eaglen. we'll also talk with marie johns from the small business administration. and we'll be joined by sarah binder from the brookings institution to look at how the proposed super committee to cut federal spending compares to other commissions appointed by congress and the president. host: good morning. it's friday, august 5, 2011. you're watching "washington journal." yesterday, everyone knows the dow in this country dropped by 513 points. the asian stock markets are tumbling this morning. fears the u.s. might be heading back into a recession and europe's debt crisis is worsening. and all eyes are on the new jobless numbers, which will be out at 8:30 eastern time this morning. amidst all this economic news, we're going to peg off a question asked by ezra klein in "the washington post" this morning, where will the recovery come from? we'd like to hear your thoughts on this. phone lines are open,

202-624-1115 for republicans. 202-624-1111 for democrats. independents, 202-624-0760. you can also send messages by facebook, twitter, and email. we look forward to your discussion on where will a recovery come from. good morning. friday morning. want to show you the full front page of "the washington post" if we can to show you their dramatic picture of what the stock market looked like yesterday with the headline, "markets plummet on global economic fears." neil irwin, who's been at this table many times, is on the phone with us this morning. he has the lead story, the u.s. stocks down 4.8%. american european crises fueling this cycle. mr. irwin, thanks for your time this morning. what do analysts say is behind the market plunge yesterday? guest: on some level, it's pretty simple. there's a loss of confidence that this u.s. economy is on

track and going to keep growing. there's simultaneously, you have, in europe, a crisis that's rapidly spiraling out of control and fears that the debt crisis has started in the smaller countries in europe like greece, ireland, and portugal, may be spreading to bigger countries, mainly spain and italy. take that together, and you have a recipe for fear and worry that the world economy is going to be in rough shape. host: and what is the source of the vicious cycle analysis? really, can you describe what people are seeing in that? guest: the thing is, these two things don't happen in a vacuum. this is weighing on u.s. businesses and likely to make u.s. companies more reluctant to expand and hire and that sort of thing. simultaneously, if the u.s. situation gets worse, european companies export a lot to the u.s. the financial markets are there, and our banks are exposed to europe, the european

banks are exposed to the u.s. so it really cuts both directions, and trouble in one place leads to the other. when you have trouble in both places, it becomes a vicious cycle. host: what is the impact of fear? guest: an economy functions on confidence, and ultimately there will not be jobs unless business people feel like it's worth investing in the future, hiring people, building a new factory, building a new store, hiring people to staff them. and when the future looks very uncertain or very risky or very nerve-racking, businesses hold back and don't do that. you know, the stock market is a lot of things, but you can also view it as kind of a real-time measure of that degree of confidence in the future. the kind of drops we saw yesterday, but over the last two weeks, one day we might not worry about it so much, but really, we've been on a steep decline over the last two weeks in the stock market, and that's worrisome. host: does that last comment suggest that the market reaction is actually logical,

given world events? guest: markets have their own internal logic that sometimes seems to make sense and sometimes doesn't. but the reality is, just the fact that this market decline has happened is worrisome. we're down about 10% since the high earlier in the year, so that's all americans who have holdings in the stock markets and their 401-k, wherever, their 10%, you have businesses that want to invest in large companies, go to the stock market and trade money. that money is 10% more expensive. so what you have is the stock market being down definitely affecting the ability of businesses, the willingen of individuals to spend money and invest. host: you heard in our open, we're going to use your colleague's column, which on the front page is called, where will the recovery come from? let me ask about you what tools washington might have to spur a recovery that they haven't use the thus far.

guest: one of the scary things about this situation right now, and one of the reasons the markets seem to have dropped since the debt ceiling deal was reached, is there's a realization that washington doesn't have great tools right now. back in 2008, we had this horrible downturn, this financial crisis, and at that time, washington had a lot of money to do fiscal stimulus. the federal reserve cut interest rates dramatically. they tried to prop up the economy. but, you know, some of those tools are now spent, and what we might see is if we do have a new recession, if we do have a economic down turn in the u.s., it's not clear where any kind of government support to try to stop it is going to come from. we already have this deficit spending at 10% of g.d.p. that we're talking about fiscal consolidation and reducing that budget deficit is expanding it. their main target interest rate is still zero. they are doing -- they already have -- trev trillions of dollars on their balance sheet, so if they can do more, it's

not clear how much that would help. we're in a different world than in 2008. host: the jobless numbers are due out at 8:30 eastern time. what are the expectations for those numbers? guest: the expectations among the forecasters who make a living predicting these things are pretty modest. they're expecting about 85,000 new jobs to have been created in july. they're expecting the unemployment rate to be about unchanged at 9.2%. the thing is, you know, if those predictions are right, even if the situation is a little better than they thought, that would be a good sign there might be a bounce back in the market, a little diminishishing, but it's a disappointing number. it's very weak job growth, even job losses last month. then all that drops, and this is going to be alive and well. host: neil irwin, who authored the lead story on yesterday's market plummet, thank you very much for being on the "washington journal" this morning. guest: thank you. host: as we mentioned, it's

ezra klein's column, also on the front page, the headline is, "where will the recovery come from"? he closes this way -- host: our question for you is when will a recovery come from? are you arguing for the fed to step in with more liquidity? are you arguing for debt reduction and a balanced budget as the key to this? would you like to see more stimulus and jobless programs from washington? let's hear what your thoughts are on where a recovery will come from. let's begin with a call from new orleans, louisiana. this is bobby, who is on our republican line. good morning, bobby. caller: good morning, susan. when i heard your question, i felt i needed to jump in here. where is the recovery coming from? you asked if it's coming from the fed, treasury, or where. it's going to come from the

pentagon. just as people probably wouldn't have imagined this nightmare arriving when they were back in the 1980's, i listened to cnba this morning, it's going to be another 1938 scenario. it's just a question of when. roosevelt didn't save us. world war ii and the production manufacturing for the war saved the united states. that's where the recovery is going to come. who will it somebody russia, china. i suppose that's for the pentagon to decide, but that's where your recovery is going to come from. host: so building weapons for customers outside the united states? caller: for the united states, as well as customers, that's a good question. a lot of our exports in 1938 we want abroad to help europe fight the war against the nazis and japanese, and it's going to be a similar scenario, i guess a little bit more ominous with the various weapons systems we have now, to put it mildly. but yes, ma'am, that's

unfortunately -- war is about money, production, jobs, manufacturing, a lot of little cowardly people are going to make a tremendous amount of money sitting back and laughing, the munitions makers. but that's where it's going to come from, susan, i'm sad to say. host: you're calling from new orleans. later on in the program, we'll talk about the debt deal, which does cut pentagon spending and also makes it part of the tool if the negotiatetors don't reach a compromise. next is a phone call from new town, connecticut. ruth is on the line, democrat. you're on the air. caller: good morning. thank you for taking my call. i think the previous caller was probably right in referencing 1938. we were on the road to recovery when everybody panicked and roosevelt pulled back, and just like what's happening today, the political system is so divisive, and it doesn't seem to be a way that our congress

is going to compromise. we need stimulus. i don't think we're going to get it. at 70 years old, i am very depressed. i have children and grandchildren, so it isn't for myself that i am worried about. i just don't see the united states in the position that it was in the 1950's, 1960's, 197 e's, 1980e's, ever returning, because our wonderful people who i think need term limits so that they're not quite so indebted to corporate money, anyway, i don't see them coming together to do the right thing. they were ready for the last how many months, talking about the debt ceiling. host: thank you. next up, bethesda, maryland. good morning, democrats line. caller: good morning. yeah, it's interesting. i think the guy who called in just before was right. all the people who made all that money on war and debts and the bush administration are going to start making money again. and for our republican friends,

if you're asking where is the recovery going to come from, well, obviously the job creators are going to bring all those jobs back from overseas, even g.e., who's making a killing, didn't pay any taxes. all those companies, didn't you know? they're going to bring all those jobs back because they're patriots. host: and reaction from american hero on twitter to our first caller. he writes that the common frightening myth that war fixed the great depression. next is a phone call from big sandy, texas. we ask, where will the recovery come from? this is scott, a republican. good morning. scoip good morning, -- caller: good morning, susan. it's the same answer that's been all along, taxation, regulation, and litigation. get the boot of government off of business' neck, and it will recover. obama has increased regulation. he wants to increase taxes. there's just no good business environment to do business in

this country anymore. the people who create jobs are sitting on the sideline, and they're going to continue to until this man either changes his man and sees the light or it quit listening to people like paul krugman, a socialist moron. what's wrong with the world and the world economy is socialism. it's government everywhere consuming way too much. host: scott from texas. here are two fixes from the parties in the papers this morning. "the wall street journal," obama reboots jobs plan. it says in this piece on friday, mr. obama is set to announce a plan to spur hiring of veterans just hours after new unemployment numbers are released. he plans a bus tour through the midwest and a separate trip to michigan, where he will visit an advanced battery factory to talk about economic growth. the white house believes its jobs ideas will spur economic growth which in turn will calm the markets. and from the republican side of the aisle and also in the "new

york times" today, republicans fresh from debt battle set sights on balanced budget amendment. there's this story -- house republicans feeling they have forced success figure cal victories are moving on to an even bigger challenges. host: back to your phone calls. where will a recovery come from? this is gloria, an independent in ashboro, north carolina. good morning, gloria. caller: good morning. i feel that a lot of this has been precipitated by all the wrangling that's been going on in washington. the two parties act like football teams, not adult men. a good deal of this unrest has been precipitated by their

foolish wrangling and talk. they've done nothing, and that's it. host: thank you, gloria. gloria's attitude is reflected in new polling numbers. the front page of "new york times," congress seem as top culprit in the debt debate. 82% in polls, michael cooper and megan c. brennan are the authors of this. a new "new york times"/cbs news poll, 82% of americans now disapprove of the way congress is handling its job, the most since "the times" first began asking the question in 1977. host: republicans compromised too little, the majority said. also, 72% disapproved of the way republicans in congress handled the negotiations, while

66% disapproved of the way democrats in congress handled the negotiations. and mr. obama in the poll, debt ceiling negotiations, 47% disapproved, 46% approved. where will a recovery come from? that's our question this morning. next is a call from collierville, tennessee. this is vivian. good morning, vivian, democrats line. caller: good morning. the first thing to start our country back to recovery is to get jobs back in america, the jobs for people working, they can pay their health insurance, their mortgages, their children's loans for school can help. the only thing republicans leaning on last year was jobs. they haven't created one job. the only situation for our country to wake up is america telling the rich economists to bring the jobs back to america. thank you very much. host: let me ask you a question. are you a supporter of free

trade? caller: in a way. one reason i'm saying, i never hear it, and i moved to tennessee. we had big factories here. everything started falling apart. we've been getting tainted products back from different countries, china, taiwan, vietnam, where cheap labor, it's all up to the rich companies to bring back these jobs. thank you very much. host: this reflects the fact that there's a green light. this is the "baltimore sun" this morning. senate leaders announced a breakthrough on trade agreements for south korea and other u.s. trading partners, promising flipped votes on one

of barack obama's top priorities after congress returns next month. asking, where will a recovery come from? fort wayne, indiana, is up next. this is don, a republican there. good morning, don. caller: good morning. the first thing i would do, i would eliminate the e.p.a. and anybody else who makes regulations in washington that is hurting our country. i would take and open up myanmar, drilling for oil. oil is what makes our country run and how our prices are fixed or whatever. i'd do something with the gulf. i'd put all of these on a permit on a fast track for everyone. and then i would build two new refineries, one in the colorado area, kansas, maybe one in ohio, one in the east, one in the west, and i would say that

they are owned by the people in this world that are having a hard time. but anyway, and i'd do it as fast as i could. >> thank you for your idea. from facebook, several comments. it will take a miracle, their comment. one says the private sector is where it will come from, not government. one says, end taxes and let everything be free. and it comes with the removal of uncertainty and confidence in the world markets. you can join us in this program with facebook as well. go to facebook.com and search for c-span. next is maricopa, arizona. this is steve, independent. you're on the air. caller: yes, i just wanted to make the comments, i think the recovery will come from jobs. host: but how do you stimulate jobs, steve? caller: well, what they tried to do around detroit, a lot of

autoworkers were being laid off. they had government programs that were giving them training in other fields of heating and air conditioning and things like that. i know a lot of people -- i totally believe in the free market system, but i think there's a lot of programs that the government could put out in the major metropolis cities or whatever that would help the unemployed people that don't have the skills to get certain jobs to help them along, to get skills. because with school being college and that being so expensive these days and things like that, i would do that. i would say medicare part b, i don't like that, because they're talking about cuts. i would actually get rid of that. i know bush signed that in, and

that helps the drug companies. since they can't negotiate prices, i think that's kind of crazy. congress and the house, they actually put down a bill a few months back or whatever that it would penalize u.s. companies for sending their jobs overseas. that's where i think the leadership with the congress that is there today, and i know that they get a lot of their funds from corporations and things like that, that they need to, you know, to get jobs back over here or whatever, that the lady before mentioned free trade. free trade is nice. however, as it sits right now, we don't have free trade. host: i'm going jump in. thanks so much.

many callers with very specific ideas on where a recovery will come from. we're asking you your thoughts on where a recovery will come from. front page of the "usa today", 17 states are planning to give shoppers a break on sales tax for school-related purchases this season. massachusetts and arkansas added a holiday for the first time, while illinois dropped its holiday this year. you can see the headline -- host: next is newport, rhode island. and this is eugene, republican. good morning, eugene. caller: how do you do? in 1980, i think we had 21 million manufacturing jobs. now we're down to 10 million, and we've had a gross national product more than double since 1980. so we've lost about 20 million

or 30 million manufacturing jobs. eventually, major corporations will employ more people abroad than they do here. a company just last week, g.e. announced they're going to spend billions of dollars in china and india, and even companies like google and so on, they're investing in india and china and korea. so the only way we can stop this, if we do some major overall of our system, like do away with our minimum wage, reduce our corporate taxes, do away with the 40e-hour week, and try and mitigate the power of unions. host: eugene, thank you for

your call. next up is dallas. this is katherine, a democrat there. go ahead, katherine. caller: good morning, susan. just give me a little time. i don't think we are -- i don't think there are any great solutions for the united states. the united states is the only country that has never fallen, but we're falling now due to the democrats don't have any backbone to stand up for what they believe in, due to the corporate companies. everybody say give them tax breaks. they've had tax breaks for 15 years. it has not bought anything. and like the other lady has said, you bring jobs back, but people say the free markets. now, all those people who wanted the tea parties and the republicans, look at these different states. even when the government sent money to those states, and i'm in texas, they took that money -- they decided to take their money that they give to help the people who pay their bills.

now, people are not working and people are not having any money to pay taxes. it's just like your bank account. if you don't have any money in your bank account, then how in the world are you going pay your bills? i just think we're doomed to fall, and all the people losing money in the 401-k. remember, america, be careful what ask you for. you ask for it, you got it. host: katherine from dallas. next is elise on to witter who writes, businesses need demand. big business is sitting on tons of money. they don't need more. patrick in portland, maine, sets an email about this, recovery will come from an almost overnight influx of private corporate investment, but not until congress trips the e.p.a. and the nlrb of their stranglehold on business and energy sectors. never to reduce the penalties on capitalism. the government can collapse the system. they can't save the system. next, phone call.

this is san diego, jim, independent. good morning, you're on. caller: good morning. i'd just like to say, as soon as the american people start looking at products that they bought instead of buying in america, it can force the corporations to come back to the united states, and then our jobs will start repaying. because when we keep on buying foreign products, those jobs are just going to keep on disappearing and keep going to china, poland, and next, wherever else. it's said we got to get all those jobs, but we're running out of money here. and this is disappearing. now, we have left into buying american-made products. i go out every day, and i

search and buy made in the u.s.a. i bought some carrots the other day. the guy tried to sell me something, goodyear tires, but they were made overseas. no, no, no, it must be made in the united states. so he sold me some dunlaps. host: thanks for your call. next up, cleveland. darryl, republican with the answer to the question, where will the recovery come from? you're on. caller: yes, how you doing? basically, this is simple, and they should figure it out. it's about consumption. you can't have massive government and massive debt in the global economy with cheap labor. 50% that have money is going to be spread out overseas, but americans will have to pay back a billion dollars plus interest, so that's just going to build up debt versus, say,

40 or 50 years ago when you put a billion dollars out there and maybe 80% to 90% stayed in america and the rest went overseas. so you have to do two things. you have to, one, reduce the scope and size of government. you have to have a small government, not massive debt. and number two, we to spur the economy. so what you need to do is have a $50 billion -- say $50 billion, just throw out a number, have it be a clean bill with no pork, no pet projects, doesn't go to multinational corporations or multinational banks. that goes directly to small community banks and credit unions with the stipulation that 85% to 90% that have money goes directly to small business, homeowners, and people in the community. this way you spur consumption and demand, and the people who are sitting on the sideline,

the corporate money sitting on the sideline will begin to invest more because there's demand. and at the same time, you're reducing the scope and size of government. it's like bill clinton said, he really understood the global economy and what's come up with free trade when he said the era of big government is over. because you can't have massive government and massive debt and the global economy with cheap labor. host: all right, darryl. thank you so much for your call from cleveland. wanted to show enthuse story on the front page of the "wall street journal." bank of new york mellon on thursday took the extraordinary step of telling large clients it will charge them to hold cash. the unusual move means that some u.s. depositors will have to keep big -- excuse me, will have to pay to keep big chunks of money in the bank, marking a stark new phase of the long-running global financial crisis.

host: let me show you the editorial page of the "wall street journal" for their perspective on that story. they write, their lead he had to recall called the global rout, they write this -- host: next is a call from new haven, connecticut. chris is a democrat there. caller: hi, susan. thanks for taking my call. i think that the solution has got to come from the american people. i think it's pretty obvious that congress's solution to it

is ruining our economy, just overnight practically. i think that america makes basically two products, ways to kill people and culture. and ways to kill people, i'm not real fond of. but culture, i'm real fond of. and we make the debt most popular culture in the world. why aren't we selling this product? i mean, the only people that we can sell the debt to who kill their own people. thank you. host: georgia, pete, republican there. pete, you're on. good morning. caller: the earlier caller, i think he was from texas, had it right. i would like to ask and say taxation, regulation, and litigation equals strangulation . we have to get government off the backs of free enterprise. the democratic socialists and power, they honestly feel to

their core that they're the solution, that they can manipulate the markets and manipulate the economic world and fine tune it, and all they do is drive us deeper and deeper and deeper into peril. they don't understand the free system. they demonize corporations for making profits. they just hate the word rich. and they will never, ever change. so the only recovery will be to sweep them out of the office and get people who believe in free enterprise and profits that put people to work. host: thank you. there's been a deal in the f.a.a. impasse. it's on the front page of "the washington post" this morning. f.a.a. to receive temporary funding, whether federal workers will get any back pay is unknown. it ends, the stalemate that cost federal workers almost two weeks of pay also short-changed the treasury of more than $300

million and those airline ticket taxes. the senate is in today in a brief session, and there's some expectation that they will deal with this f.a.a. using the house legislation passed earlier. let me go next on this question about recovery to twitter, who writes, no recovery without consumer confidence. no consumer confidence without jobs. no jobs without government intervention. forget debt, hire now. opposite point of view from bob in florida, who sends us this email. it was our own government spurred by the g.o.p. that let the oil companies gouge us, let the credit card companies deny us, denied affordable healthcare and allowed rampant fraud, and they wonder why we have nothing left to spend on anything unnecessary. next is a telephone call. earnest, good morning to you. independent out there. caller: good morning to you. how you doing this morning?

host: great, thanks. caller: i think it's a no-brainer, or no-boehner, whichever way you want to look at it. the people are stiffening up their backs and that caused problems in the government. they're creating a lot of problems for everybody else. i think that it's a no-brainer that all these taxes are 99% of them come from the working man's paycheck. and if you don't have people working, you're not going to have taxes. so the more people you can put to work, the more money will be in our coffer and the better off america's going to be. thank you for your time this morning. host: thanks for calling. next, shirley is watching us in texas. shirley, do you have a prescription for the recovery? where will it come from? caller: well, for the average american, wages have been stagnant from 1987, so the average american has already been in a slump for years and

years and years. and what we need is hope. we thought we got that with obama, and we did, but still, everything we hear from the other side of the aisle who are holding us hostage is to take things away from us. nobody is locking after the people of this country. and they're getting depressed. not just economically, but we're giving up hope. we're giving up hope. you're going to have to get off our backs. and it's not government regulations doing that. it's people telling us that we have to live on nothing, that we have taken from the government and not given to the government. that's a bunch of bull. i wish there was some way we could get rip of republicans.

host: thanks for call. on facebook, through capitalism is the only way to fix this. you can tax a corporation and small businesses, but they will only raise prices or lay off workers. below that, chad reid posted this, stop spending more revenue than is brought in. the same rules that apply to anyone that needs to get their financial house in order. and ronald also on facebook, the best way for a recovery is through the government to get out of the way, period. we have 10 more minutes until we take this question, and our next guest will be here for a version of this. it's going to be on defense spending and how it might fare in the special committee being set up by congress. and until then, we're asking you, where will a recovery come from? new york, the fact that businesses passed on costs and the price of their products to

take them out of employees in the form of lower wages is irrefutable. that said, the congress and president can create an environment for significant jobs by eliminating the corporate income tax. next is a phone call from oklahoma city. don, republican. good morning. caller: good morning. i think the easiest thing to say is we need to rework our tax system. it's become so ridiculously complicated. we can't do anything with it. and we need to rework our social security system and medicare. they've made it too easy for too young of a people to get on it. we're living to our heat aids. we don't need to retire at 65 and live off the government dole. we need to get all the social programs reorganized. y'all have a good day. host: thanks, don. "the washington post" is

reporting that some of the fixes being proposed by the white house here in washington as job creation measures include tax credits for hiring new workers, renewing tax credits for wind power, allowing fannie mae and freddie mac to rent foreclosed properties, and spending more money on school construction and renovation. those are some of the ideas percolating here in washington, d.c. what are your ideas? next is a call from ontario, california. what's on your mind? caller: i just wanted to say that we've tried the republican way the last 15 years, and the democratic president passed nafta, and nafta has a country. so we need fair trade, not free trade, and we need to tax those corporations that are taking jobs overseas, which was voted

down by the republicans. i think we need to pay close attention to what our congress is doing to our country and hold them accountable at the next election. we cannot afford to keep on the same path with reduced government and the revenue we need to run our country and expect that things are going to get better. host: thanks, stephanie, and thanks for watching in california at this early hour. on facebook, it's going to take some time to recover from the mess the g.o.p. party put us in. some people think president obama has a magic wound and everything is going to go back to normal. wake up, america. this is not the movies. and next phone call is from laurel, maryland. richard, independent, you're on. good morning. caller: yes, thank you very much. my comment is regarding the question itself as to where

will the recovery come from. and the world recovery, of course, is getting back something that you had before. and that seems almost impossible for certain classes of people who are more dependent on manufacturing jobs, which is shut down and the other part of the question is where. my concern is not where, but when. i mean, it's 2 1/2 years since barack obama took over, and it's 30, 40 years -- this crisis was 30 or 40 years in a gradual, contrived manner. so the other thing is what you show this morning. it is a very dramatic description of a 10% drop.

if you figure that 100% is what it was before. the jobs are 10%, and the graph makes it look like it went off the page. so 10e% of 100 is 90% less, but the graph is deceiving. however, we need to buckle up the seat belt and ride it on out. thank you. host: thank you. that's richard in laurel, maryland, in the washington suburbs. about 10 more minutes left. next is a phone call from texas. mike is a republican there. good morning. caller: good morning. i listen to t. bone pickens and turner, i believe it's on c-span about three, four weeks ago, and they were talking about the oil field.

we used to drill our own oil. i took care of a wife and five kids off the oil field. what i'm saying is if we opened up our own drilling in this country, because we've got enough oil left for 350 years, gas especially, that would employ at least 500,000 people. easy in this industry. and they also brought up the fact that 329 callers on natural gas in europe equals to one 18-wheeler, as well as a diesel truck as far as polluting the air is concerned. and this is running cars on natural gas. plus, playing the hero just recently of democratic

congressman out of florida says she didn't want any pipelines coming from canada because it might blow up. pickens saying that he tracked 3,500 wells in the united states and never had a blowout. i worked in the oil field for 20 years and never had a blowout because we cared about what we were doing. host: mike from texas is arguing energy is the way for a recovery. we have just a couple of more calls. let me show you two comments on facebook that are opposed to one another. matt, considering that the global economy has been volatile since the attacks on the world trade center on september 11, 2001, i fear there may be no recovery. and right below that, it was volatile before 9/11. people have such little memories. and beach boy on twitter tweets, recovery could come from the green revolution and progress or war and regression,

going back to oil gas, coal, and nuclear. green bay, wisconsin, next caller. paul on the where will a recovery come from. paul, you're on. good morning. caller: good morning. i think what we can do to immediately affect the job growth is to cut federal taxes on all manufacturing plants to zero, and we will be get a movement in employment, and that's the simplest thing i can say this morning. host: ok, paul, thanks for watching. lets me give you a tour of of some of the editorial pages. there's much to fear in fear itself. central banks can only delay market price adjust ams. behind that "new york times" lead editorial, it's not necessary or good for the economy, and now is a political hand grenade.

from "the wall street journal," weak dollar, weak economy. by choosing to pay nearly nothing, the fed discourages thrift and encourages income growth. beside that, how big government hurt the average joe. and continuing with some of the editorial comments this morning , in the "new york times" business day, learning to live with debt. debt can kill, but you can't live without it. and finally, "the washington post" economy and business section, as the global economy nears the end of its strength, time to brace for the pain. we're asking you, where will a recovery come from? next call is from orange county, california. leo is a democrat there. caller: good morning, susan. thanks for taking my call. one thing that i want to do, i've worked construction all my life, and there's one thing that i can say is, when you put -- you put back into the infrastructure, what you get out is not only in wages, but

employers. this is fix it up, pipeline, schools, all of this stuff, and the worker does make a decent page. for all these people that don't want the government involved in their business, what i would suggest is don't accept help when we've had tornadoes, the floods, all of these other things that we've had within the country. and wait around until these rich people that have put the money in the park without even drawing interest, just so they won't put it back into building in america. they have such loyalty to you, working people, that they won't even invest the money into america so that they can get people working.

so i tell you what, what we have in america is a bunch of uneducated people that are on fox news. thank you very much, and i appreciate you taking my call. host: last call on this topic is from north port. where do you think a recovery will come from? caller: good morning, susan. there's a lot of good compliments coming from the call there's make sense, but washington seems to be averse to common sense. i think the question should have been shortened to, will a recovery from? i don't believe we're going to have a recovery. host: so what's the future look like to you, john? caller: i think our economy has been dealt a mortal wound by corruption in congress, the regime in the white house, and wall street. it's washington's failure to make the necessary cuts in spending and our monk russ

debt. i think there is no possibility of recovery, and america is, unfortunately, probably seen our last days. i mean, this has been a crisis in the making for the last 100 years. host: so this is the new normal? are you expecting things to get worse? caller: oh, i think things are going to get a whole lot worse. host: leaving us on a down note there, but the conversation will continue, if you'd like to pursue this topic, on the facebook page. you are welcome there and continue to post your comments at facebook.com/cspan. here's the table. we are going to continue our conversation with different guests this morning. in just a while, we'll talk about small business and the recovery. marie johns, the deputy administrator of the small business administration, will be here to tell us how they're hoping to spur small business for their part in a recovery. but next, mackenzie eaglen will be here, talking about defense cuts under the special committee that's being

organized by congress and the debt negotiations. >> the house of representatives has been off eight weeks this year, including this week. did you get eight weeks of vacation this year? because i sure didn't. >> on her nightly tv show, alyona minkovski tries to take a slightly irref represent view on the u.s. >> we're willing to step outside the box, figure out how to make tv news exciting and entertaining and informative again rather than, i'm sorry, but like i said, the garbage that it's really dwindled down to be. >> she'll talk about her network and her show, sunday night on c-span's "q&a." >> am i not surprised? good things come in two. there's c-span with live coverage of the house. live coverage of the senate on

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or we must die. >> vote for president johnson on november 3. >> this weekend, a look at the history of political campaign ads with l.s.u. professor robert mann, also former homicide detective james lavell oath day jack ruby killed the man under his protection, lee harvey oswald, and former speech writers for president nixon reveal how his messages were crafted and communicated. american history tv on c-span3. get the complete schedule at c-span.org/history. "washington journal" continues. host: on this friday morning, meet mackenzie eaglen from the heritage foundation, a specialist on defense spending. we're going to talk about the cuts already agreed to in the negotiations and what the prospects are for the debt hammer of the special committee and what it says, what happened to defense spending if no

agreement is reached with them. thanks for being here this morning. i want to start -- because yesterday, the pentagon was the top civilian and the top military leaders had a press conference to talk about the pentagon spending and the debt. let's listen to secretary panetta, and then we'll come back and learn about what's been said and their reaction to it. >> because we are a nation at war, we face a broad and growing range of security threats and challenges that our military must be prepared to confront. from terrorist networks to rogue nations that are making efforts to obtain a nuclear capability, to dealing with rising powers that always look at us to determine whether or not we will maintain a strong defense here and throughout the world.

it is that multitude of security challenges that makes me particularly concerned about the sequester mechanism that was contained in the debt ceiling agreement. this mechanism, the kind of doomsday mechanism that was built into the agreement, is designed so that it would only take effect if congress fails to enact further measures to reduce the deficit. but if it happened, and god willing that would want be the case, but if it did happen, it would result in a further round of very dangerous cuts across the board, defense cuts that i believe would do real damage to our security, our troops, and their families, and our military's ability to protect the nation. host: these are the headlines that came out of that yesterday

in the various papers, fighting for defense. in his second warning in as many days, leon panetta cited the continuing threat of terrorism as reasons not to exceed roughly $400 billion in cuts. below that, "the washington post," panetta warns against additional cuts in pentagon budget. a panel should look elsewhere, defense chief says. and in the "new york times", senate pleads for no more cuts, a suggestion to raise taxes or reduce entitlement programs. well, let's start with the first part, what we know, which is approximately $400 billion in cuts in the pentagon budget. what's really behind that number? guest: in april, president obama denounced his own budget that was pending on capitol hill that came over in february for 2012. he outlined a goal of $400 billion in defense cuts over 10 years. that's rough where will this debt ceiling legislation shakes out. the different baseline, the estimates, but they're comparable in terms of their long-term impact on the defense

budget and military spending priorities. the president chose $400 billion in his initial speech, because that is essentially what the previous secretary of defense had already taken out of the defense budget for various initiatives, as well as the money that he had given back to the white house before we even saw this budget. basically, the cuts of the last two years have already happened in defense, we're going see that same number applied for the next 10. host: so there's consensus on that number. it was an easy number to reach? guest: well, the last secretary made it look easy. part of that was internally trying to cut overhead and addressing bureaucratic inefficiency and other types of structural reform. the question is whether he's going to actually -- the new secretary is actually going to reap a lot of those savings. it's up in the air right now how much is actually going to be returned to the treasury versus how much just goes away as a result of you're thinking you're going to get more when you don't find out until it's over. host: does the drawdown in the

middle east account for that number? guest: they do not. the pentagon basically has two budget. you have a budget for the wars in iraq and afghanistan. it's about $120 billion this year. and then they have the base budget that funds the military of over two million people and everything they do around the world everywhere else. that's really your peacetime and future budget within the next generation for innovation and technology. that's the budget that's going to be affected, the base budget, as we call it. in the debt ceiling legislation, there was simply -- they were basically saying we will adjust the cap according to spending t. drops next year to $100 billion. we can expect that to be fully funded. host: so that's fungible, in other words? caller: i don't believe so, because it's a hard number. it's protectable. the pentagon is one of the few agencies that puts out a

five-year budget every year when they sent it over to capitol hill. we can already see what they were going to issue. we already know what the pentagon needs for next year. we already have the set of numbers that we can work from for this baseline. i guess in theory, there's wiggle room on the overseas war spending, but in my mind, it's a hard cut to debate. host: we will move on to talk about secretary panetta's fears about the trigger mechanism. let's get a differing point of view from this table earlier this week. gordon adams was here, former associate budget director for national security. and he was talking about these budget cuts and his perspective. let's listen in. >> it's quite obvious this is political rhetoric, but not analytical rhetoric. we have done this several times in the last 60 years, and we can do it now without it being armageddon. that being said, i don't expect

armageddon. i would expect, say, $500 billion over 10 years. now, you're talking about something like 8% or 9% of currently projected defense budget. it's been done in the past. it's been managed. we have a reasonable force at the end of it, and it's still globally dominant. i think what we're looking at is this whole debt and deficit is defense debate is caught in the dance of washington with a lot of rhetoric surrounding the choices people want to make and don't want to make. reasonable people are going to compromise. i'll tell you, they always compromise when they're doing budget at the level of a top line. there's not a department in government that cuts because it's done analytically, it cuts because a top-line negotiation is going on. same is true for defense. host: will you respond to him? guest: guest: well, gordon and i would absolutely agree that the pentagon is going to try to justify their strategy and chase the budget number to meet these goals. this was something that

congress plucked out of the air, partly probably of obama's speech that at the end of the day he's goinging to struggle about how they're going to live and work under these numbers and pose upon them, which is not what we would call a bottom-up review where you determine your budget based on your strategy by any means. i think that these cuts will have much more of an impact as gordon is predicting. ultimately what we could see, whether or not we have the trigger mechanism, the cuts could range from defense to very wide variables, but it could raise from $400 billion to almost a trillion dollars from just the base budget, which is really about $500 billion. and that's closer to 15% to 20% reduction in that funding account. that would be a military that book mentally books different. host: what is the ratio of production to savings? how does that work?

guest: well, the challenge is that the pentagon is running these kind of strategy and budget drills in parallel, and so, again, they're chasing these numbers, and there isn't a lot of time to give this great thought, so the confidence to do what we call salami signing. you give everybody a haircut. all of the services will apportioned appropriately. we've done that in the past. that's definitely the wrong way to going about this crusts. i certainly expect them to require more glasses. if it's managed too quickly or too poolt, it could be devastating. i don't think the secretary was overstating that yesterday. caller: someone who also argued for the federal revisiting of how we spend military dollars, the former assistant secretary of defense at the kennedy school. the right way to trim in the "new york times" this morning,

america can scale back military spending. he argues it's not enough to tinker with the defense budget deal, but also we we use the power. a smart strategy would depend on tailoring our foreign-policy to fit the clock that we have. guest: this is a fundamental foreign policy debate. you do not starved the military in the hopes day you will restrict the president's ability to do something overseas. deciding what america's role in the world is and what you want your military to do is a part of that. that is the conversation that i absolutely agree everyone should have. what we have seen with previous budget cuts in the 1990's is that reality does not change on

the ground. in fact, all three have added commitments? so the difference here from the 1990's is that we had the reagan build off to live off of. we don't have. we have an all volunteer force and they are worn out when. not just the people, but all of their stuff and equipment. host: let's move to the trigger mechanism and the deadline for this is a somewhere around thanksgiving. what will happen if no agreement is reached? guest: they need a simple majority approval from the committee. if they do not get that, the

trigger kicks n. the cuts are pretty dramatic and pretty immediate and they hit the department of defense and military the hardest and most quickly. security becomes a much smaller category of spending then this year. we exclude other agencies like veteran affairs and homeland security? -- and homeland security. the trigger is designed to be pulled? i really don't see a scenario in washington -- secretary leon panetta probably knows this better than anybody that there is a zero political will to take on federal entitlement reform. we have seen everyone's

positions become entrenched. i do not see any movement on tax hikes. this trigger is likely to happen which is concerning to him? -- to him. they are going to possibly overwhelmingly include defense cuts. we are probably looking at this kind of number, 800 or $900 billion over 10 years. host: our last guest this morning is a political science professor at george washington university and she has studied and written about these various extra committees and how they are structured functionally to work or not work. we will get her perspective on that. mackenzie eaglen is our guest, national security studies research fellow at the heritage foundation.

we are welcoming your calls, comments, and tweets. i'm going to start with a tweet this morning. guest: i think overhead and the bureaucracy that supports it is a great place to start looking. what i do not want to get this salami slice think where we start hacking away at all this equipment without looking at these harder choices to make. the department of defense is the single largest employer in america. that is active guard and reserves. we have over 700,000 civilians at dod. these are the kinds of help the

exercises that should result from these cuts. host: there has been a major move to outsource contract work. has it saved money? the guest: government is like a pendulum. one of your previous callers says america has a short attention span. what we saw in the 1990's was a great effort to save money by outsourcing. over the long term, it depends. if you are outsourcing and eliminating, that is different. it is better to eliminate functions as opposed to just simply outsourcing. what we have seen in this past decade is the pendulum swinging far back towards insourcing.

specifically on the acquisition part of the house. the majority of that is services, not actually hardware or equipment. we are seeing this major swing back towards insourcing when federal employees are under consideration because they are highly skilled and professionals. they are more senior government officials in washington. host: for mackenzie eaglen, first call is larry. good morning. caller: good morning. i think we should cut the military budget in half. i don't see no reason for this. we go all around the world killing people. we have no business in iraq or

afghanistan. the people of afghanistan -- another thing we need to do is -- in the 1980's, ron reagan called it star wars. we have been spending money for 40 years. we spent trillions of dollars on its. it is like throwing money down a black hole. we need to close down all of these bases and embassies. we need to get out of the business of war and get into the business of peace. we wonder why people hate us. host: i am going to jump in at that point. closing bases in europe. we are now experiencing some of the results of closing bases and europe. what about reviewing european

bases and freeing up continent space? guest: this is something that the last administration just completed. we are drawing down our forces in europe. on the ground forces side already. that number is now coming up again for scrutiny. it is under examination if that number need to come down even further. a lot of times, the host government shares the cost with the u.s. it is a stop on a global highway. it saves our military time if they are already over there or if they have a place to refuel. it saves lives in germany and other places. we use these to transit to other places around the world. to military is busy.

they are in a lot of places. counter-piracy in somalia, counter-terrorism in yemen, homeland defense, flood relief here in the u.s. every single day, guarding the border in arizona. doing a lot of things everywhere to protect americans. we are unlike any other country on earth. we have global interests and responsibilities. there are few places untouched by our interests and the need to protect them. by argue so long as our interests are there to protect them. host: talk about the level of troops and what their role is. guest: that has been an area where we have been drawing down

forces for a while. book should be cracked back open to look at if this is the right force mix at the time. it is not a stable place in the last five years. we are seeing a lot of provocative behavior from the north korean regime. various nuclear and military shows of force. i am concerned that if we are not there or do not have a physical presence, it will only provoke the north korean regime and teven more. host: this is a comment from joan who writes --

is that correct? guest: is roughly correct. what we have seen post 9/11 is exponential growth in the cost of compensating uniformed personnel. basically, if you look at the average per capita cost of the person in uniform on the active- duty side, about $150,000 per person per year, so it is a lot of money. we pay the military mostly in benefits of which is why it is so expensive. deferred income benefits are primarily retirement and health care, and education. the single largest driver is healthcare. just like we are seeing on a national scale, the explosive

growth in costs in the provision of health care, in the department of defense, the military is outpacing toward national problem by three times. there is no doubt that the department of defense provision of these types of benefits need to come under fundamental re- examination. host: next is jim from florida up. good morning. caller: good morning. thank you for taking my call. i appreciate you guys. mackenzie eaglen, i think you are a patriot. i served in the navy and served my country. i like the fact that you have "eagle" in your name. god forbid -- without the department of defense and our military, everything else would be a moot point. we could not protect anything else because we would not have a

country. i am concerned about that. i am not politically correct. -we have been infiltrated -- i think we have been infiltrated. i am really concerned about that and i hope we get better about that. i appreciate you and i am a real fan of the heritage foundation as well. host: this comment coming in from new mexico -- host: do you believe that the democrats want to destroy the military? guest: no, i do not believe that. government is about choices.

you have to make difficult choices. article 1 of the constitution says the primary responsibility of government is to provide for the common defense of the american people. it is a fundamental responsibility of the politicians here in washington. as a part of this at the ceiling debate, it is very disconnected from the budget. all the focus was on the discretionary side. i do not know about these -- i do not know enough about these programs to suggest how all of it would change. you could 0 out the defense budget and we have not solved any of america's the scope problems. so i do believe strongly that

economic and military security are mutually reinforcing. we need a strong economy to fund a strong defense, but you cannot cut defense in the hopes of saving the economy if you are perceived as a weak nation as a result. host: this writer on twitter -- guest: that is a good question. when we look at the pentagon budget, like i said, it is about $500 billion. $80 billion of that is foreign intelligence programs, most of which are classified. you can see how small the defense budget really is. if you have to pay 3 million people, that is a big portion of that budget. the rest is really research and development and equipment. but i think as part of the

defense cuts, i think the tweet raises an excellent point, that intelligence is not immune to contributing to reductions. host: michelle, good morning to you. caller: how much of the budget is used for foreign aid where we go into a country and pretend that it is a humanitarian task and then we build it up for the interests of america? don't you think it is time to bring america back to the global looking glass and bring all of our troops home to give them jobs here instead of working them to death for each soldier? thank you. host: this writer on twitter writes --

guest: it is a very small component of the federal budget. is about 1%. our military does a lot of military building capacity around the world. we work with foreign military and security partners to give them the types of skills or training or resources that they might need to basically avoid having to send u.s. forces later. it is designed to be a cost saver and strengthens our alliances around the world to decrease the threat of conflict. this is arguably a good thing. in terms of our allies doing more or protecting everybody, absolutely not. sea, air, space, and even cyberspace -- our government is responsible in making sure that

shipping lanes stay open every single day so free trade to move across the world and basically show up at a walmart where we have good competition and access to all types of things that we want on those shelves. at the end of the day, america needs to do this because it is in our economic interests as well. host: this twitter writer pickes up on that theme. guest: if you look at the federal budget, and i will go back to the numbers -- 19% of federal spending declining to almost 15 percent and. we are talking under one fifth of every taxpayer dollar coming and to fund defense. what does the government do for me?

the only thing i can think of the science building a house because of a mortgage and may be some student loans in college, the only thing that the government does for me is keep me safe. host: next is a florida, frank is a democrat. good morning. are you there? frank, we missed you, too bad. we are going to move on to north carolina, an independent. caller: i believe using the word defense is quite a misnomer. it is like our psyche has been changed to wear if we cut our $900 billion empire in any sort of fashion, that somehow hurts our defense. there is somewhat an

underground black ops or paid for by the cia and more going on in these countries. when people awakened to where one-fifth of their money is going, to kill the contents of thousands of civilians in other countries, want the people wake up and demand these cuts? guest: i am concerned that as a part of this a debt reduction is happening too fast in terms of defense cuts so we are not having a serious conversation about it like we need to. i think every federal program including everyone under the department of defense umbrella should come under scrutiny and examination and stand under their own merit. it seems only fair. i started out by saying this is

the third year of defense cuts. the challenge for me is it is not passing a small test when no other federal agency is doing that. gas, everything in defense needs to be examined from the ground up -- yes, everything in defense needs to be examined from the ground up. all of these types of difficult questions. host: of the washington post this week had an interesting point and counterpoint. wide defense spending should be cut. this morning, they have every bottle on that. -- they have eight rebuttal on that. -- a rebuttal on that. i am going to ask you to do the same. white defense spending should be cut.

-- why defense spending should be cut. he writes -- we spend more on defense than the remaining countries put together. us.ums it all up for guest: virtually everybody that can be deployed has been. that is how america has funded

its defense. you have to significantly ramp up spending during wartime because you cut it so deeply during peacetime. so, the budget growth that we have seen post 9/11 needed to happen because you are using your military at a breakneck pace. this was not an investment in the future. it was a much different defense budget growth. in terms of america's defense spending relative to the rest of the world, you also have to look at defense spending by other metrics, a percentage of the federal budget and how it has gone up in real dollars, and then as a percentage of the

overall american economy. defense spending is at an historic low. right about at 5% of our gdp spend on defense and military. during the cold war, it was significantly higher. i would argue in terms of the size of our economy, america is in the 20s. that is an interesting metric that does not often come up. host: we have about five or six minutes left with mackenzie eaglen. let's go to martinsburg, west virginia, next. carl is a republican. caller: i can remember when bill clinton did it to the cia. i just hope we do not cut

defense spending to the point that something and lot worse happens to this country. thank you. guest: i think you raise an excellent point. our military does not fight in wars to protect our interests here at home and us as citizens. they are also supposed to prevent conflict. they are not just supposed to be at the pointy end of the spear and kill people. they show and demonstrate so much strength and also have presence around the world. you have troops somewhere or ships sailing somewhere across the world as a show of force to prevent conflict from happening which ultimately does save money. when you start cutting defense too far or too fast, that is

exactly what can happen. you can invite conflict. you can create things that are unnecessary. president reagan had this vision of peace through strength. america never went to work because we were too strong. host: a number of tweets asking about corruption and fraud, money lost in iraq, money unaccounted for in the pentagon. can you talk about what the real scope of that is and what the pentagon is doing? guest: in the war budget, there has been a lot of mismanagement. i do not think anyone can dispute that. there was so much money that flowed so quickly. this was at the same time when families were using body armor

in iraq because they did not have the protection. budget went up so quickly to alleviate these problems. what we did see was a gross mismanagement and waste. thankfully, congress took notice. they worked to oversee a bigger provision of contracts and services in both of these countries. there is still a lot of work to do. i have seen congress take their eyes off the ball in this regard. there is a lot more that can be done. the military has the money that they can use for structural and government projects in these countries and also an area that is ready for scrutiny in terms of the department of defense being unable to pass a financial audit is a problem that everyone thinks in washington is a

headache. it has been decades since they have been able to do that. it is going to take a really great partnership with capitol hill to get this done. it has to get done. there is no way that congress and the military can say -- host: and our next call is from west haven, connecticut. caller: what i do not understand is the debt deal. you could do a good part of reduction of that with social security which is in deficit spending. people are living longer. that is true. are congress has taken -- our congress has taken $1.50 trillion out of social security trust fund which has no principal or interest.

the former president' george bush, $1.50 dragon was to cover the hole in social security. hen will plug it and teh start taking it again. host: let's move to alexandria, va., an independent. caller: i have two quick points. i have done 10 years in the marine corps i think it is a good thing that we are cutting the fat and little. we had too many people walking around especially overseas. to many contractors. these people wasting space and a lot of money. from a more academic perspective, i want to say that

when we talk about budget spending for the military, we tie everything back to the national security strategy. look at the president's approach to security. if we follow that along and read closely, you are seeing a nation-building type strategy where we are going to work on country's development and political development and economic development, and that is tied to our own security. when we involve ourselves with such massive programs that get into socially reconstructing other nations, this is where we do a lot of spending and where a lot of waste comes in. there are a lot more important things that america's interests are taking place. guest: thank you for calling. i appreciate your perspective. i think a lot in uniform would

shares that opinion. they think money could have been spent better or it was wasteful, and that is the input that capitol hill needs to hear as they help the department of defense figure out what to cut and what is right, what is wasteful and what not we should be doing. i agree with you that everything is supposed to be done in the defense realm. you size everything based on what the president's foreign- policy vision is. that is the appropriate way to do this. the challenge here is that defense budgets have been in front of strategy. these two are disconnected from the debate inside the beltway here in washington, and i wish it were not. i hope secretary leon panetta will be able to take a step

back and work with the hill on the exercises that you and i are highlighting. host: it is not possible to address the committee directly. in november deadline. thank you very much for being here this morning. mackenzie eaglen, national security studies research fellow at the heritage foundation. we are going to return to the economy during our next segment. we have the deputy administrator of the small business administration, marie johns. she will talk about helping to promote small business development at. we wanted to show you a bit of a washington moment. there were still a few hearings. yesterday, there was a committee on sudan. the congressmen from northern virginia frank wolf got very, very heated and emotional when he was discussing policy in

sudan. we thought we would share that with you. >> today, we honor a singular act of gallantry. as we near the 10th anniversary of the attacks that the thrust of our nation into war, this is an occasion to pay tribute to a soldier and a generation that has borne the burden of our security during a hard decade of sacrifice. i want to take you back to the circumstances that led to this day. it is may 26, 2008, in the remote east of afghanistan near the mountainous border of pakistan. helicopters carrying dozens of army rangers race over the rugged landscape. their target is an insurgent compound. the mission is higher risk, broad daylight, insurgents are

heavily armed. it is considered a risk worth taking because intelligence indicates a top al-qaeda commander is in the compound. soon, the helicopters touched down and are renters come under fire. within minutes, lee roy and another soldier are pushing ahead in a courtyard surrounded by high mud walls. that is when the enemy opens up with their ak-47's. lee roy is hit in both legs, but he summons the strength to lead the author richard to cover behind a chicken coop. he radios for support. he hurls a grenade at the enemy, giving cover to a third ranger. an enemy grenade exploded nearby, wounding lee roy's two

comrades. a second grenade lands, this time only a few feet away. and the human impulse would tell someone to turn away. that is what sergeant lee roy could have done. >> the house of representatives has been off eight weeks already this year. >> on her nightly tv show, a slightly more different you. >> we are willing to step out of the box and try something different to figure out how to make tv news exciting and entertaining and informative again rather than the garbage it has dwindled down to be. >> she will talk about her network and her show.

>> "washington journal" continues. host: that break did not work out quite the way we planned. if you are interested in the conversation on sudan, it is available on c-span possess of video library. we are back to the economy and the focus on small business. let me introduce you to marie johns, the deputy administrator of the small business administration. everybody this morning has been looking for this new jobless number to come out. employers added 117,000 jobs and the unemployment rate this month has dropped to 9.1%. guest: it is good news. i like to think it is good news that somehow based on the work that we have been doing at the small business administration -- we represent half of the zero economy and half of the people

working in our country today. 2 out of every three new private-sector jobs are created by small businesses. the agency has been working very hard to put the tools in the hands of small businesses. host: i pulled a number from the internet yesterday that looks at job creation by small businesses to give a snapshot of where we were. they said that in 1999, small business contributed 4.7 million jobs to the economy. in 2010, that number dropped to 2.5 million. that is a snapshot of the slowdown in job creation since the recession hit. what is behind that number? what with the impediments of small businesses? guest: it is important to set

some context related to the recession. the great recession was the worst economic downturn since the great depression, and all businesses were extremely hard hit. small businesses were hit at a more powerful rate and then larger businesses. what we have done following the recession when the recovery act was passed, that gave our agency to put more capital in the hands of small businesses because that is a large part of what small businesses need to grow to invest in their businesses and create jobs. they need a technical assistance that we provide. our programs are another important part of our approach to support small businesses. host: i am going to give you the phone numbers because we want you to get involved with us. we would like to hear small

business owners prospective. we will put those on the screen. we'd like to hear from you during this segment with mrs. marie johns. the guest: of the downturn was devastating, so we have been coming out of the worst downturn since the great depression. small businesses need access to capital, access to markets, technical assistance for their businesses to grow. as we have seen between the recovery act and the small business jobs act and the president obama signed, we have been able to put $42 billion of capital in the hands of small businesses. we are seeing the numbers coming back. job creation is on the upswing. the recovery has not been even.

we have been looking very carefully at where gaps persist in terms of access to capital and job creation. we have an emphasis at this time on underserved markets so small business owners whether a woman, a minority, a veteran, whether that business is in the rural area, that we are seeking those businesses out and connecting them with resources. host: the wall street journal has a story with this headline -- they write --

host: how can your administration help with that side? guest: that gets to the -- the counseling and technical assistance does speak to how to develop marketing plans. but the economy is not a model. is a very complex organism. that is why the good news about the jobs numbers is a good not only for small businesses but it is restoring confidence in the economy and causing people to make decisions that perhaps they were reluctant to do previously when they did not have a job. so the fact that we are growing jobs and the economy is getting stronger means that this issue will be addressed as well.

the economy has affected everyone in a very challenging way. that is why as we are working to bring more resources to small businesses, that is going to have a positive effect. host: a lot of talk on regulations and the effects on businesses. guest: before this appointment, i spent many years in telecommunications, so i know very personally the impact of regulation on business. the issue is balance. some regulation is important and appropriate. so what we are challenged to do is make sure we are finding the right level of regulation that makes sense but does not impede a business's ability to grow and create jobs. we have just completed a very of that eight-city tour

the president announced a few months ago. we went across the country to ask business owners what do you see as a regulatory burdens? where do you see opportunities for the government to address those burdens? we are taking that input and will soon be releasing a report. host: the first caller is paul from tennessee. good morning. what kind of business do you run? caller: i am looking to go into cable tv construction business. let me take a second -- i want to ask our guest is very important question. i do not hear anybody saying it. small businesses are taking the brunt of this president's reckless spending. let me ask this lady something.

the president came out saying social security people would not be getting their checks. we had $170 billion coming in. he said we did not have the money to pay that. he lied. there is $78 billion sitting on the books right now. that is not including what social security has. if my government tells me a line that they cannot pay their bills, tell me why i should invest in this economy and help get us out of this recession by starting a small business. guest: what i would ask you to do is recheck your information because this president has been very supportive for small business growth and job creation. president obama has signed into law 17 tax cuts for small

businesses. $42 billion was put in the hands of small businesses. we just recently announced the creation of 20 new micro lenders around the country that will have the opportunity to put $50 million and hands of small businesses. there are many, many important resources that would indicate that there has never been a better time to start a new small business. this is a challenging the economy. but this is an economy that the president inherited and is making so many moves to strengthen the opportunities of small businesses. if you want to starve the cable- tv company, you should visit one of our regional offices and we would be delighted to tell you about the tools that we have for you to start your own business.

host: at what point is a business considered small vs. large? guest: we have a definition of small business of being a business that has 500 employees or fewer. within that definition, the vast majority, 90 plus percent of businesses are 10 employees or less. certainly, the majority of the work that we do is focused on those companies, the smaller end of the spectrum, but we have to make sure that we are supporting those businesses that are small but have the potential for high growth because they are terrific job creators in this country. we have a broad mission because there is a number of examples of the small businesses. we pride ourselves on being able to customize our approach.

host: mary on twitter writes -- guest: we had a number of industries -- there are industry codes that we monitor and a review on a regular basis to determine the appropriate size standard to constitute a small business based on the industry sector. small-business in the aerospace engineering category is going to look different than a small business in a restaurant category. so that work is ongoing. what i would encourage the individual who post the comment to do is to continue to comment. we are constantly looking at

standards and regularly have those matters posted in the register. host: marie johns has some hoosier roots. then in washington, d.c., she served as the president of horizon in washington. -- verizon in washington. and managing member of the consulting firm before her appointment on the small business administration. let's take our next phone call. our next call is from brooklyn, chris is a republican. caller: thank you for taking my call. i have a comment but first i would like to correct one thing that seems to be always out there, and that is that president obama inherited this economy. he ran for president. host: can i stop you?

we have this debate about the overall direction. we are focusing on small business. caller: i personally do not think it is good to have a small business administration at all because we do not have a successful small businesses that have gone through them. we have entrepreneurs in america that start their own businesses that do not rely on the government. we could take all of that money and the political appointees, all of that spending would stop, and businesses would hook up with each other the way they always have. of the notion that you are getting a bureaucrat that knows more than a small business owner is silly bank the government does not create jobs.

so many people do not believe that small businesses are the answer. host: thank you very much. you worked in private industry. guest: the notion of being called a bureaucratic after 30 years in the private sector is interesting. what i would say to chris is i would love for him to travel with me and talk to the thousands of small business owners that i talk to around the country. i was recently in houston and a gentleman who came to this country as a dishwasher, fast forward some years later, now owns five restaurants in houston. he credits his success to the support that he got from the sba. now, he did the hard work and have the skill and business

acumen and it gives for running a good restaurant. we were there to provide him access to capital when that was not available anywhere else. there are countless stories like that of others who have benefited from sba programs and technical assistance that the agency provides to over 1 million entrepreneurs every year. chris is right that people start businesses in their garages and spare bedrooms. what the sba has shown is with the resources that we provide, it is the support that they often need in order to grow to create jobs that our country needs. host: how much money is allocated for small-business loans? guest: we have a budget of roughly $700 million.

we have our 7a and 504 loan programs. between the recovery act and the small business jobs act, that was roughly $42 billion in loan capacity for small businesses. the default rate varies. in terms of a general number, probably looking at 10% to 15%. host: does that number concern you quest toward i am looking at a return on investments. do you think that a taxpayer gets a good return on that investment? guest: absolutely i do. we are constantly looking at our risk portfolio, risk mitigation, because we want to make sure that we are being very careful steward of taxpayer dollars because i am not the only

business person at the sba. there are many of us who can with a private sector background and were recruited to the agency for that reason. we also have a mission that i think is crucial to make sure that businesses that have difficulty finding credit elsewhere -- many of the large banks left the small business lending market. they simply abandoned and that market. the fact that the sba can provide a government 74 loans helps banks and other lenders mitigate their risk and make the decision to provide capital that small businesses need in order to grow. host: greg, good morning. caller: thank you for taking my call. i operate a very small automotive repair shop. the state of vermont is very small. i believe that there are many

small businesses here in the state. i have gone on to sba's web site to try to find out access for capital to buy the property that i am currently operating on. as you already mentioned, i have tried to outsource banks here in my area and i am only able to get a commercial loan. i am trying to basically work out of my hip pocket. you had mentioned that the sba had moneys available currently to help out someone like myself. i set my dvr to record your information. when i go on to sba, there is so much information. last time i went on there, i just got so frustrated. i just gave up.

i am trying to keep my chin up. i employed a couple of people right now. the amount of money that i have going out for a lease, the bills for utilities, it is just incredible. if i could purchase this property, i could cut my expenses in half basically. what can you give me that are some interesting words? thank you. guest: thank you for calling. what i would urge you to do is there are two things. you can e-mail me and it would be happy to direct you, but if you go on the web site, you can easily be directed to the information that you need in your geographic area by inserting your zip code. we have relaunched our web site a few months ago and it is a vastly improved from our former

website because it is much more easily navigable. there is a lot of information on the web site, so the challenge has been to try to organize that information in a way that is easily digestible for a small business owner like yourself. go back on the website, give it one more try and insert your zip code. that will direct you to the office that is in your area in vermont, and that is the place to call to get information. that person can tell you about lending opportunities that are available in vermont. host: sba.gov is where you can find it on the internet. i have a chart of a monthly index of small business optimism. before the recession on a scale of 100 on 10 factors, small

business operators were given optimism of 91. trending in the wrong direction in june of this year, 91. i am wondering yesterday after the big drop in the stock market that the role of hope and optimism in the recovery. guest: they are very important elements because consumer confidence is really largely what underpins activity in the market. if you have optimism about with the economy is going, he will make a decision to take a long war by that durable goods, -- is going, you will make a decision to take a loan or buy that durable good.

we want to be in touch with small business owners, whether that is online, around the country, to talk to small businesses to make sure they understand that there are schools out there to help them. i have been struck by the fact that there is an awareness gap. i will a knowledge that and it is something i am working hard on. so many small businesses do not realize what resources are available. every time i have the opportunity to talk about those resources, the optimism is palatable. i can feel and know based on the input that i get that small business owners are happy to know about those tools. host: we talk about the role -- what is your experience inside government? thewe guest: llwell, government

is different from the private sector and there are challenges. at the agency, but there are many things that we would love to do. we have another overseer, congress, where we have to oftentimes rely on the legislative process in order to get the tools that we need to further improve the way that the agency operates. that is a gravity factor that we deal with. in the meantime, we are working very hard to make the agency run as effective as possible. the sba -- when our team came in, we decided that we wanted to focus on training, building a strong capacity within the agency, as well as focus on making loans and making the other resources available to small businesses. we are working on making some