the state of vermont has figured out a way to cover all of your employees by using less money and do not have a 20%-30% increase, i would say, "where do i sign up?" or have governments faileevery single time?

people much smarter than me. barack obama, hillary clinton, howard dean. where we fail is by designing a cost-containment system that works. i will not push send on that paper this and must be configured h to get cost containment and the delivery system right. all i can say you is that, yes, it will cost money. i will not taxes on west it costs less money than we are spending now. when that happens, vermont will be more competitive than the other 49 states for jobs and economic opportunities and we will win. host: in indiana, they write -- guest: whenever you talk about the health-care system in

vermont, ask this question. are you ask a question that is different than the problems have in the current system? no, you're not. the current system allows them to use and limited health care and unlimited cost. that is our problem. we have to design a syste where we promote preventative care and there are rewards for preventive care because we know it saves money, saves lives, it produces healthy people. we want people to diet, exercise come clean, good aving, getting off of smoking. most importantly, a system that we can afford. you're describing the current system right now. if you do not think health care costs are out of control, you're living on another planet. this will sink america. why you think geral motors caused so much trouble? host: fort worth, texas is next.

caller: thank you for taking my call. twice now, the governor has said that we need to get rid of the fee-for-service system, but our doctors not supposed to walk for a fee? it is easy for the dirty politicians to demonize physicians who work the very best, but what about the nurses, janitors, orderly's? there is a lot that goes in to health care and taking away the fee-for-service to not pay salaries will not be the answer? guest: i did not say lower salaries. i say we are not paying enough. we are wasting our money on an insurance company profits, an extraordinarily inefficient duplicative system, and a system that provides a system or a date are being second guessed by the insurance companies.

i have not said one negative thing about the people who deliver services in vermont. we have the best quality syste in the country, one of them. the challenges are that these small, rural providers are primary health-care providers who cannot survive in the payment system design that we currently have in america. they are not getting enough money. this is about getting rid of the waste, insurance company profits, and a payment system that is bankrupting our providers. host: newport, vt., democratic line. your next with gov. shumlin. caller: thank you for taking my call. i am a state employee. host: go ahead, caller.

caller: i am a state employee and a union member. thank you for your respect for state employees and union members. my question to you is that your at the governor's contention right now and there are several governors across this country who seem to be attacking public service workers. the only thing that i would ask is that they have the respect that you have for union workers. again, we do appreciate your work. guest: thank you for your call and thank you for the hard work that you're doing. i think vermont is a great example of how you balance budgets and work together with your state employees to solve problems. she took a 3% pay cut two years ago. another 3% this year in terms of maintaining that cut.

theyade significant concessions in our pension plans. we did it by bringing everyone to the table and say we are in really tough times. they worked incredibly hard for the state of vermont and i've tremendous respect for the work that they do. we just came out of the toughest winter in recent memory. had some much snow that it was unbelievable. men and women were out there plowing snow in a 40-foot snag. they are running trying to clear the you roads making $12 an hour. these are people who got us into these mess. the teachers are not the people who got us into this mess. but i keep saying to my folks is that a common, shared sacrifice is what washington ought to be doing. my state employees, unions have come to the table and worked with us to make those tough choices. i will get them back on track as soon as we return to prosperity, but it is about mutual respect

and working together. as a chief executive of the state of vermont, incredibly proud of my state employees. they provide a service, work hard, and are incredibly dedicated. they have made some tough choices with me. i will not demonize them in an effort to try and correct the problem brght to us by wall street, the abuse on wall street, not the abuse on main street, not the person working for $14 an hour trying to feed their family. i will never forget that. host: off of twitter -- how do you respond to that last part? guest: president obama did an extraordinary job to get the health care bill that he got. it will make a huge difference for the uninsured americans and it will make a huge difference for states that do not provide basic, adequate health care. i think will go down -- it

will go down in history as a great moment for america. if you think the president got everything he wanted in that health care bill, guess again. listen. the special interests, as long as they're driving the train when we talk about health care reform, you will not get true reform. that is what happens in washington. special interests, pharmaceutical, medical equipment manufacturers make some much money off of our misery, and frankly they're driving the train. it is vertough to get real, comprehensive reform. i am convinced as one governor that, first of all, getting health care right is a jobs creator, and economic opportunity, and it will come from the states. the laboratories must be the states. we are excited to do it and we can get it right. when we do get it right, some of us will and some of us will not. we can and willove to a sensible health care system in america.

it will take time but the change has to come from the state is we have not sold out to the special interests. host: the question off of email. have you been talking with people at the white house about this? guest: absolutely. we are working with secretary sibelius. everything that we do, we keep them abreast of what we are up to. we need their help. we'd be able to take the medicare and medicaid plan and have the flexibility without reducing the standards. we need to design a system that actually works. having said that, our main concern in this plan is a guy from harvard who worked together with his students to look at the health-care stem in vermont and come to us with recommendations sanctioned by the legislature was president of the senate before i became

governor. we tell them to come back to us with a way to deliver quality health care, universal access, publicly financed, and we wanted to know how much money it would save us. they came back and it said they would serve as a lot of money and it would make sense. he has been doing health care all over the world for many years. he designed a system in taiwan, vietnam, a number of countries. i told him that we would love to have has helped right here in vermont. he said that he had given up on america because of special interests and the rest. i begged him, as senate president, to me to vermont and help us design the system and he did. he is our main consultant and he has been extraordinarily helpful, as well as the whole team, and bringing hospitals, doctors, nurses, to the point where they say they need to pursue change. that is where we are right now.

host: another question off of twitter. guest: they contribute a little more, frankly, now, than they did before. we just came out with a package with our teachers that is sitting as $25 million per year, $100 million over four years, that will increase as time passes. i know there is an obsession with pensions right now, public employee pensions. many of the states have not yet met their obligations to find them. in vermont, we have done a pretty good job of that. we balance our book and pay our pensions. the truth is that my averaged a employee after a lifetime of work for the state of vermont gets a pension of anywhere between $21,000 and $24,000. that is not rich. all i am saying is, sure, i

understand. many of my fellow governors, scott walker and others, have made a real obsession of basically undermining collective bargaining and going after state employees. i just do not think that is where you are going to get the most job growth and job cation and income growth. i just do not. i think you get it from the areas that i have outlined. we have extraordinary opportunities as we move to renewable ergy and a new way to power. the question for us all is are we going to have an educated populace that will be able to do the work of these high-tech 21st century jobs? are we going to ask our kids to learn conventionally to ensure that that we are driving them to get a degree in higher education because they will not be able to make good money if they do not? are we doing everything we can make sure that when little kids show up at school, when they get to kindergarten and first grade

that we have done everything to make sure they are ready to learn? i can tell you that the other countries areoing to eat our lunch if we do not. it is about education. it is about investing in innovation. it is about having capital for good ideas to be carried out in business. it is ensuring we have a health care system we can afford and having the technology to compete in a global marketplace. i am optimistic about our future. i really am. that is where we should be focusing. that is where the money is. that is ready opportunity is and as governor, that is what i'm focused on, 24/7. host: illinois on the independent line. caller: you are right on target. i grew up in germany so i know what public health insurance is all about. my father had private insurance. when he had health issues he

was in a semi-private room and i was in a room with 10 are 12 people. you may want to double check with countries like germany, but as far as i'm concern, you are right on target. i hope that someday you will be the vice-president or maybe presidents in the next cycle around because you know about how to take care of the people. i thank you for your work. guest: i appreciate the call. i am a vermont boy. i did not know if you can get me down to that mess in washington. i will try to stay focused and getting it right here. host: port charlotte, florida. caller: what a breath of fresh air to listen to you. one of the big problems we have is that the media does not come across.

after all, they represent corporations. i wish you were on every station at least once a day, or someone of your caliber to explain to the people so we could have education through television. the single parent -- it single parent system, you are mathematically correct. i'm a high-school graduate and 72 years old. i can do simple, basic math. the media gives some attention to the other side. they talk about the debt ceiling. now, the media should take responsibility in saying that medicare and social security did not contribute one penny to the debt ceiling. host: governor, can i ask you about your efforts on renewable energy and wondered ministration plans to do about it?

-- and what your administration plans to do? guest: this is a huge are virginity we are not spending enough money on. listen. we can talk all we want about the debt ceiling, and we should, but we are missing the opportunity. the opportunity is that we are buying tons and tons of oil that will make this planet unlivable from countes that do not like us. we're going to war and sacrifice american lives for oil. i am convinced that if we stay on this trajectory that it will continue to set us back economically because we caot make money fast enough to pay for the rising cost of oil. if you look at how fast the chinese, the indians and others are building cars and sucking up oil, you look at the simple fact that we are nowfor the first time in human history, burning as much money -- as much oil as we extract from the ground. it does not take an economist to tell you this is a crisis.

we should decide for me to stick with the current power system and let that bankrupt us. we can decide that we're going to make this an economic opportunity. i am convinced that america can produce six, seven, or 8 cents solar power. president obama is committed to do that. the energy sector is committed. we have to do it. we have to find ways to harness the wind and sun. then we need to find green, renewable ways the power. in vermont, this is what we are doing. we want to ensure that as they grow and build the big hydro dams that we have access to some of that green, renewable power at a reasonable rate. at the same time, we are building out our own wind,

solar, biomass, small hydro, everything we can do to move to a community-based power system. we are designing a great to deliver that power. i'm convinced the power of the future for small states and america will be small community- based power. it together with your neighbors to have a solar power to drive your technology used. my point is this, two economic opportunities we should be talking about more. the first is energy efficiency. vermont is the leader nationally. we are building new buildings, reducing years. america is the biggest energy hog in the glove. we have to make that better. when we make that better, we put dollars in our pockets that do not good to saudi arabia. and, most importantly, we are making a contribution to making the planet more livable for kids and grandkids, which is

extraordinarily important. we are building wind, solar, biomass. we are harnessing everything we can and redesigning our grades so we can deliver renewable power to every home -- redesi gning our grids. we are shutting down our old leaking nuclear power plants so that we can move to that energy in future. host: sarasota, fla., so you can go straight ahead with your question or comment? caller: thank you, governor. i would like to comment on a few things. you talk about bush of being the problem. that is a talking point that is getting very, very old. during bush's tenure, there were barney frank, chris dodd, maxine waters, who what really wanted to put a chicken in every pot. they created this house and

bubble that we are all suffering with. you also talk about renewable energy. there was an inventor many years ago by the name of thomas edison who created the incandescent light bulb. he did this without government support. maybe there is another thomas edison out there. host: a also added this e-mail. how many windmills would have to cover the vermont landscape to power in the city of stowe? guest: we will be powering many of our communities and we are doing a turbine project right now that will power thousands of thousands of homes. all i can tell you is that we believe that we can move to a renewable energy future. we believe we can be 60%-7% renewable within the next 10-15

years. we will make that happen. if we do not, i just want to say that what happens if we do not? what happens if we keep burning coal, oil, and fossil fuels? the answer is that the planet will be fine. bitter the things living in that that will be in trouble. -- it are the things living in it. we have no choice. there is an economic opportunity, and we must. in terms of the debate about bush and who did what, let's not bicker about the past. washington to use less finger- pointing and more coming together with good common sense, radical solutions to problems to create jobs, educate americans, the more innovative and creative. i am sure there are a lot of thomas edison's out there. notice agreeing on that. i am a private sector guy. my own view of government has always been where you can get

out of the way to enterprise, that is always good. my point is that the infrtructure changes we're making in vermont cannot be done by the private sector. building up the internet and cell phone service, they cannot affordo get to every last mile, so we have to partner to get it done. of a health care to the private sector, it will bankrupt us. period. on education, we cannot leave that to the private sector. you need an educated populace for jobs. let's get together. let's stop bickering. let's get things done here. host: governor peter

other incentives exist to reduce debt finance. in a partnership, for partners, the inclusion of debt at the partnership level increases the

limits of the deductibility of partners' shares, a partnership losses, and deductions. debt finance and investments can create deductions and can lead in some situations to-effective tax rates on returns to investments. there are also tax rules that favor equity finance. at the individual level, the individual investor may prefer equity finance because under present law the relatively low rates of tax on dividend income compared to the interest income. if the investor recognizes the capital gains that results from retained earnings of the business, that is also taxed at a lower rate than would interest income. for a corporate equity holder, there are low effective tax rates from the -- for a corporation that is paying tax on the interest large at -- are

at full corporate rates. for most investors and issuers, equity promotes tax-free mergers and reorganization, facilitating fluidity in the business sector. taxpayers have considerable flexibility to design estimates that are characterized as debt or equity under the code. it is difficult to create rules to distinguish debt from equity. the courts have identified multiple definitions for debt. estimates can be constructed as an economic matter. finance experts can probably identify it better than i. in the 1950's, congress attempted to define debt and equity in the internal revenue code, but retreated from that effort. treasury has the authority to issue regulations to identify

that inequity, but has never exercised that authority. i think those are some broad points you can draw from our report. thank you for the opportunity to prepare this material for you. our staff would be happy to provide more detailed work on any questions that might arise. i am happy to answer any questions you may have to de. thank you. >> missiles in, you are recognized for five minutes. -- miss olson, you are recognized for five minutes. >> chairman camp, chairman baucus, senator hatch, thank you for inviting me to testify this morning. i appear on my own behalf. the views i expressed are solely my own and are based on my experiences in the private and public sector. my compliments to the chairman for your decision to tackle tax reform.

the tax codes treatment of debt and equity as one of many issues but should be considered as congress considers reform of the tax system be one of law congress cannot repealed is the law of unintended consequences. individuals and businesses respond to economic incentives and disincentives. it is important for the tax writing community to be cognizant of the incentives and disincentives, particularly with the treatment of debt and equity. in its current form, the internal revenue code provides an incentive for businesses to raise capital. it arises from the interplay of our tax system. double accessories -- incurring debt service as a straightforward means of mitigating the double tax on corporate income.

the disparate income of -- there have been several failed efforts to draw lines between the two, but legislatively and administratively. treasury and the irs proposed regulations back in the 1980's that were subsequently withdrawn. the impact of the internal revenue code has been a concern for a number of years and has led to proposals to neutralize or -- to neutralize debt and equity. this has given rise to corporate governance concerns. the treasury department's design of a dividend program. prior to 2003, the tax on dividends brought the top tax rate on incomes to nearly 60%, creating an opportunity for corporate managers to cite

inefficiency as a basis for reinvesting rather than paying dividends. be paying a dividend requires free cash flow. that discipline was dulled by the tax system. the lower tax rate on capital gains made methods of delivering capital gains to shareholders a more tax efficient means of distributing excess cash to shareholders. the proposal would have brought a measure of transparency to corporate taxes. dividends would only be inscrutable if corporate taxes had been paid. this was seen as giving corporations an incentive to pay income tax. shareholders -- that proposal could have reduced the value of corporate tax incentives by preventing the value of those

incentives to flow through to shareholders. there are separate ways of reducing the double tax inequity. a dividends paid deduction would have a significant effect on tax revenue. it would eliminate all tax on dividend and, when the tax is held by a tax-exempt entity. dividends paid deduction could result in removal from the u.s. tax base. as the tax writing committee considers tax reform options, one simple means to reduce the preferred debt financing is to lower the corporate tax rate. lowering corporate tax rates would reduce the value of the interest deduction. besides reducing the distortion between debt and equity financing, they would have the benefit of more closely aligning

rates with other countries which have fallen in recent years. another option would be to integrate the corporate tax systems along the line of the bus administration but we do that for a budget proposal by eliminating the dividend exclusion proposal. you could go for full parity between debt and equity to the adoption of a comprehensive business income tax which is a study by the treasury department. in considering corporate tax reform i encourage the committee to make sound policy. thank you for the opportunity to discuss this. i will be pleased to respond to questions. >> thank you 3 much. mr. fleischer, you're recognized for five minutes. >> thank you for inviting me to participate today. i teach deals, partnership tax, and tax policies. my research focuses on tax change the structure in the

field. i will publish my testimony on that perspective. the main point i want to make is that the debt equity distortion is costly on two levels. the first level of cost is obvious. deals are structured to reduce taxes, which erodes the tax base. this is the explicit cost of the debt equity distortion. the second level of cost is specific. when a corporation restructure's a deal to reduce taxes, the restructuring imposes a cost on corporations themselves. it adds complexity do their capital structure and even changes critical business decisions. that equity distortion imposes an explicit calls on the public in the form of systemic risk. the council encourages a lot of wasteful tax planning. these implicit dollars is the collateral damage of the debt equity distortion. the best way to reduce this collateral damage is to

eliminate the a distortion in the tax code. legal distinctions in the tax code that have no basis in underlying economics or a bad idea. the tax lawyers i know are very clever. if you give them an economic incentive to turn it equity into debt or a corporation into a partnership or ordinary income into capital gains, they will work tirelessly so the dog is treated as the cat for tax purposes. i will recreate -- briefly elaborate on the cost of the debt equity distortion. the first implicit cost is risky managerial behavior. common stock gives executives unmeaning upside, but limited downside risk. with enough that, it becomes a rational for executives to make --- the shareholders bear most of the rest. the psychic cost is the social

costs from increased bankruptcies and systemic risk. the problem is especially acute with banks and other financial institutions. the answer lies social costs are larger. the third cost is wasteful tax planning. in a world without tax distortion, corporations would make decisions based on market conditions. instead, many corporations and financial institutions in particular review financial products to engage in regulatory arbitrage. in the typical scenario, bank executives want to increase the amount of leverage in the farm to reduce taxes. taking on too much debt runs afoul of banking regulate -- regulations. lawyers and investment bankers

qualified debt as tax purposes and equity. these hybrid instruments allow financial institutions to appear safer by appearing to have greater equity capital. in fact, it amounts to increase in debt. the adults treated as cats for tax purposes. aig, a lehman brothers and other failed institutions have large amounts of these hybrid instruments on their balance sheets before the crash. these estimates did not perform well during the crisis. the estimates were properly treated as debt obligations that will not provide a cushion. the resulting loss in instability caused and the public, not the banks themselves. the best solution is a broader tax reform effort that would eliminate the debt equity distortion.

event -- eliminate the deduction for interest or move to a corporate cash flow and tax system. if congress is interested in giving immediately on the debt equity distortion, my suggestion is to focus on financial institutions. that is where the problems are. they had the most leverage. the failure of the institutions for -- have enormous social costs. one approach would be to eliminate the deduction of interest by financial aestheticians. the goal of such a limit is not to punish banks, but to remove the tax incentive to increase leverage beyond the ratio. i will be happy to answer any questions you have. i thank you for the honor of participating in this hearing >> mr. desaie will be recognized for five minutes. >> it is a pleasure to appear before you today.

i am and professor of finance at harvard business school. in my comments, i want to state the fundamental problem. changes in the economy and the tax system have caused novel implications. i will comment on the possibility of debt and equity and the recent -- and the recent financial crisis. a classical corporate and contacts with individual to -- individual -- this distorts financing, organizational reform, and investment decisions. in the u.s. system excessing the relative tax burdens is accompanied by several of actors. the simple narrative that this is borne out by recent patterns

in the data. the differential in tax treatment creates a host of opportunities for financial engineers to innovate. the magic treatment of debt and equity income is complicated by three significant developments. the first development is the rapid globalization of firms and capital markets. this makes the tax treatment of multinational firms central to the corporate tax. it creates situations where investor level taxation involves foreign investors and allows the possibility of getting domicile functions across multiple jurisdictions. the second development is the taxation and taxable investors -- it is customary -- it does not reflect two very aborted development -- the rise of tax- exempt investors as major

players in the market. the third development -- the corporate tax is now largely for public corporations. they compete with tax obligations. the sentences -- incentives compromise tax policy goals. while excessive leverage is sometimes associated with the tax code, concerns over the role of tax policy and fostering the financial crisis appear unfounded. it is difficult to describe significant roles. for the nonfinancial corporate sector where the present debt is thought to exist, the starling fact is out unleveraged that was before the crisis. the rise of cash balances and the decline of debt is a trend from the last decade. it is not related to tax incentives. it is responsible for the perception of leverage in the

non-financial sector. the increased reliance on equity financing speech to the scope of the bias on our debt. the excesses' of the financial sector leverage, which are very important, are best addressed to regulatory approaches rather than taxes. the corporate tax is ripe for reform for many reasons. excessive leverage may not rank highly in them. regulatory, structural, and right solutions can be deployed to adjust these concerns. regulatory approaches, which -- must be crafted with care. begging create added complexity. if the stripping of earnings by multinational firms is a concern, new regulations should be integrated with current policy. a lower corporate rate is likely the best antidote to that behavior.

if leverage is concerned, deductibility must consider how organizational forms will be enacted. given the uncertainty. reforming the corporate tax structure can provide a solution-based treatment of debt and equity and undue distortions and provide a first step towards fundamental tax reform. a more modest report to modernizing corporate tax should topple a rate reduction with a better alignment of tax reporting and by some taxation of corporations. reducing rates, simplify international taxation, and broadening the base are cornerstones of reform. such reform efforts rather than regulatory approaches would best advance your admirable agenda of strengthening tax policy and

america's economic future. >> thank you. mr. johnson, you're recognized for five minutes. quite i would like to speak about household debt, nonfinancial corporate sector debt, and financial sector debt as three separate issues for your consideration. there is a common problem across all of these kinds of debt, which is apparent to all american homeowners. if you buy a house that cost $1 million with only $5,000 down, you are much more at risk when house prices go down than if you had put down $50,000 or five of the thousand dollars. you also get great upside. you get a better return on your equity. the issue before us with regards to the previous financial crisis and in regard to what may happen in the future is to what extent individuals or corporations create a spillover

of system risk when they choose to be a over leveraged from a social point of view. looking at households, i am upgrade it is somewhat obvious that the tax code has encouraged households over long periods of time to massively over leveraged and take on a great deal of risk. it has macroeconomic consequences when house prices go down. i urge you phase out the mortgage deduction. it would not be destructive and dangerous. the nonfinancial corporate side -- i think we do not have a major problem. i agree with the previous witnesses with regard to the attractiveness of making the system more neutral between debt and equity. i think there are a number of reforms he can do.

it to lower the tax of equity warlord the deduction for interest payments. or, even better, move to a more integrated system for corporate taxation, perhaps with individual taxation. that is not the number one issue with regard to a macro risk and financial stability. those risks are about the financial sector. senator baucus said it exactly right. we had a financial firms going into the crisis in 2008 with letters of at least 40-one. those are not isolated examples. we have tried to rootlet released -- through regulation to limit leverage and have capital requirements. it has not worked. the balls will attempt to limit leveraged to require more capital, the major international response to the crisis, has also not had a genetic defect either

now or in terms of what will happen later in the cycle as firms want to take on more leverage. the top bankers and traders are paid on a return on equity basis. if they have less equity in the business and things go well, they get nice compensation. if things go badly, there is a downside risk. who bears the downside risk? it is largely borne by the rest of the economy, by the nonfinancial sector, by households. whether or not you are in favor of bailouts does not matter. you get devastating losses. you get an increase of debt to gdp. as mr. levitt pointed out, the debt level has gone up dramatically in the past few years in the united states mostly because of the recession caused by the excessive leverage in the financial system.

it makes no sense to have a tax code that encourages debt leverage at the same time as you try to pull it back rather and effectively with regulation. at the minimum, the tax code should be neutral between debt and equity. i strongly advise you to follow the lead from other countries in taxing excessive leverage. in the u.k. they have a tax of 7.5 basis points on what they define as excessive leverage. that tax, i think, is rather low if you consider the imf and other organizations assess the value of too big to fail. we should be taxing away the advantage. i would suggest speaking to the points made by mr. hatch. if you want a pro-growth system, you should tax excessive leverage and use the revenue

that generates to reduce corporate taxation for the non- financial sector. the non-financial sector is what got hit hard. that is what the jobs are not coming back. that is why this is been such a painful recession. thank you. >> thank you, mr. johnson. questioning will alternate between members of the senate as recognized by chairman bacchus and members of the house as recognized by myself for a single round of questions. senators will be recognized in order consistent with rules and practices. house members will we recognized in order consistent with practices in the ways and means hearings. each member will have three minutes to question members. this is a little shorter than what we are used to having, but to accompany everyone, we want to hold it to three minutes for each member. in by chairman baucus to begin the questioning. >> thank you, mr. chairman.

i am curious about the question of financial aestheticians avert leveraging. there are an infinite number of financial products that set their own needs. should that be dealt with through the code were dealt with through a regulatory regime or some combination? there are some areas where changing the tax code is better. there is some general feeling that lowering the rate to flat in the corporate tax code a little bit helps. i only have three minutes. i would like to throw in the application of pass through. -- implication of pass through.

if the three of you could briefly just comment on that basic question. which is more important? we are talking about the corporate side. >> on the question of whether we should try to address excessive leverage to the tax code were through regulatory responses -- the answer is, yes. on the tax side, what is important is to remove the extra incentive to borrow. i do not think we should use the tax system to try and solve all our issues in the bank regulatory area. the critical thing on the tight side is trying to make it more neutral. on pass-throughs, i think the development of pass-throughs -- when you think of a partnership, you think of a small business. now we are seeing very large

companies, including large financial institutions, that are organized as partnerships. to me, that should they are barry is its bid to tax distortion and will go to great lengths to try to avoid the corporate tax. >> what is the solution? >> as i said, i think the short term solution if you want something in the short run would be to limit or cap the deductibility of interest by financial aestheticians based on a leverage ratio. -- institutions based on a leverage ratio >> to outline what the possibilities are, hyping within the tax policy round -- realm there are several branches.

one type would be financial activity taxes where everybody involved in finances will get a specific type of tax. one would be eight to big to fail type attacks. it's your assets are over a threshold level, you pay a separate tax. one can limit interest deductibility. the first thing to realize is that financial institutions are highly specialized and understanding them is extremely difficult. regulatory apparatuses our best. but does not mean we have succeeded in the past, but it also does not mean we should try it tax instruments in a very complex setting with highly responsive taxpayers and a lot of this additional detail. that is why i am very skeptical of the tax estimate to address financial leverage. not because it is not a problem, but because there are better ways to do it. i understand there has been a failure to do it. there is little evidence in my

mind that these kinds of taxes or a representation of the vengeance many of us feel. >> financial planners plan all around any kind of financial regulations. they are clever. >> indeed they are. >> they are driven to find a product that will find the greatest return. >> they will do more so when one thinks about a tax estimate. that means we need to strengthen regulatory approaches. we can actually govern them in a more thoughtful way. i will say that it is useful to remember that a lot of the leverage was hidden. let's think about lehman brothers. i do not think anybody realize tell leveraged they were. that is a part of the crisis. they will take you beyond the realm might have imagined. >> whether you liked it or not, senator, the impact of leveraged

choice these farms make -- i think we all agree with what the staff as determined. it makes no sense to have regulation and tax cuts pointing in opposite directions. i work a great deal of regulation with regulators. i am very supportive of what they are trying to do. it is not enough. they are also constrained by international regulations, including basel 3. the japanese, the germans, and the french provided the lowest denominator. why should that be the last word as the. constraint on excessive leverage? there are many appropriate ways to tax excessive leverage including a capitalization tax. the irs made a very good report on these issues. >> thank you very much. >> thank you.

mr. desai, you say a lower corporate tax rate would in alleviate pressure on the tax bias for debt over equity. can you explain how a lower tax rate would address debt equity bias? >> sure. the most simple person of this is the entry level taxation as part of the problem. reducing that rate ends up taking away that distortion to some degree. it goes further than that insofar as one of the problems here is not just that in the aggregate for nonfinancial corporations, but the possibility that the corporate tax rate -- tax base is being eroded in america. it is a widespread concern. lowering statutory rates is a very valuable thing to do. it takes out the incentive for

the united states. it is part of the reason why there may be tax bias towards debt. once you take that away, you reduce that. second, if we think that we elocution of and tom, which is a legitimate -- legitimate concern today, lowering the rate has the affect of taking that away. >> there seems to be a general consensus that the federal tax code favors debt over equity for corporations and financial firms. to the extent you consider this a problem, is the solution to change the treatment of equity or the treatment of debt? how would any of those changes affect taxpayers that take advantage of the current debt bias? start with miss olson and

go down the line. time is short. >> i thing you can go either direction. we have too much of a bias towards debt against equity. you can go in the direction of reducing the double tax on corporate income or go in the direction of some restrictions on answers. if we go with restrictions on interest, you need to think about significantly reducing the corporate rate and think about transitioning because there are capital structures in place that would be affected by that kind of change. >> mr. fletcher? >> my preference would be to let on the answers side the interest deduction. the benefit is you can reduce corporate tax rates which reduces all sorts of distortions and incentives. >> briefly i would say that this is an opportunity. there is the possibility of more comprehensive approaches.

i think that is a very useful opportunity. but to try to fix this on the margin is not as advisable as something like the corporate business tax. >> mr. johnson. >> my suggestion is to have an allowance for corporate equity where you are allowed to deduct some of the dividend payments based on an assessment of what is the normal rate of return on capital. for the financial sector, you have to go further. i am proposed new tax excessive leverage. it is a poor solution. but every five to 10 years you have some consequence of this. you should take that revenue and use it as general revenue. you can reduce tax rates of other parts of the economy. they are going to be hit very hard when the bank still bad. >> thank you. chairman bacchus? >> thank you.

under senate rules, we go according to a first-come first- served basis. senator hatch, or next. >> professor, this is a question for you. it might also be answered by miss olson and mr. barthold. i in your written testimony you said "the current corporate tax system is the worst of all worlds. i rates." can you explain that a little bit more? say the average rate is 70.5% and say the statutory rate is 35% and the average ratio would be one to two. do you think there's some ideal ratio? when to want, maybe? should we have a statutory rates

somewhat lower than the average rate. could that be accomplished? >> i guess what i was trying to get out is two things. the statutory rate is high. by i i made by global standards. when i said it was the worst of all worlds, there would be some benefit that comes from that. we have highly responsive taxpayers. we have very high statutory rates which are distorting incentives, as we know marginal rates will do. we are not collecting very much. the promise of tax reform that other it countries have embarked on and i hope you embark on is lower rates, broader base, and bringing together statutory at average rates in a way that is much more efficient.

it is also more consistent with political viability. corporate tax is now viewed widely by the american people as something that is not paid at all. it gives discredit to the overall tax system. to bring those back in line is a very worthy goal. >> i think i agree with mr. desai's comments. it would be better if we had a lower statutory rate and if we did some things to broaden the base would have the effect of increasing the effective tax rate closer to the statutory rate. the differences now are illustrative of some of the ways in which the tax code directs resources. that will maximize national and come and economic growth if we remove some of those

distortions. >> senator hatch, i will probably reemphasize the points. when you're looking at the statutory rate, you look at the marginal tax rate that applies. economists emphasize the importance of the marginal tax rate because it is the margent that influences the next investment that may be made or the next financial choice that might be made. high marginal tax rates tend to distort choice. they can promote more debt and equity. they can promote tax shelter behavior. they can reduce incentives to invest, which reduces incentives is -- which reduces incentives for future growth. economists are generally in favor of lower marginal tax rates. as to a ratio of margin to average, average reflects policy concerns that members may have with the tax code. that is your decision.

>> gracias. my time is up, mr. chairman. >> mr. levin is recognized for ticket -- for five minutes. >> processed, mr. chairman. this has been interesting and, i hope, helpful. i do think the complexities emphasized as we approach these issues, we need to leave the ideology at the door and try to dig into these issues. in a sense, it is easy to say lower the rates and broaden the base. the problem is when we start talking about how he brought in the base -- broaden the base, that is not easy. we have held hearings on transfer pricing. it is not easy. we have held hearings on tax havens.

there is often disagreement about that. by the way, let me just say on mortgage interest deduction -- some of you had mentioned it. i urge that we be careful about our proposals. that is one way to kind of lower the right. but the impact, when you look at the distribution analysis of mortgage interest, it has been very much a middle-and come tax provision. i thing most of us have to ask where we would be if it had not been in existence the last 40 years. there are some problems of excess, but i think we have to be careful about not throwing

out the baby with the bath water. that me ask each of you just directly -- some of you have already expressed your cells -- do each of you favor taxation of excessive leverage in the corporate sector? yes or no or however you would like to modify that. >> i would go in the direction of eliminating some of the bias between debt and equity. i do not think it would be a good idea to tax excessive leverage. i am not sure how we would define it or how we would apply it. we try to cap interest deductions ended did not turn out very well. >> mr. fleischer, we have 20 seconds left. >> in favor moving the tax incentives to be excessively

leveraged. going beyond that, you have to proceed carefully. if you want to oppose a penalty tax on excessive leverage, in my support that, but you have to be careful. pipes no on very targeted things. on your point about revenue, you're right about broadening the base. noncorporate business and tom has grown enormously. the gap between book and tax and tom is something that can generate some leverage. >> if i could just add, the tax on excessive leverage is with the european union is heading, including the u.k. london is our biggest competitor. we are behind the curve on taxing excessive leverage compared to major comparative countries. >> thank you. >> ok. next is senator wyche and brigid >> chairman bacchus and german

camp, let me thank you both for your bipartisan leadership in putting together this important hearing. i believe that tax reform is the major unused tool in the economic recovery toolshed. the federal reserve has cut interest rates repeatedly. the economic recovery act was passed. numerous initiatives are in place to help homeowners. but bipartisan tax reform is now sitting in the economic recovery toolshed. i hope that as we considered this, a variety of factors go into job creation. but the last time there was bipartisan tax reform, our country created 6.3 million new jobs in the two -- in the two years after it was passed. senator coats of indiana and i put in as part of our tax

reform and idea that suggest that one way to make the tax code last tilted towards debt finance is to disallow a portion of the deduction for interest costs could jubal to inflation. that would make the interest on debt last deductible and would make equity finance a bit more attractive. you all scored that as part of our proposal. my question is would that not mean that if you had broad tax reform, you had that one feature in it, that means you have that substantial sum -- one under $63 billion -- you could cut rates for middle-class votes, focus on creating jobs for our country, they get the deficit. is that not what this court

really means? >> yes, sir. you had a proposal that would limit interest deductibility and features to do that by measuring the inflation component annually -- as we noted in a report, there is a substantial amount of interest expense claimed annually. a reduction in the deductibility of that is a substantial base broader. >> thank you. thank you for your professionalism question for you, mr. fleischer. we appreciate your involvement in this as well. the congressional research service has found that over the life of a loan, half the value of the interest deduction is now inflation. is that not another argument for limiting the deduction to which non inflation

[unintelligible] >> i think it is. i think there are different ways to limit interest deductibility. i think you what to think about inflation as one possibility. my own personal opinion would be a comprehensive business income tax, which would be simpler along those lines. >> thank you mr. chairman. my time is up. >> thank you. mr. herger is recognized for three minutes. >> thank you, mr. chairman. several of you mentioned that the tax code bias towards debt investment may encourage some businesses to take on an excessively risky amount of debt, increasing the risk of bankruptcy and the associated costs to society. while the most serious of these consequences is the loss of jobs resulting from major bankruptcies. since one of the most important issues facing congress is the

urgent need to create jobs, could you comment on whether reforming the tax treatment of debt and equity might help create a better foundation for stable job growth? >> i do think it would. i think you could probably buy some unanimity from the panel. some simple, efficient, fair tax system -- the easier it is for businesses to make decisions, including hiring workers going forward. >> two quick thoughts. as i mentioned in my written testimony, it is remarkable we have not had more corporate bankruptcies given the nature of the credit crisis. i think that is because the nonessential corporate sector is under leverage. would it have an effect if we

made that not deductible? one thing we had to keep in mind is the cost of capital would rise as a consequence. some of the social spillover affect of bankruptcies would be of benefit. because of capital would like to rise as a consequence of that. that would as a potentially offsetting at banks. i am not sure if this that easy. >> mr. johnson? >> as long as we are putting this in the context of medium- term fiscal consolidation, the financial markets believe we have a credible plan for bringing down the deficit and controlling the debt. yes, i think there is ample scope for measures that would encourage short-term job creation, but i would caution against focusing only on that. my experience in europe tells you that country's who

previously thought they had an impeccable credit rating can come under market pressure more quickly. whatever you do, but it in terms of medium-term credible consolidation. >> mrs. olson? >> i think there is definitely some value in doing whatever we can to make the tax system more rational. something all of the lines of what you're talking may move in that direction. >> thank you, mr. chairman. >> thank you very much, mr. chairman. a thank you to you and german camp for doing what i hope will be more than just one meeting. congratulations. as we talk about all of this, and clearly we're having important discussions on tax reform, which clearly needs to happen -- how do we create

incentives for investment for american jobs? how do we create incentives for american families to be able to plan themselves and achieve important goals for their families, like home ownership, which as been under attack given what happened. the majority of families thought they were saving equity in their home and we saw what happened with the housing market and so on. it has been very difficult i think, for families on a number of fronts. there is another area in the code where we encourage people to save. that is to the pension protection act of 2006. i am wonder, dr. desai, if you might respond to the fact that congress has allowed firms to all to enroll employees into

and then allow employees to opt out if they desire. it was reported on earlier this week that while more people were not contributing to 41 k plans, many of them are making contributions that are less than what they otherwise would be with the typical 3% default. i wonder if you have suggestions on how we can improve this provision to encourage greater savings as we focus on pensions, which are another important part of economic security for families. >> i think you are absolutely right to turn the discussion toward savings. that is underneath it all one of the most important metrics we can measure our success by, given the history of the american citizenry in the last

couple of decades as being a good saver. you are also right to put your finger on pensions, which are an important piece of the savings picture. just briefly, one of the revolutions in economic of the past two decades has been over behavior of bias. when you force people -- not force -- would you give them that all options that allow that to save easily, that is an incredible device. i think in the design of pensions, paying attention to default provisions and paying attention to making it extremely easy for a person to save is a very important part of this. of course, one would be remiss without mentioning the broader point, which is the distortion to saving in the tax code that is primary and the opportunity for fundamental tax reform provides you with a bigger lever on that.

>> thank you very much. process, mr. chairman. >> mr. rangel is recognized for three minutes. >> thank you, chairman camp and chairman bacchus. i do not remember the meeting in 1940 -- [laughter] but i certainly welcome this meeting. not only do we have democrats and republicans blocking civil and acting civil like we had the house and senate coming together even though they are close by physically, people do not recognize how seldom we have a chance to see each other. this panel is extraordinary. i think all of us, especially our share, is excited about the possibility of tax reform. it takes this type of cooperation in order for us to move forward.

it takes a better understanding of equity and debt in order to develop a system that is fair and equitable. having said that, there is a big elephant in this room. it is called "debt ceiling." until we get that out of the way it will be impossible for us in a bipartisan way to deal with this very serious problem. everyone admits it is really damaging our economic growth by not having a fairer system with lower corporate rates and closing loopholes. having said that, i wonder, mr. chairman, if i would be out of order is by ticket vantage of the minds of our great panel here to ask them -- is there anyone here that sees any connection at all in terms of

increasing the debt ceiling as we had -- as we have 17 times to make sure our great nation pays our debt and the solution to the budget problem that we have, which, of course, involves revenue and cutbacks in spending? as people who understand these serious problems, is there anybody here who sees any connection between dealing with a reduction of our debt and authorizing the president to increase the debt ceiling? if you do, i wish you could share it with me in 30 seconds. having seen no response -- beeline >> mr. rangel, i hope this sets the stage for the debt ceiling negotiation. >> but you do not see any connection between increasing the debt ceiling and dealing with our serious problem with

the national debt do you? >> they are all important steps. >> i know that. everything is imported. but really, as a professional that has worked with the internal revenue and has served presidents in the past, do you see a connection between the two except for politics? >> i stayed there are imported policies that have to be addressed. you have to address them on the revenue side. it is very important to get our fiscal house in order across the board. >> if you do believe we can hold the question of debt, spending, and revenues with denying the president the opportunity to pay our debts internationally? you do see a connection? which administration did you serve under? >> president bush. >> ok. i have completed my questions.

>> senator nelson from florida. >> i am are afraid we will fritter away this opportunity to get tax reform done, but if we had our druthers, the senate committee has come out and said you could do 8 $4 trillion package and the $2 trillion of revenues could come from just eliminating 17% of the tax expenditures over the next decade, which amount to $14 trillion. if you were to whack 17% of those tax expenditures, where would you go first? >> i will start. i have written and testified previously about some loopholes, some of which might be characterized as tax expenditures that carry

interest. that is converting labor and come into capital gains. there are other examples, including some of the treatment of the estimates we talked about it for the banks used to just look -- used to exploit the debt equity. >> just briefly, i would say in general i am loath to characterize anything as a loophole. i think taxing of administrators know there is no free money hanging around. what is at play is policy choices. if you want to look at the tax expenditure side, my understanding is the big numbers

are born to be on housing. it destroyed to be on employer provided health insurance. people have written about these. they are sick of the get sources of revenue. but think the cygnet -- the employer deduction on health insurance is significant. that would be a place to look. housing is important, but i do not think it has to do with leverage in the financial crisis. the preference for all our housing is another place to look. >> excessive leverage in the financial sector. it is the very biggest banks as opposed to disproportionate risk in the system. this is completely existent -- consistent with the broader assessment of the right and the left. left.