yet a model, which is a routine business model, is that you do not distribute things that require a prescription unless you have been seen by a doctor. if there is an anthrax attack in new york, there are not enough doctors in the world to see the people that need to be seen. we could fix this in a week and then start the process of putting this out. that would be a great deterrent. it would tell the terrorist that, if i weapon is anthrax and distributed, the united states would be able to react and mitigate the harm instantly. >> apart from the fda, what is the most dangerous threat it to the united states? [laughter] >> id is not jeff goldberg. >> it is not jeff goldberg. if you worry about one thing, what is it? >> mumbai-style attacks, which require basically no technological expertise. some people with small arms to go out and just start shooting,

like what they did in cobble just yesterday. it just requires people who were willing -- it would be nadal hassan multiplied into several squads. the arms are readily available. and then you rely on our culture to produce the terror. what is remarkable is that, when you hear the parade of horribles, why has this not happened yet if it is so easy? this is an indicator of how great operation and sophistication therefore, they will probably start surmounting this to some degree because there are too many people in the world and a handful of adults will try to attack our systems and our culture. we need to harden our systems and harden our culture. we need to develop a culture of

resilience and resilience systems. the department of defense has not really reoriented itself from its system of defense. in some ways, the department of homeland security could become, in the coming years, as important in some ways and maybe even more important in some ways as the department of defense as the locus for defending our public systems. think about the value of an and tbs culture. the most -- of the hon ntsb culture. hundreds of people dying in airplane accidents. hundreds of catastrophic casualties. we know that a board will go out that will look hard at what happened, dispassionately analyzed it, very passionately, but conclusions, tweak the system, reduced the chances a

little more, and millions of people will get on airplanes the next morning. that is the culture of resilience. we need resilience systems and brazilian culture. >> we have to go to questions. we have not talk on the political plane. the common assumption is that pakistan has the biggest threat. they understand how the army operates. what would you fix -- how would you fix this problem if you could? if you were the president of the united states, what would you do to mitigate the damage that could be done to us by people in pakistan? >> first of all, we have to maintain our relationship with the state of pakistan.

it's endemic corruption is something we have to face up to. the core concern is india. they have fought several wars. they have lost them. they are worried that india is surrounding them by going into afghanistan. with their economic problems and corruption and their focus on india, it is pretty bleak. that said, it is in the interest of the united states to sustain that relationship in the best way that we can and have this collaborative arrangement. for the last 10 years, it has been very effective. comments were made about degrading al qaeda and the leadership. a large part, it was carried out as a result of that successful partnership. the defense minister in pakistan has ordered us out. so we will have to adjust to that. that is where the threat is.

>> when you were dhs secretary, how many of the threats you were dealing with emanated from pakistan? >> i would say the majority of the series wins came out of pakistan. >> what did you do about it? >> i agree with mike. they arrested people who were interested in getting bin laden. but mike is right. we lost about a decade with pakistan in the last century where we cut off dealing with them. there is a group of folks, young officers who would have come to the u.s. and trained and for relations, who did not come. i think we have two alternates and firmness, but we have to -- i think we have to alternate firmness, but we have two remaining gauge. >> the reddis site is from yemen

at this point. it has a -- the greater threat is from yemen at this point. it has a failing government. that is where these internet materials are developed. i put that as number one. they do not have nukes by pakistan, but they are eminently more dangerous to our homeland and pakistan. the hotel in kabul was the hub connie network. they have taken -- the hakani network. they have taken credit for that. it is located or training area is located just at the afghan border. very lethal operatives from this network go across the border and kill our troops. i am pretty pessimistic about our relationship with pakistan.

to think we have to work on it and i know we're doing this. if we have to take counter terror measures to protect our country, even if they are within the borders of pakistan, as we did with osama bin laden, when we see that there are groups there that intend to attack us. number one, the reset of the afghanistan policy by obama last week gives us more brain cells and resources to focus on pakistan. no. 2, there is the refocus by brandon yesterday that we have to focus on our home and from groups, whoever they may be. it is not a war on terror. it is a war on al qaeda and their affiliates who are intended to attack us. we will put the right resources against them. >> i agree with plan a. but i think you need a portfolio strategy. keep working with the pakistanis as best we can, hard as it is.

long story, complicated, read about it all the time. you need to keep plan a. it is not to think how we can tweak plan a. no one here knows enough to get into the technical details of that. but what is plan b? what is your hedging strategy? since no one has high confidence in plan a, if the times square attacks have succeeded and that truck bomb had gone off last year and killed 500 people in times square, my estimate is that it is a better than 50/50 chance that the united states would have lost a military attack in pakistan within the next week or two. the president would have been pressured to do so. the president told the pakistani government this. you do not want us to have to invade your country at scale.

so please try to manage your country. so what is your hedging strategy? you're hedging strategy has to be quiet if pakistan becomes a failed state? we have to plan now for what we do if the pakistani situation is not manageable internally, is not manageable internally with respect to their nuclear stockpile, with respect to it becoming a century for mutated versions of the islamist extremist groups that are attacking both the pakistani government and our interests in india in different ways, including the provocation of a india-pakistan war. that is a strategy of containment and isolation with the capability to conduct long- range strikes at selected targets into hostile and denied areas. plus, important international cooperation with the people that the pakistanis will still rely on as their friends, chiefly china and saudi arabia.

do think about what the hedging strategy should be if plan a fails. >> thank you. questions. raise your hand and there are some microphones right here. >> can we reverse this? what is the greatest threat to al qaeda at this point in time? is it the government's of pakistan and afghanistan, where they currently are? what is the greatest threat to al qaeda? >> i think there are two threats to health care right now. first, it is the air -- the arab spring and what has happened in the arab world. the unifying effect that existed some time ago, i think, has been destroyed. secondly, the primary leadership in the united states and going after a holding accountable the leadership in very determined

ways. it has taken a long time. it has cost a lot of money. we had to change laws. we had to develop operating procedures that were different. but that operation has been used to kill osama bin laden, for example. it is u.s. navy seals trained under title 10 as an element of the department of defense. they carried out that operation under title 50, commanded by the director of the cia. we had decreed the legal framework and so on. i think the determination of the united states and the persistence to see justice 10 years after the fact has been the greatest threat, in addition to this trend. >> if i could add to that, i think phil mentioned that al qaeda has killed more muslims than non-moslems. i think the muslim world is aware of it. the arab spring had nothing to do with al qaeda. the change that is occurring is

a bottom-up change by people who actually want freedom. they do not want to go back to the seventh century caliphate. secondly, the u.s. finally, and other countries, too, but i do not want to give obama a plug here, but that is to give them a narrative. we are not in a war against muslims. it is not that george bush did not make that clear or that obama did not make that clear, but it bombing in five different muslim countries can make that distorted. we are clarifying the fact that we are in a war against al qaeda and it is -- and its affiliates. what we stand for is something that is very appealing to younger people who are rising up and taking huge risks in tunisia and egypt and syria and bahrain and a number of other countries.

>> it is clear that we have become more sophisticated of the last decades on how al qaeda has become more sophisticated. are we fighting last year's war? >> we have mentioned those in the younger generation. i think the sophistication has a couple of respects. one has a delivered target into recruiting westerners and those who have clean records to be operatives. the second is through the internet, providing what appears to be at least some subset of the populating an appealing propaganda of what is going on with the visuals and modern technology and exploiting that. as the generation changes -- that is why i think that osama

bin laden may wind up in a way accelerating this process. we will see much more sophisticated and nimble organization. >> clearly, domestic and global airport screening and homeland security measures have been very successful in preventing another major attack. can the panel speak to what seems to be an open border with mexico and this constant flow of people coming in? while the majority of immigration is clearly here for work and improve quality of life, there has to be some percentage, 0.5%, 1%, a fraction of 1% that have a more mysterious intent with this country. what are we doing to deter terrorist activities from the southern border? >> first, i always get in trouble with my friends in canada. almost all of the terrorist come

over from a land border has been from canada, not mexico. some groups who emigrated to canada actually created recruiting pools for terrorism. we have problems with securing the border. it is a very difficult challenge. if you look at the southern border, is two thousand miles. we build 600 miles of fence. we increased to the patrols. unless we invest huge amounts of money, it will take time to continue to make it harder to get across. i used to argue that one hopeful thing would be comprehensive immigration reform with a temporary worker program. the pressure of that border would be funneled into a system of regulation.

no country in the world, other than a totalitarian country, has sealed its border entirely. >> i do not think that ceiling our borders is the right answer. letting students come here to study and permitting foreign terrorists to come here, obviously screening them in case they are terrorist affiliated, that makes sense. but we lose the ability to create these foreign ambassadors for the principles that we stand for. secondly, i think our near term threats are not from foreigners coming in here. it is from homegrown terrorists who are here and to have a clean record and are either radicalized on the internet or through their own travel go somewhere else and seek out training in these other countries. they are not invited to do this. they generate their own interest in this and go and learn

something. >> before we go there, i want to do with follow up on what he said. like you said, there is one flaw. there's this general notion among all right-thinking people that we should keep the says to students and they should come here and learn to -- we should give visas to students and they should come here and learn our principles and learn to like this. there are a dozen people who came here as students who were somehow immune to the charms of the united states. kusa.sa coos o >> but we can name a number people who have come here and have not fallen in love with united states. >> the most important ideologue for modern and islamist extremism is a fellow who

became radicalized by living in rural colorado in the late 1940's. when he returned to his native he developed this ideology in which the west was the source of all evil. it is true that someone can go to an american college and believe that the u.s. is full senate should be wiped from the face of the arts. -- is full of sinn and should be wiped from the face of the earth. you would not have that in charlottesville. [laughter] >> i had a friend who was a budweiser distributor. >> the phenomenon that happens -- and this is interesting to look at sociologically.

the whole notion that this is a problem of west versus islam -- this is a war within islam about different people who are learning to cope with this law modernity. there is a very radical fringe. it is mostly focused on local conditions they dislike and a majority of bad develops a global agenda. that agenda and that narrative became very powerful during the 1990's as a function of history. but a useful way of thinking about this from a historical point of comparison is that the last phenomenon that reminds me a lot of this was the large- scale growth of european- centered anarchism which reached its peak around 1880 and 1920. this was a source of enormous fear and terror. it killed six heads of state around the world, including a president of the united states,

william mckinley. self-radicalizing people inspired by ideologue's living in exile in london. mainly from germany, france, spain, italy, and russia, and immigrants from those countries coming to the united states throwing bombs in chicago and believing in the ideology of the east. who were these people? these were people who were deeply alienated by the turmoil of modernization in their harshly repressed places at home. they've were trying to bring down the system and trying to create a utopia that could never be. there is no chance that the idealized al qaeda telophase will ever be realized. it represents rage and dreams. what will eventually happen among that small group of people, many of whom are

expatriate's, they disassociate from the home community and then form an identity from this kind of extremism, expatriates' in madrid, the bombers in paris, or the guy in north carolina, who feels alienated because he cannot fit into that society there and he needs another identity that welcomes him. what happens to these people is they get channeled into other forms of alienation. in the case of anarchism and somewhat more ominously, it all morphs into much more dangerous movements that are able to tap into that rage and a dream and our in much more powerful and more organizational ways, like fascism did in the teens and 1920's. >> as someone who is sitting here becoming increasingly terrified and listening to this discussion on policy terms is a

fascinating and very energizing. on an individual basis -- and without meaning to sound silly -- it sometimes feels like the only way that me or him or her, the only way we can protect ourselves is to never leave the bathroom. if you never leave your bathroom, you will be fine. but you cannot do that and you have to go outside. on an individual basis, how can one addressed the kind of concerns that we are feeling? >> by the way, the bathroom is one of the most dangerous places in our world. [laughter] there are more slips and falls in the bathroom. then there is the kitchen. you need to move to karachi where it is safe. >> that is a serious question. it speaks to a certain failure among the political class and i will include me in it, even

though i am a recovering politician. i think it is easy politically to play the fear card. you get a lot of traction for that. if we have not done a good job on this panel of saying that there are threats out there -- and fill just put this whole thing in perspective -- and phil put this whole thing in perspective. we have to do it better job of helping the public to understand what it can do. phil use of the word "resilience." i don't know where your bathroom is and your bathtub, i am sure, is big, and you can hide out there. you can have a little kid at home and have your own form. we talked about this five years or six years ago about having a phone tree of how you can connect to your family members.

you can get that to happen. and you can think about this stuff and put it in some perspective. the israelis are attacked all the time. for now because they have taken preventive measures. but the people of israel understand that there are threats against their country, more than there are against our country. the way to defeat them is to not be terrorized. it is a state of mind. that is what terrorism is. if we have a plan to respond or a plan to prevent -- remember, it was two street vendors who figured out the times square plot. they saw a truck smoking and they called law enforcement. the law enforcement was spectacular in finding those guys quickly and unwrapping the plot and going against a lot of people. i am telling you that you are

stronger and, unfortunately, we, the government or by it, the former government member, have not giving you enough encouragement. >> jane, you make a very good point. it begs the question. this is a question we will see as we move towards september. do the last 10 years represent a massive overreaction on our part? we have spent trillions of dollars in response to the 9/11 attacks. >> but this may be the fundamental problem. i actually think that the message of this group is that things have gotten considerably better and there are still things we have to be concerned about. we have to adapt, but we have done quite a bit to make ourselves more secure. the media often frames this as either panic and hysteria or that the whole thing is overblown and there is no problem.

those are false choices. we are in the middle. there will be threats. we are good about managing them. we are not perfect. there will be some failures. the public, by and large, is more resilient than we give them credit. if there were a mumbai-style attack with guns, this country has experienced gun attacks before, including colorado. yet we have recovered from that. i do not think we will fall to pieces. i think we sometimes under serve ourselves by not doing what jane said, which is spending an hour to put together a plan and laying in some reasonable supplies in case we had a destruction of food or water, which you can get from a natural disaster or terrorist attack. we are somewhere in the center. there are real problems out there and we have to be concerned about some medium-to-

long term serious problems. but we do make progress and we have a lot of in a capacity as individual citizens -- a lot of nate capacity as individual citizens to take care of ourselves for a certain period of time. >> what i think we hear consistently from this group is that there is a series of choices. there is a core professionals out there who worry about these things, intelligent, law enforcement, homeland security, whatever some level of resources need to be dedicated to that kind of thinking and potential reactions. it is something that we need to keep side of. as an intelligence professional, my job was to detect a threat, what might be coming. we tend to think about that a

lot. we are very good at thinking about the last four or the last problem or the last issue. this think about the things we have to do in calibrated in a way that we can be safer and we can be the safest place in the world and with our level of resilience, we will indore. >> thank you for finally mentioning intelligence, which is our first line of defense in this issue against this threat. each of you have had critical roles. following 9/11, there was a flurry of activity. it is now 10 years later. some say it is time to revisit that, but that in order. things are a bit confused.

stovepipes still exist. i wonder if each of you could still give us a briefing on where you think intelligence needs to go from here. >> i think this is a great question to biggy back from. there was a 9/11 report and you should all read it. there were a lot of recommendations in that report and they have to do with a lot of the things you're talking about. from all of your perspective, talk about the recommendations from that report that have not been fulfilled and what you would do right now if you could to enact some of those recommendations. >> i will make a couple broad points.

i want to leave some key issues open to them. the key points i want to make is, number one, philosophical principles to keep in mind. yesterday, john brennan said that the president's highest duty is the safety of the mayor -- of the american people. wrong. that is wrong. it is to preserve the constitution. the reason security is important is because the greatest danger to the constitution is massive panic and insecurity. that is when there will be the

victory. the domestic foreign divide was bridge. it is so rich with -- is bridge without compromising our liberty. that needs to be sustained in a conscious effort. the last observation i will make about intelligence is this. there are a number of controversies on how this is managed. people have preconceptions should be managed. they just take their preconceptions. what they should do is analyze how well the community is managed by objective criteria. can you manage back office systems more effectively? admiral mcconnell did that

better than any in maximizing the management possibilities in cited the current law. he is well qualified to talk about whether or not we need to go further. all of the intel reform issues have been relatively easy. when we had these huge national security reforms between 47 and the early 1950's, a rapid succession of laws, it was not turmoil, it was because the defense budget was being radically cut. it was under terrific pressure. for the last 10 years, the budgets have been going steadily up. it is harder to get larger.

>> i think that the take down of osama bin laden goes to the navy seals but most should go to the intelligence operatives in our new intelligence system which was massively revised in 2004, which put together clues to find careers, to find a safe house, to predict with reasonable certainty that osama bin laden would be there. and then to enable those navy seals to understand in specific terms what they might find if they went to the area and surrounded and landed in that compound. that was a mass of intelligence excess and it would not have happened without the legislative reforms that came out after 9/11. the biggest failure in terms of

those reforms is congress. the biggest reform that has not been implemented is a reorganization of congress to revise the committee structure to be able to do the right kind of oversight to protect our constitution. it is important that belatedly that issue surfaces. i don't see any chance that that will be corrected soon. yesterday, in washington, we were talking about congress. i was not aware of this, the house appropriations committee has just reported a bill that requires the dien night to get specific authorization from congress every time he tries to move money between point a and. be and that undermines the joint command structure we set up in

the 2004 law. it will be to make sure that congress never in acts that. this system is beginning to succeed. >> we have to let jane go to work. >> i will not talk about intelligence, i think that jane has covered it. this was partly implemented. one of the key recommendations false documents are enabling people to travel. as part of a comprehensive set of reforms, we updated our passports. there was a requirement of a passport to cross a land border. the second was to strengthen the identification and the robustness of security for our drivers licenses. you will not belief the -- that

we had to move these recommendations forward. it was about 90% done under my tenure. and i was a constant struggle with members of congress who represented districts along the canadian border that felt there would be a negative economic impact even though i would say, yes, but if someone comes in from canada and is that if a bomb in new york city, that might not be a problem for your citizens but it is a problem for the people in new york city. this is an example of everyone agrees with the need not in my backyard and not my term of office role is a tremendous institutional obstacle. if, god forbid, we don't get it done, we will bitterly regret it. >> very quickly.

>> we are in an evolutionary process and and a point of decision. let me use the department of defense as my example. we established the department of defense and how we will operate in 1947. we argued about it for years and years. the congress caught frustrated. the bill was passed and then it would streamline. if forced join judy. -- if forced joint to bduty. she says all it takes is leadership. my response to that is that if that is all it took, you would have written a better law. >> i said 50% law, a 50%

leadership. >> we got 50% wall. >> i agree. >> this is 16 agencies. 15 of them work for a cabinet officer. the first focus of their job is to protect that officer's private if. the one organization that is not supporting it to the cabinet officers is the cia. the law says that the director of cia will report a through the dni. we are at a point where if working better, are we safe? not totally. are we safer? absolutely. secretary chertoff had to deal with 78 oversight committees. we are at a point in time where we are evolving and this question will come up again, do we want to have a more

streamlined intelligence community that is controlled by an authority and is accountable for its performance. already on the hill, a draft to say that the dni seeing a problem cannot move money from one point to another. it has to be micromanaged by congress. we have this debate, we will have another crisis, and then we will adjust. >> thank you to the panel. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> next, a speech by republican presidential candidate, texas congressman ron paul. after that, a form on the future of social security. then gov. ed rendell talks about

america's infrastructure needs. on "newsmakers," as american children head back to school, the education secretary talks about the state of the u.s. education system as well as wafers from the note child left behind law. "newsmakers" sunday at 10:00 a.m. and 6:00 p.m. eastern on c- span. texas congressman and republican presidential candidate was the key speaker at the florida liberty summit in orlando. he talked about the federal reserve monetary policy. the summit is hosted by the group campaigned for the body. ron paul finished the second place in the iowa straw poll. that was one percentage point behind the winner, michele bachmann. >> thank you.

thank you very much. thank you for coming and thank you for that very nice reception. i would like to think jack for the introduction. mark has some good organization skills. thank you for helping out. [applause] i wanted to make sure that we made this meeting because we have that vote last week and i wanted to make sure that you knew about the results. you might not have heard about it so i wanted to let you know how things came out. [applause] some day, when this momentum continues, which it is, the crowds are getting better, the

enthusiasm is getting louder, the country is coming our way. we will get some of those big interviews on sunday morning, who knows? [applause] it is great to be here and i would like to talk about what i talk about all the time and that is liberty. i want to address it in a certain way. generally speaking, i am sure you have been as i have been challenged over the years and that is that we then have the ticket believes that we believe sincerely in the constitution, they are strange ideas. they are out of the mainstream. there is something odd about them. i think the oddballs had been in control of this country wait too long. [applause]

the one issue i have talked about for a long time and motivated me even in the early years, me being involved in politics, how often now they say that this idea of commodity money, gold, and the constitution. how silly it was. i was reading something and i had to laugh a little bit. the person that was writing this said that, ron paul has interesting ideas about monetary policy but this is preindustrial. does he realize where this country is moving? what has happened in the past 40 years? we have been deindustrialize by this run away paper standard. money is very important.

of monetary policy is key. this is key for those who believe in the entitlement system because you have to finance it. it is key for those individuals that will finance wars overseas. this is a very very important issue. when you think about what has happened over the past 100 years, essentially, i have to check every morning exactly how much we have lost against gold. this is about 99% of the value of a 1913 dollar we have lost. then they want to say, this is a good system, purposefully the value in the currency? i would say after a hundred years, it is time that we should come to the conclusion and that is we don't need a central bank and we need to get rid of the federal reserve system as well. [applause]

when they tell you that this is a silly idea to think about old, how could anything be sillier than taking pieces of paper and writing numbers on them and having value? i think grade school kids can be taught something about money that they don't understand in washington. it is because they want it that way. they note serves the special interests and the interest of big government and big corporations, the military- industrial complex, the financiers, the bankers. they know they can make a lot of money getting all that money first. they know when they control money, they can also bail themselves out when necessary. that has to come to an end.

we need to do more about our middle-class. [applause] it is pretty bad when congress has the stimulus. this is a lot of money. this is minor compared to what the fed does. the fed believes that they should be able to do this and do it in secret. we had better audit the fed and find out exactly what they have been doing. [applause] they have been pumping around 15 trillion dollars these last four years. 1/3 of it went to foreign banks and foreign governments. this is such an outrage when the

people here this, they become outraged. more and more people are hearing it. the truth is that i am very surprised that we're this far along on delivering this message. four or five years ago, before the last campaign, no one knew how many people like you are out there that had already thought about it and knew about it. here, there was thousands and thousands. i believe there are millions of people who are now aware of what is going on. they argue the case that printing money is will -- real and we should do it for special interests. they mock the notion that we should follow the constitution. the constitution said that only gold and silver can be legal

tender. do cannot make bills of credit. they use the force of government and to stay with the legal tender laws, you must settle all of your contracts and use the only money which is paper money. if you are so eager and so uphold and think that you have the right because the constitution, you have the right to use gold and silver coins, even those that were minted by our government and still says legal tender and the constitution says they are legal tender, they can be arrested and put in prison with this and charged with counterfeiting the counterfeiting is only at the federal reserve. [applause]

this is an absolute economic fact plot by duplicating units of money with nothing behind the currency but just to duplicate paper money, there is no additional wealth put into the economy. all it does is dilute wealth and redistributes wealth. it is very well-known in the study of monetary history that when governments do this, they have been doing this for centuries. when they do it, it inevitably wipes out the middle class. mexico has gone through a we monitors asian and runaway inflation. germany did it, zimbabwe has senate. -- has done its. it has been done so many times. inevitably, the only way to restore confidence is always with real money. of course, when we do that, the

people have to believe the individuals doing it. if they announce tomorrow, if they said, we're going on the gold standard. it is safe. we will honor this. we will not change our foreign policy, we will not change our spending habits, our deficit, who would believe that? we had one example in our history where we did that and the people had a little bit more conviction about the country and what the government said and that was after civil war. they quit printing the greenbacks and they withdrew some. then, we did not have a welfare state. after three years, the price of gold went down dramatically. today, it is so different. to deal with the monetary issue, you have to deal with the role of government. more important thing is to have people in government from the

presidency on down, individuals that you can trust and understand and will not lie to you. [applause] as bad as it is in washington from the top down and as bad as this is that we have been taught by socialists, it is really the people's fault as anyone. we are not a challenge now. we are sick and tired of it all and we know it has to be done but we're still probably numerically in the minority because more than half of the people in the country have become dependent on the government and therefore any attempt to do it will make people angry. we have seen this in the states then have tried to correct thing. they're angry around the world.

they are very upset about what is happening and they don't quite understand it as the price of food is going up. they don't know that the world economic system and the monetary system is being manipulated by printing so much money. they are reacting to prices going up and therefore they act out. they are capable of doing this at the country's and in this country. the people -- they are capable of doing it in this country. the people have the appetite for big government. we have a large number of people. i meet them on the stages, they don't think we have enough wars going on. they think that we need more wars. thank goodness, we are breaking through. the people are with us on that. when you get the former secretary of defense, robert gates, finally goodman added that business and say, anyone who thinks we need another war needs their head examined. -- finally coming home and

getting out of that business and say, and even the things we need another war needs their head examined. [applause] if we allow those who find special reasons to wanting to keep our presence around the world, so many bases in so many countries with no real effort to bring these troops home. there was an announcement now that we're working on an agreement with the afghan government to stay because they are inviting us to stay until 2024. sure, sure. what do you think the odds are of leaving iraq? i think they're slim to none. until we get someone in office who will change the foreign- policy and bring the troops home. [applause]

sometimes little items stand up bigger than the trillions of dollars. it is hard to comprehend. there's one thing that went on in iraq that i think you can remember and it makes them look silly. why are they doing this? they decided after reconquered iraq, we had all of those people over there and we had to conquer them. we conquered them and we were at the green zone but we build an embassy in the green zone. this is the big -- this is as big as the vatican. they put authority, authorization, and funding for 17,000 people to be employed in the embassy in iraq and do you think they are planning on coming home? i would say this suggestion would be that if you will save that $1 billion, we should save it and put half into the deficit

reduction and put it into some program here at home where we can help some people have learned unfortunately to be so dependent on the government just to stay alive. i think that is a solution. if we would stop that money overseas and help people here at home and take those 17,000 jobs and make them here at home and not overseas. [applause] the one thing a president cannot do without congressional authority is that he should not go to war without this congres'' approval and have a declaration. the one thing a president can do and i would do is that i can and the wars that are undeclared and unconstitutional. [applause]

the commander in chief is and can charge of the military. he can direct the military. we can bring them home. they say, you want to bring them home too fast, you don't have enough time. when they want them, they can get them together and ship them over there pretty fast. why can't they ship them home pretty fast? [applause] this is not just in the war zones of the middle east but in the perpetual occupation of countries that we don't need to be occupying. that is south korea, japan, germany, all of these countries and the nearly 900 basis that we have. close them down, bring them home, and very quickly. if we pursue this, you will organize a military.

get them home. think how many people would be spending their wages here at home rather than in the german and japanese economy. bring that back. that would be like a stimulus. [applause] you do these debates. they give you 30 seconds. they took 40 years to mess this up and you're supposed to answer in 60 seconds about how to correct it. [applause] i can lift a few things in 60 seconds that would help a whole lot. have sound money, get rid of

deregulation, reduce the taxes, bring our troops home, and change our foreign policy. lo and behold, that to be very very helpful. repeal laws. it does take a while to get a consensus and have this happen. the most important thing you have to do to turn it around is you have to get rid of the mistakes and have been made. pricing in the free market is crucial. socialism cannot work because they don't have a free market pricing structure and it is impossible to work. he was right and it failed. jansenism, we fix the prices on one half of it. -- we fix the prices on half of it. this is all the distortions. you cannot get back to growth and did you get rid of the

extortion. you have to liquidate debt and you have to get rid of the bad investments. politically, that is difficult. when the crisis came in 2008, it was announced that everyone will suffer. there will be a the pressure on us there will be a depression. we gave billions and billions to the people who were making the money and the other people lost their homes. that did not work. but that was shifted from the wealthy to the poor. that has to change. what we should have been doing in 2008, which has been said by many economists, is when the crisis comes and someone is bankrupt, it you have stricter regulations, not weaker regulations. they say you have messed up, you go bankrupt, you don't go to the

people. [applause] in many ways, we have lost confidence in freedom in general and we have had a lot of confidence in understanding how these markets work. we have always been talked into saying there will be people that will need help and therefore we have to help them. when you do it their way, the cracks get bigger and more people fall through. the best way to take care of human need is to have a free society and free markets.

that will take care of the maximum number of people. [applause] they are always saying into charging us with not caring. if you sacrifice a little bit of liberty, let's say you help those that need -- it is wrong, because it is not morally right to steal from one group and give to another, regardless of what their needs are. economically, it does not work. when you help a little bit, a few people, you sacrifice 100% of the principal. you have endorsed a redistribution of wealth. that is a sort of like saying the income tax is not as bad as 1%.

1% and endorsing the principle that the government owns all european in come and allows you to only keep a certain percentage according to their dictations. that is why the income tax is the worst type of tax on a free society. [applause] i think so much about what we have done in these last decades has been undermining this principle of our personal liberty. so many have not understood where our liberties come from. they think it comes from the government. we were voting on something protecting the consumer. i said, why do you have to do this? why do you feel compelled to vote for this?

they have an attitude. they do not recognize it. we cannot are. -- argue that there would be no problems with ever freeze a pot -- society, they would just be minimalize. as soon as you do the government, you destroy the wealth, the free market, and the property rights. what we have done is we have undermined across the board this idea of who's like it is. the government assumes it is their money, and it is your life. we can draft 18-year-old to go off to war. young people still have to register. remind everybody, in case we need you, we will ship you off.

the most outrageous suggestion i hear. a famous liberal economist today, now talking about, arguing the case that war in depressions and recessions. that is a criminal bought. it is absolutely wrong. the depression ended with the second world war. because they hold off 16 million americans -- hauled off 60 million americans. this idea that when we get into trouble, we have a war that will stimulate the economy. it does not. it redirects the investment. businesspeople may make it.

this is a very dangerous philosophy based on the fact that the government thinks they own us and controls us. they do it in economics. what about the other sense? we should not have to give up any of our freedoms to provide security for ourselves. [applause] in a personal way, this attack

has been systematic for many years. it has been done with this ill- advised war on drugs. think about what they do in the name of regulating drugs. we have not gotten rid of the drugs, but our liberties have been gotten rid of. these swat teams are going into the wrong house is killing people. it is time we recognize it is your life. you cannot go and require other -- the government to take care of the when they do these dumb things. [applause] one thing that has always been hard for me to understand is our country is pretty good in

protecting religious freedom. there is less tolerance than there used to be, because of a phobias around on this. most americans say you have a right of no religion. we protect intellectual freedom as well, pretty well. when it comes to making your own decisions about what foods you eat, what you drink and smoke, your personal habits, there is a bunch of adair. the people say, when they are too dumb to protect themselves, -- we know what is best for them and will take care of them. it is insidious in the culture in this belief that there is -- you are needed at any stage to take care of us. the society i do not want is when the government controls us.

religious control or forcing us into these wars, that is what we do not need. we need to stand up and demand our freedoms. [applause] nobody will forget where they work on 9/11, 10 years ago. those were difficult times, especially for those of us trying to explain what 9/11 was all about. there was a fair amount of

legislation that came out. the first bill came to the floor to rectify the problem that existed was not to address foreign policy -- or asking questions, why do people commit suicide terrorism? where do these people actually come? they did not ask that. they said, what we still need to do is pass the patriot act. it makes no sense. i talked to one member of congress and said, why are you voting on this? he says, how can i not vote for the patriot act under these circumstances and explain it? i said, that is what your job is. [laughter] [applause] almost every bills in congress

and has something tied to it that is the exact opposite of what it does. if it had been properly named, it would be called, repeal the fourth amendment act. [applause] most likely, they would have had a difficult time passing that piece of legislation. how can attacking your freedom and initiating this attack on our privacy, search warrant, searches without a search warrants, why we are suspected terrorists without probable cause and treated that way? why you are involved in a monetary issue coming maybe a terrorist. the term is thrown around. how would paste -- passing the patriot back to make us safer

without understanding what is going on in the world. it is an attack on our personal liberties. that is why we continue to campaign for liberties. that is why the organization is so important, to change people's mind and the situation in washington. i am astounded at what has happened since the last campaign with the campaign for liberty going around the country. the people that ran for office -- i did not -- i do not think we counted it all, the amount of legislatures around the country. they are numerous. that is where the encouragement comes from. the ideas are alive and well. yes we have terrible problems, they have undermined our liberties. we still have some left. we still have the opportunity to select different people in washington. right now, we have a tremendous

opportunity. the evidence is crystal clear that the views of the last century, 70 years on foreign policy, the evidence is in. they have failed. our views are now appropriate to be put in place. [applause] we must remember that they cannot stop an idea that where the time has come. i believe our idea, our time has come a. -- has come off. -- has come. [applause] the country is waking up due to all of the evidence we see, the

political landscape is changing. they are desperately struggling for that one single candidate that will capture all of america and can represent the status quo. it does not look like they are finding one very easy, which opens up the door for us, i really believe it. [applause] the great strides have been made at the great -- grass roots of the tea party movement and the changes going on. this has been official. there is a good reason why the tea party movement has a rose. there is no one t party movement. -- tea party movement. i remember when it got started in 2007.

[applause] there was a necessity for people to stand up and tell it the way it is and speak out against this party system that we have. we have a single party system. think of how much does not change regardless of the party. monetary policy? entitlement change? foreign policy? no, they endure the same ideas and have been caught by the same people. the country is standing up in the singing, we can get their attention. we do not have the opportunity to do it in a third party. i am annoyed by the fact that we know one of the excuses for us has been to go overseas. i think it is a real stretch of their imagination. we are overseas to spread our goodness and democracy with the

point of a gun? we are killing a lot of people and we are spreading democracy in the world? at the same time, our democratic process where we can have different competing parties is virtually impossible. it is so difficult. i tried it once. i spent most of my money trying to get on ballots. it does not happen. there was a need in a vacuum. something had to be done. people finally got so incensed and a spontaneous movement. a few came over to join in get some of the benefits from the tea party movement. i think it is very healthy. our job is to help define the movement.

i think that is what campaign liberty has been doing and will continue to do. we know and understand what liberty means. we know it means personal liberty and a different monetary policy and a different economic policy. we take the oath of office very serious. this is where progress has been made. at the university, young people a lot of times represent any significant change. if the campuses were dead and totally uninterested in what we were doing, i would be very discouraged. today, this is where we get a lot of attention. this organization, it is an outgrowth -- [applause] it is an outgrowth of the campaign liberty. jeff has done an amazing job.

they are getting hundreds of organized individuals around on campuses. that is very significant. people now have access to so much more information. i struggle when i decided that -- i do not fully understand the information. i was trying to figure out the plain truth of these things. it was not easy. just as the desire to find it motivated to keep looking, no internet, if you did not get it from politicians or professors. you have to get it elsewhere. i get a lot of credit back in those years to have the foundation for economic education helped me. it was back in the day when there were so few people trying to keep it together. that was part of a remnant. there is always a remnant in

society that hold things together. we still do not know, where the remnant is, but it is a lot bigger than i ever dreamed it was. [applause] there were a few organizations, but they have blossomed and innovated the universities, the conventional universities. to this is magnificent, what is happening. this makes the big difference. the dissemination of information, whether it is political or educational information, it is through the internet. it is magnificent. it is a real cool.

[applause] there is reason for concern. i do not claim i know when things will happen. your dollar loses dalia -- but i think things will be much worthless next summer. i think the dollar is in a crisis. it is pervasive and around the world. all other countries use the dollar in their research. this will not be one country. it will not just be the united states. this is why people are rushing into something they can fully trust. even putting money in the bank does not help anymore, because they are thinking about charging you. a lot of money is floating

around, but nobody has any confidence. this week, we saw the consumer price index was going up. it is going up twice as fast as the government is telling you. housing prices continue -- housing sales continue to go down. if you look at the prices of houses the last few months, they have been creeping up. all things of real value -- there will be a need for those things. that is what is happening. we have the opportunity to use all of these issues, because the world is changing, the attitude is changing. there is a lot of room to be very optimistic about our opportunities. as bad as things are, it will not be easy.

much better off than we were five or 10 years ago. many of us were concerned at that time. the evidence was not in, but it is in now. they know these problems are here. we know we are better received because of this. freedom is the insert, bringing people together -- i feel so positive about the benefits of liberty. i do not shy away from someone saying yes i do not care about people. only a free society cares about people. that is what we have to convince people of. a free society is not judgmental. you may be judgmental in the sense that you know what is right and wrong. not in the sense that we want to

write a loss and spend money on what you should eat or how you should spend your money or if you should drink raw milk or not. we do not want to do that. [applause] i am convinced that it brings people together. this brings together those that consider themselves progressives or moderates were libertarians. they had bits and pieces of the freedom idea. there is no reason why we cannot work with people on the issues on which we agree. this is a way that people feel less threatened and will come together. i work well with any group in washington as anybody. you get a lot of support from progressives that are sick and

tired of obama's, constant wars and attacks on civil liberties. [applause] in a history of freedom, a rather young philosophy. authoritarianism is how do world -- how most of the world has lived throughout history. having dictators and things, we did have a good start. not a perfect constitution. a lot of shortcomings, but good compared to others. we recognize private property, contracts, self-reliance, and not a world umpire. we became the most prosperous nation in the history of the world. we are still very wealthy.

we destroy our production, got careless understanding with liberty was all about. our press the charity is very fragile, because we destroyed the foundation. it does not take a a whole lot to push the whole house down. the foundation is gone. we need to restore the principles of liberty. people became infatuated with the materialism. it is wonderful, perpetual, and and all we need is the government to redistribute it, and we forgot about all of the principles that produced the wealth. if we think we can do this by spending and deficits, will be printing money -- and printing money -- we have the people now coming with us and right now, the evidence is so clear that

government is failing around the world. the only question is what are they going to be replaced with a? are they going to go backwards? will we continue the process that has been slipping away from us? can we restore that and and get the people encouraged enough to say let us use the remaining freedoms that we have and promote this great country of ours once again? thanks very much. [applause] ♪nand ♪

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] --2011] ♪ ♪ "start a revolution" ♪ ♪ "volunteers of america." ♪ ♪ next a form on the future insolvency of security. then a governor talked about america's infrastructure needs. after that, a senate hearing on funding repairs to roads and bridges.

>> watch more video of the candidates. see with political reporters are saying. track the latest campaign contributions with c-span is website campaign 2012. it helps you navigate the political landscape with stricter feeds and updates from the -- twitter feeds an update from the candidates. all at c-span.org/campaign2012. [chimes] >> notice the color of the bourbon. this amber color that you see is

coming from the chart on the inside. it is where bourbon is all of its color and a lot of its flavor. currently they discovered over flavors just in the folk and the charge from the beryl. >> and next weekend we highlight frankfort, ky on book tv and american history tv. look for the history in literal life of the kentucky state capital. vice, violence, corruption, and urban renewal. kent masterson brown on the life of a cavalry soldier, and john porter. american history tv on c-span3 a visit to a distillery, one of four in operation during prohibition. the first tasted houses burned

to the ground. book tv and american history tv in frankfurt kentucky, next weekend on c-span2 and 3. >> next a discussion on the future of social security, with a former bush economists. the trustees latest report says the program will remain solvent until 2037. the association hosted the event. it is about one hour and a 10 minutes.

>> we begin this form to a salute to seniors. i believe you will benefit. baby boomers, and the younger generation, our grandchildren and great-grandchildren -- i believe you are in for a treat. before i turn it to the most distinguished panel we have assembled, allow me to make a couple of observations. as a young reporter when i worked in this very building -- so-so security was 76 years old sunday, august 14. it was passed by congress and signed into law by president roosevelt. the system experienced few growing pains. it was a healthy and vibrant

retirement benefit. after it got into its 50s and beyond, it started showing some wear and tear. who among us does not at age 76 or in my case, 75 facts i believe almost everyone agrees that some so security reform is needed. it is not political one upmanship. -- it has served seniors very well. it has kept millions of our most vulnerable out of poverty. my mother depended on her check. her sister would have celebrated her 99th birthday august 14. my cousin turned 76 this week. then one sister living in florida celebrates her 84th.

our national spokesperson and pat boone, is age 77. he is still singing at conserves. seniors have paid their dues. they are entitled to solutions not political pot shot. a system that started as a 2% tax on $3,000 worth of income has risen to a tax on over $600,000. to be sure, i did the math with an old-fashioned pencil. $5 a month back in 1935 is as much as $13,000 annually. that is $100 in change per month.

lower rates of birth means fewer workers paying in. living longer. as one observer put it, seniors no longer conveniently die at the age of 65. one congressman now almost 90, he states that he has been statistically dead for 25 years. that puts a big financial strain on the system. the first recipients is a perfect example of why the system is in some financial straits. she paid in less than $25 before retiring. instead of conveniently dying at age 55, this retired

schoolteacher live to 100 and saw her investment of $25 and was paid nearly $23,000 from social security. that is at 92,000 percent of return. a cleveland ohio man actually retired a day after the system came into law. he paid a nickel. he got one check that lasted 17%. that is a 340% return on his investment. >> the trust fund is the favorite cash cow of congress. two former senators, the

republican of pennsylvania held a press conference a few years ago. they said if private businesses did what we do in congress, stealing from this trust fund, they would be locked up for investment. the two people we are privileged to have with us have straight forward practical solutions. unfortunately, they often run into a political dump on capitol hill. perhaps seniors will no longer be used as political pawns. now to our distinguished panel.

dr. bernstein served as a chief economist and economic adviser to vice president joe biden. he was a member of president obama's economic team. he is also an executive director and a member of president obama's economic team. he was a senior economist at today policy institute here in washington. during the administration of president clinton, he worked with the u.s. department of labour. he has co-authored numerous books. he has been published extensively in various venues, the financial times and others. he is a commentator for cnbc and msnbc.com. he has an economics blog as well. he holds a ph.d. from columbia

university. here he is. [applause] >> a rousing applause. thank you very much. it is good to be here. i'm glad to be here talking about a favorite topic. a nice introduction. i like to find myself in the company of one of my favorite economist around town. the story i could tell about him is that when he was the director of the congressional budget office, he annoyed everybody equally. that is very important in this town. i give him a lot of credit. let me start with a set of principles. i might talk to you about 3 part thaw. principals, fax, and fiction. -- facts, and fixes.

these are the set of principles, ideas, that that my thinking, and i hope yours as well on social security. it has to be the goal of a civilized society in an advanced economy. it must be to a guaranteed pension, which is essential to meeting the goal. private plans that depend on stock-market returns can complement the basic guarantee, but they are simply not compatible with the goal of retirement security. private employers are providing ever fewer defined benefit plans. everything about the three legs of retirement security, pension, savings, social security, and i will argue with some of the points made in the introduction, i would argue that social security is the stronger of the three legged stool.

not because it is so strong it does not need fixing, because it does. those are the principles. here are a set of a fax that died my diagnosis of the problem and the prescription to help fix and maintain the this. the average benefits as jim pointed out are not overly generous. about $1,200 a month, $14,000 a year. that is the average benefit. those benefits are very important to people. i think it is commonly misunderstood. many do not know these facts. the importance benefits, even not at the generous levels, for more than half of elderly beneficiaries, for a quarter, it

provides nearly 90% of their income. the spending down of your savings, diminish probability of working, as you get older, it's -- the dependence on so security increases with age. the majority of a family income for two-thirds of the beneficiary and nearly all of the in camera for about one- third. -- in come for about one-third. if you were to take so security out of the picture, poverty rates among the elderly would jump to 45%. it is a huge poverty reduction program. let me move on to some of the budgetary points. my first is that the benefits are critically important. when i get it to fix this, i --

fixes, i will emphasize -- i am not one of the don't put everything on the table people. i am not saying that benefits are outside of the target. when we think about achieving sustainability in social security, we need to be mindful of the importance of those benefits to the beneficiaries. let's talk about the budgetary challenge. when you hear people talk about how the entitlement spending is sustainable, you hear a lot about that these days. it is true that entitlement spending is expected to increase from 10% gdp to 16% in 25 years. only 1 percent of that 6 percentage point increase is so security. that is not nothing. pressure on entitlement spending coming.

-- coming from the health care side. if you look at the projections over time, so security not only -- social security not only goes those 26% gdp by 2035, it stays at a 6%, while health-care entitlements continue to grow. it is based on demographic pressures and other pressures for health care costs. -- it is more so on cost pressures for health care costs. along with this entitlement pressure, we cannot afford to fix the social security shortfall. the 75-year shortfall amounts to about eight tenths of a percent of gdp. according to the most report --

most accurate report,eight tenths of a percent of gdp. that is just about equal to the revenue that you would achieve from the exploration at the high and bush tax cut. tax cuts.d bush when people argue that we cannot support social security, but we can afford those high in the tax cuts, i think that is a hypocritical and destructive argument. how is it that every advanced economy can afford this, but we cannot? what is so different about us? if you look at the countries of europe, their democratic pressures are more challenging than ours. yet, we are an international slacker. laggard/

. the average for the replacement of the average median income is about 40%. sick -- 60%. ours is about 40%. it is social security going broke? i think this has been a terrible mess information campaign, some -- miss , of the worst miss information i have seen. it is absolutely the case the full benefits can be paid through 2036, at which point the trust fund is exhausted. it may look like the benefits go to 0, but they do not. they are still coming into the system and the social security

could pay 75% of scheduled benefits. this is widely known to people in this room, but most people think out there that trust fund, that is all she wrote. that 75%, -- i think there should be a combination of tax increases. you can dress up those options any way you would like to. at the end of the day, that is what we are talking about. as you may have gotten from my part of the discussion as to how important benefits are to social security recipients, what a large share of they are to the large -- to the average retiree, i would rank benefit cuts as considerably less viable than revenue increases. i do not take them off of the table. here are some ideas. there is a long menu. those that do a good job at this have, -- i was going to name a few most commonly discussed in the debates.

the first is essential to gradually increase the maximum amount of earnings in which workers others pesos security taxes. they pay until it covers 90% of earnings. i think it is around 84% right now. historically, it has covered 90% of earnings. there is so much concentration, the share above that threshold has increased to about 16% in tens of more traditional at 10. you could close off 50 basis points. look at the consumer price index that is so commonly discussed these days.

it is basically a more accurate measure of prices. switching to that is almost on everyone's list, including the president. that is a benefit. sometimes newspaper reports get that wrong. it is relative to promised payroll benefits. i think it is a good idea. now you get into some of the ones that are more tricky and controversial. to reflect rising life expectancy rates to raise retirement ages due to longevity -- and that is -- too many people it is a very compelling idea. you heard correct assessments of them living longer. be aware of one thing.

i have this on my list of fixes. men retiring at age 65 has risen years in the top half of the income scale, but only one year in the bottom half. increased longevity has become a function of income and of lesser income men are not living that much longer than they did a generation ago. raising the eligibility age is not a slam dunk. we all are not living longer. those in the top half are and those in the bottom half are a little bit. i want to hear what the debt has to say. there are other ideas. we can talk more about those in q&a.

i want to add one idea on the table. i think doug might like it. it comes out of a budget plan. employee health-care benefits -- the health care benefits that employees -- employers provide for their employees are not taxed. in this will lend debt reduction plan, they came up with an idea that i think is interesting and has some appeal. economists -- week complained about this -- tended to worry about the extent to which this employer tax exclusion on health benefits extort the system in a lot of different ways. if you could apply the payroll

tax to the value -- maybe phase it in, it could take some of the cost pressure off of social security. it reduces almost half of the 75-year gap that the actuaries estimate. estimated growth of these fringe benefits, the increase in health-care costs, has put pressure on the health-care system. wages are taxed, non wages are not. this applies the payroll tax to some of the benefits in a gradual way. i used to write speeches for politicians.

america is the greatest country in the world. that is true. patriotism runs strong. what do you really mean by this? what makes us such a great country? in my view, ideas like social security, they provide security in respect to those that raised us and spend their lives helping to build our future. those are the ideas i think would maintain this program well into the future. thank you. [applause] >> thanks very much, dr. bernstein. the highe a comment on income and low income seniors. low income seniors suffer more on this heat wave we are having.

they cannot afford to turn on their air conditioning. that is a shame. more people die in heat waves then they do in freezing weather. please explain the trust fund to me. i still cannot explain it. it is coming across the bridge to the other day and one senator said i am drawing social security now. i do not know what it was about a -- about as not getting so security checks. we have a social security trust fund sitting there. i said, true. i was encouraged by that. you understand how much is in the trust fund. yes, over $2 trillion. not really anything in there.

the fact is, he almost ran off the bridge. what, there is no money in it? that is a sad commentary, but that is the trust fund. now i will turn to doug, who has a distinguished record as an academic, policy adviser, and a strategist. he was chief economist for president george w. bush in 2002 for the council of economic advisers. during 2007 and eight, he was with the investor of the

economic policy for the john mccain presidential campaign. [unintelligible] moved on to syracuse university from 1990-2001. he mistrusted professor of economics. chair of the department of economics. serves on the board of the tax foundation the floor is yours, douglas. [applause]

>> thanks jim. happy birthday to social security. i hope i make it to 76. i have three parts to my remarks. i want to talk about the five crucial decisions that one has to make regarding social security. once you make the list, you have an idea regarding the reforms. let me start with the problems. the financial condition of so security is what we hear about. there are many different numbers and metrics. it is easy to get completely baffled about what is going on. the simplest way to think about it is revenues about 5% gdp

benefits that have to come out, usually 4.5%. they are gone. they will rise to about 6.5% gdp. the revenues are here as far as the eye can see. you can add it up or do infinity and beyond and get different numbers. we have benefits that exceed what we can provide, and it has to be addressed. problems get lost inside of that that are important. there are different problems. the disability part about 17%. it often gets lost in this

discussion. anyone talking about social security must remember that reforms have to be done in conjunction with one another. second thing to remember is so security is powerful government policy. it affects how much we save and work. we should think about the economic incentives be representing people with regarding social security reform. it troubles me when we forget that this is such an important part of our economy. most people who look at the system have the conclusion that the minimum benefit is to love. when doing reforms in the face

of financial difficulties, step one is to make them worse. i think there is a universal agreement that this must be addressed. the key problems are problems among uncertainty. we're not here to talk politics. the fact that we do not fix so security and we have workers unsure about the nature of the deal they will have is a disservice to everyone. that is bad economics and a bad policy. we want it resolved as quickly as possible. they wanted to put it on solid footing. you have to decide where you're

going to be. how much are you going to do on the tax side and the benefit side. in the end, you have to make a decision about where you come down on that. it is the most politically charged of the decisions that one has to make in reforming social security. step two, is different but equally charged. what do you want to continue funding the practice of social security? do you want to move to a system -- make a decision about that and did dictate a lot about your ability to handle the financial problems of social security. the revenue coming in is not enough to cover the benefits going out. i pay for my own retirement and someone else pays for theirs.

how do you want the system to be? benefits and taxes to you want to be associated with this? -- you cannot make it a universal program by not providing it to the highest individual. that is the nature of the decision that you have to make. where you come down from net. probably no real political heat to there.

>> "washington journal" contins. host: on your screen is gov. ed rendell, former governor of pennsylvania, two-term governor and he is co-chaired of a group called building america's future. what is baf, governor grenll? guest: in january of 2008, gov. schwarzenegger, gov. bloomberg of new york city, and myself, started this organization dedicated to try to convince the country and the congress to do a long-term infrastructure revitalization program.

interestingly, at that time, almost every developed nation in the world had either undergone or was presently undergoing a decade-long infrastructure revitalization program. spending real dollars going infrastructure at scale, not only bolstering the short-term economy of the countries but the long-term economic competitiveness. our report that we release last monday was called "falling behind-falling apart." 20% of our roads are inferior. the site of engineers ranked our nation's infrastructure as a d and the roads and bridges d- minus. in 2005, the world economic forum -- world economic forum said we have the best interest of and the world and now we are 15th best. the air transport infrastructure

is 32nd best in the world behind countries like malaysia and panama. in ports, 22nd. we are falling apart and behind our competitor nations and by falling behind, it is going to cost our economy and our economic competitiveness in the long run. mayor bloomberg and i dedicated to try to convince the people as well as our legislates doors that we have to do something and do it very quickly and at a significant scale over the long term this nextecade. host: how much do we currently spend on transportation infrastructure -- and specifically when you talk about infrastructure, transportation infrastructure? guest: it is and it isn't. we talk about infrastructure and rebuilding it, we are talking about more than just transportation but talk about broadband, the electrical grid, the dams and levees.

a lot of things that go into infrastructure behind -- beyd transportation. but to answer the transportation question, the congress around four years ago -- there was the surface transportation reform commission and they found we spend $84 billion a year, state, local, federal, and a little private money, and infrastructure, transportation. they recommended that we needed to spend $220 billion a year, so at an increasef about 140 billion just for transportation infrastructure. at baf, we think everything put together -- school buildings, you name it -- we need to spend an additional $200 billion a year. host: ere would this $200 billion come from? guest: the good news it is not all federal money, by any means. a lot of it would come from the infrastructure bank the president has crectly talked about. if you fund it at $25 billion

or $30 billion it could boost $500 billion of private-sector funding. american had funds and investors are ready to invest in infrastructure because it's got a stable return. chinese funds are looking to invest an american and the structure, and european funds. so, we think the $500 billion figure is easily obtainable. secondly, state and local governments picked up out 45% to0% of the overall bill. thirdly, what i would do is, you know there is $1.40 trillion in taxes owed to the united states by foreign companies who are holding that money abroad. most of those countries want to repatriate -- they don't want to pay 34%. they are looking to pay 5%. 5% is too little. what i would do is have them bring it home at 15%, put all the money into our infrastructure program and that would produce another $220

billion. and if we spent $200 billion additional a year, this is the fact of people have to think about. according to every expert, including our own transportation department, $1 billion of infrastructure spending creates 25,000 jobs -- jobs at the roadside, waste water treatment facilities, t also jobs back at factories producing this deal, asphalt, concrete, the timber, that is necessary to do the things we need to do to repair and revitalize our infrastructure. so, if you do that, $0 million of additional spending -- $200 billion of additional spending would produce 5 million new jobs in 10 years and that is the single most important thing we can do to revive the american economy in the short run and in the long run to make it competitive niche -- competitive. i was listening to mark from idaho who was complaining about a lot of the first stimulus money being unspent, and in most

cases the money was spent and spent wisely. the president himself said it was a little slow getting off the mark. there is a solution. interestingly, when the governors, all 50, met with the president a month after he was elected, before he had become president, we met in philadelphia to talk about stimulus -- we all advocated strong infrastructure spending. the last stimulus did not spend nearly enough on infrastructure -- $69 billion out of $850 billion, 7%. it sondly, we urged the president to do something of use it or lose it. meaning, you gave the state a time period -- pennsylvania got a billion dollars. you say to pennsylvania if half of that money is not spent, if the job and hirings had not begun in four months, you lose that have. and if it is not done in 67 months, you lose that half.

and it gets transferred to states who are using their money quickly and effectively. use it lose it. it is amazing, if you tell a contractor i have a big contract for you -- that is the good news. the bad news is you got to get your bid in in one month as opposed to three and you cannot dillydally around. if you order that bid, you have to start working in two months, you would be surprised how fast the respond. host: the gas tax is 18.4%. in your view, should be raised? where does it currently go? guest: first of all, we don't think you can raise the gas tax right now just because the economy is so bad and it would be difficult. but we do believe over long run it should be raised. it should be raised by a significant level and we should index it to inflation. interestingly, peter, building america's future poll found that most americans think that the

gas tax is indexed to inflation. that it goes up automatical each and every year. it is not true. the gas tax has not gone up since 1993. there is virtually nothing that we do or spend money on in our society that has not gone up significantly in the last 18 years. and the gas tax -- when the economy gets better, it should be raised. it probablyhould be phased in over two or three years. but we do need to raise the gas tax -- again, in the short run. because a long run we have to find a better way to pay for transportation because cars will be using less gas, cars that aren't going to be running on gas at all and we estimate sure they are paying their fair share. but in the end, you have to pay. you get what you pay for. interestingly, people seem to look at infrastructure a little different from other spending. in the november election, november 2010, arguably the most anti-spending conseativ election we have had in my

lifetime, 64% of the infrastructure ballot referendums were approved by the voters. even though it meant either additional taxes, additional tolling or borrowing -- 64%, in red states as well as blue states. charleston, south carolina, the rightist -- reddish devoted to increase the taxes twice, once to revitalize the port of charleston which voters understood was so crucial to their well-being, and second, to help prepare a vital bridge -- repair a vital bridge that is important to the city's economy as well as the quality of life. we have not touched on how important infrastructure is to our quality of life and public safety. how many bridges have to collapse? , need levees have tbreak?

how many pipelines have to blow up before we get around to doing what we ought to be doing? host: it you would like to talk to former pennsylvania governor ed rendell, now head of building america's future about infrastructure spending and job creation -- you can also tweet in, of course, or an e-mail. on monday, president obama talked about one aspect of infrastructure spending that want to get your comment on. >> no one has been hit harder than construction workers. for us to say at a time when interest rates are low,

contractors begging for work, construction workers lining up to find jobs, let's rebuild america out and we could be reilding roads and bridges and parks all across america right now. [applause] to put hundreds of thousands of folks to work right now. there is a bill sitting in congress right now that would set up an infrastructure bank to get that movement. congress needs to move. host: i want to get your comment about the infrastructure bank proposal. guest: if we did infrastructure right, it is millions of jobs. the infrastructure bank is important. number one, it would make decisions on pjects of regionalnd national significance based on merit. not the old political system of

who has the most powerful congressman or senator. number two, it would access private sector dollars spending they want to come in and invest in american in for structure projects with there is a rate of return. number three, the president talks about capitalizing at $5 billion a year for the next five years at. that is important. that need to be participation to act as leverage. it is absolutely needed and necessary. the president should do it quickly but. i got a great person to head up the infrastructure bank. former senator george cohen of which was a former governor and mayor and knows about infrastructure. he is a big infrastructure advocate. host: the first call comes from

street louis, mississippi. curtis, you're on the air. caller: how are you doing? i am seeing some pretty good progress along interstate 10 from baton rouge to texas. i could not agree with you more .bout the bridges spendin it is starting to crack and crumble. it is the year 200011. we do not need to have four- interstates. they ought to be fixed by now. guest: you do not know how right you are spending between 1980 and 2006, the last year we had these statistics, the trucks and cars on the road increased by

103%, but our capacity increase by 84%. it is in street to keep doing what we are doing. i think republicans, independents, and even some tea party advocates know there is a difference between government spending that is not effective and investments in our long-term infrastructure. there is no question about it. i think the president can get infrastructure and some form of investment now to create jobs in that bill if everyone in the congress and the president himself is serious about deficit reduction. we need to get serious long-term deficit reduction are around the $4 trillion mark. we also have to raise a little bit of revenue. i do not think people think is right that corporations paid no

federal tax. we have to change that. in the short-term as well as the long tm, we have to invest in our future, things like infrastructure, research to create decent, american js. host: this tweet coming in to you -- guest: no, we are not. if we do the right things we have to do to reduce the deficit and cut spending, we can, at the same time, invest. every economist has looked at that. the simpson-bowles commission, the deficit reduction commission, alan simpson has said we have to invest because right now we may be out of money, but i do not think we are, but right now for the

average american, they are more interested in jobs and getting their brother in law back to work and getting their s on the payroll. that is what they are interested in. the most important thing for all of us to realize is we can do both. we can do enough investment right now to stimulate the economy and put people back to work. if we do deficit reduction this much. we can do both, and wshould do both. host: an independent from virginia. you are on with former pennsylvania governor ed rendell. caller: i really love pennsylvania. several years ago, i made a trip from abington up through altoona to niagara

falls. i went up 219. at that time,ou had to go through a 100 small towns. are you familiar with that area? guest: i gave a lot of state money and the appalachian regional money to build up and eliminate those bypasses, to build up 219 from the border all the way up to the new york state border. is a perfect example of a road that needs to be built, not just for our quality of life, but to make that region competitive. the state invested in buildings that road, and we are starting to do it. the interesting thing is i was accused in pennsylvania of being

a big spender. did spend money on infrastructure. today, pennsylvania has a 7.5% unemployment rate, almost two points lower than the national average. it is not an accident. caller: would you consider a toll road for 219? host: we will get an answer to that. are you a semi truck driver? caller: i am retired now pending i had a smaller truck. the towns were so close togethe it tehe speed limits so low, took forever to get up there. i did not seek nationally advertised restaurants or motels. host: are you in favor of toll roads? caller: yes, i wouldn't paid big time to not go through those

small towns with low speed limits. guest: you are absolutely right. you get when you pay for. you get it when you go shopping for a tv set, a washing machine, or a car. you spend $11,000 on a car, you are not going to get a car that runs at the same as a $20,000 car. if we want infrastructure for public safety and our economy, you build snificant 219. we tried to build id without tolls, but if you build a significant road, you will see the economic development grown- up all along that corridor. it would be great for business and the local pele as well. a toll is a small price to pay for that.

you can in fact get private dolls to invest to help you with the build out. that return on investment can come from tolls. host: i think all of us that live on the east coast have driven the pennsylvania turnpike at one point or another. where does the money go that is collected on that turnpike? guest: 100% of it goes back to the turnpike itself, a small part to administration. when i first became governor, the turnpike commission came to me and said we need to raise tolls. i said ok that sounds reasonable. what do you going to do with the toll money? 100% is going to go into fixing the turnpike up. the pennsylvania turnpike is the

oldest toll road in the country. so, i said, fine. how much do you want to raise it? 41%. they said, governor, that is what it would be i we raised it consistent to inflation since 1991. i got approval. a good seven-letters. -- i got seven negative letters. host: the next call comes from rhode island. the democrats' line. caller: it is such an honor to speak with you. i am a big fan and a supporter of infrastructure. if you could, i would like you to expand a little bit and speak to the importance of broadband,

particularly for economic development in small, rural communities like ours. i think it is really critical. guest: the president has said he wants 98% of america to be connected by broadband, and he is right. we are not close to that particularly in rural aas. we need to build out our broadband system. there are several ways to do that. the private sector -- i am a fan of the private sector bank the private sector goes where there are profits to be made. sometimes in rural areas, there are not enough customers to make a profit. there has to be a form of incentives for them to do it. there is no question. there is new technology. there is a company that is trying to use satellites to

brg us out broadband coverage to 98% of the country. the at&t t-mobile merger is supposedly at&t is going to use a part of the spectrum that t- mobile has useto build out its network. we need to bring broadband to virtually every part of this country. do you know what we also need, laura? we need high-speed rail. t everywhere in the country. we need in at least three corridors where i believed it would pay for itself. one is the california coastline. two, chicago. 3 is washington to boston. it averages 70 miles per hour. can you imagine if we had a high-speed rail line that

averaged 170 miles per hour? if you could get from washington to new york in an hour and 20 minutes? no one would take the shuttle any more. it would do wonders for our air transport system. americans that travel to asia and europe, people would come back to me and say what is wrong with us? why does spain have trains that go to hundred 20 miles per hour and there is nothing like that here? the chinese are spending billions of dollars a year to build out a high-speed rail network. host: ed rendell was the national committee chair in 2000. governor, the president has talked about this speech he would be given afterabor day

on jobs. what would be your advice? guest: heavy on infrastructure. use it or lose it. that is the way we could have the quickest impact. number two, do some infrastructure in long-term planning. most importantly at a, wrap the investment progr in a big package that calls for serious deficit reduction across the board. no sacred cows. some of the entitlement programs have to be looked at. you can do it over the long term. simpsobowles recommended changes in medicare and social security that did not go into effect until 2050. i would do it earlier than that because we need more of a significant impact.

if you put the jobs bill into significant deficit reduction where we raise revenue and close loopholes, i think everybody wants to see those loopholes closed. lets close them. a lot of unintentional damage to the country. there is revenue that needs to be raised as well as spending cuts that have to be made. if we do it all together in that speech, the president will captured the nation's imagination, look like a leader, and then is up tothe congress to do something that is going to put americans to work. host: would you like to clarify your comment about hillary clinton running in 2016? guest: the interviewer asked me if i thought hillary clinton would everun president again. i said possibly and probably in

2016. she is not going to run in 2012. i know from talking to her, she believes the president has done a good job. she also says she is not going to run again for any public office. i believe she is telling the truth circa 2011. i think those of us who care about her and think she would be a great president, we mightave a chance to persuade her to do so. host: mclean, va., bolivia is on the republican line. -- olivia is on the republicans blind. caller: i am glad you are on the station this morning. i have comments to make that i wish you would address. one is the boston fiasco where

they said they would spend $3 billion and it turned out to cost $15 billion and still growing. the idea is if you say you only have to spend $3 billion, people wi approve it and then just keep increasing th amount. it is standard operating procedure for construction companies. the second thing is i don't understand the infrastructure bank. i do believe in public-private partnerships, and i wish you would explain that further. also, i am so sad that you do not have some republins on your committee. i think you have some very strong democrats that understand the need, that there are republicans that do, too, and wish you would include some of your republican friends to join you in this effort.

guest: in fact, governor schwarzenegger who is a republican, mike bloomberg had become an independent by 2008, and i s the only democrat on the group. we have enlisted a lot of members. scott smith to the republican mayor of arizona -- he and i have authored several op ed piece is all around the country. we have a number of republican people who are part of building america's future. 1 very conservative republican has been a leader in preaching we ought to spend on infrastructure. there are republicans out there who get this issue, who get it loud and clear. it has to be bipartisan.

infrastructure has always been a big republican issue. the infrastructure bank is not for the ordinary road paving and bridge rebuilding. that money would still come through the federal transportation act and go out to the states by a formula. would determine how that money is spent just like it is normally. the infrastructure bank, the government money in there, that money would be used to write down interest on loans, maybe on a few rare occasions grants, but mostly loans. let's say we have a project -- michigan decides they need to build a whole new highway, but

they need up front money from the private sector. the infrastructure bank would find who in the private sector is interested in doing that, work with michigan to leverage investment, and the bank itself might long michigan money to pay down the interest rate on its bonds or help with the private- sector to put in the money necessary. let's say the private sector was willing to invest 80% of the cost, mich. 15% of the cost. the infrastructure bank would lower michigan the last five%. let's go to los angeles. voters voted to increase their sales tax by half a penny to do an incredible amount of infrastructure spending over the next 30 years. a leader on the infrastructure movement wants to spend that

money up front now, but he needs money up front. the infrastructure bank could loaned los angeles the money and get a repayment from additional sales tax. there are many different ways that the infrastructure bank could leverage private money with a little government money. the european union clones out money and it makes a slight return. with a loan that money way below interest rates what the normal loan would be. that helps enable projects to get off the dime. contractors do it all the time. in pennsylvania, we did it while i was governor. we could disqualify you for bidding on contracts if you had a pattn. you add constant ct over runs

by the time you were done. he would be disqualified from doing that. -- you would be disqualified from doing that. bid the get rid of them. host: we are talking to former pennsylvania governor ed rendell about infrastructure spending. he is co-chair of building america's future. next call comes from cape cod, mass., mike. caller: yes, governor, it is good to hear you speaking. i am a retired disabled veteran, and i agree with your high-speed rail system id. -- system idea. i find if you want to lower the interest rates on bonds in order to boost revenues for

infrastructure, you need to maybe consider temporary switching of the bond to gold system temporarily. it is going for $1,800 almost an ounce. guest: i do not know if that is legally feasible, but it would be a terrific idea. the caller reminded me one of the things i would do if we launched into this 10-year infrastructure revitalization program that creates 5 million new jobs, i would take a hunk of those jobs and make them available for our returning soldiers and sailors and marines from operation iraqi freedom and operation in during freedom in afghanistan. i was shocked to hear is that 30% of the returning veterans

from those two wars are unemployed. they would make excellent construction workers. we should have a special program where we train them and put them into these decent paying jobs. host: governor rendell, do you understand where the governors of ohio and florida were coming from when they said no to federal funds for high-speed rail? guest: again, i have not had a chance to speak to any of them. i know john k. sick from his ys in the congress. they must have decided that the benefit from high-speed rail in their states was oweighed by the costs that the states would have to come up with to match the program. without being on the ground

there, i cannot say if that analysis is right or wrong. they were alsofraid of cost overruns. what happens if it turns out to be three times x? that is the same concern debt gov. christie -- that gov. christie raised in new york. if that analysis is correct, you cannot arg with them. i think ohio would be a state where some high-speed rail would be very valuable. i think that would be true in parts of florida as well. i do not know the cost benefit analysis well eugh to comment on it. i would say that we should not build high-speed rail everywhere. there are places where we do not need a. in the three corridors that i

talked about, you can bet that we have the density and the potential ridership. can you imagine what a high- speed rail line at 180 miles per hour would make? host: leonard is on the democrats' line. caller: good morning. host: please go ahead with your comments. caller: i know that everybody talks about jobs, jobs, jobs. what they are talking about is people with college educations and going into computers and things like that. i am originally from massachusetts. what i was getting at is how about bringing back something from the roosevelt eraike the ccc and the wpa?

guest: first of all, again think the private sector can do most things better than the government. that i number one. number two, it would take the creation of a huge government bureaucracy to manage debt. number three, it would be slow getting up and running. and there are things that i think if i was doing a jobs bill -- i will give you a good example. we have to programs -- two programs. we hired mostly young people for one or two-year stints for those programs. they provide an incredibly important service. now, we could hire in that program almost 60,000 young people.

by the way, high school graduates are the single worst demographic whent comes to unemployment. 60,000 young people, $900 million. if we'd least that money -- we released that money, those young people would be on the job by december 1. earning money, providing a service. that is a government program that exists already. it could be used very quickly. and another thing that we could do quickly is fha, fannie mae and frede mac own 300,000 homes that are in foreclosure. most of them need work. the federal government is trying to sell as homes with no market. what they ought to do is hire workers through the private sector to get rid of those homes

quickly. t them out to rental. you can use those revenues to help us save it is significant amount of the cost fixing them up. we could put those workers to work in two months. there are a lot of things we can do. theransportation financing program -- there is 300 there is $3 billion that has been allocated that has not been awarded yet. let's get those sings out. that is 75,000 new, good paying jobs. let's get those things out tomorrow. there is a lot that the president can do. i hope the republicans and conservative democrats act responsibly for the country's well-being.

host: who is the biggest republican threat in the presidential race to president obama? guest: i think gernor mitt romney. that is a ticket that would appeal to many voters. theink they've are strongest candidates because they do not scare anybody. gov. rick perry has scared the bejabbers out of a lot of people. i am a mitch daniels fan. he and i used to testify before committees on the privatization of transportion assets. we almost

. .

?

so my question of you and whoever wants to answer it -- things have to be paid back. in a sense, there is a respected nature to this. on the one hand, nothing will happen if we do not have this

road almost done. it has been 40 years building it. it costs $25 a mile. that is now. on the other hand, if it is built, the world will open up in west virginia and that is not a casual statement. industries are moving at a rather rapid pace from the congestion of the washington, d.c. area into the eastern part of our state, which is where this would have the greatest impact. i am interested in how you would evaluate a project like that. it is not new york to boston, but in a state that is opening up. >> the way we would define and

enforce assure project is where is it combines social benefits with economic benefits. clearly, all over the long run, it should generate significant economic benefits. the question is how do those -- how does the private-sector debt -- get involved? how does that turn into a an opportunity for a return in investment? there are a host of ways that can happen. if it is realistic development or potential revenue strange or -- streams or investment opportunities that do not directly correlates to the actual road, that can develop a whole bunch of either jobs or other types of economic benefits. it is always very difficult when we see projects like that, too narrowly focused and say

that this route can generate this amount of tolls and therefore it is a good project. i think you have to look much more broadly. if it can generate benefits for the state and create other jobs and lots of other inherent benefits, therefore, we would define it as a very successful infrastructure project. >> to have ways of figuring out how large a that growth and development might be. you cannot do that out of the top of your hat. >> that is right. professionals at morgan stanley can be helpful in a peace to -- piece of that. there are people who specialize in quantifying economic benefits. those professionals can be very helpful to put a project like that in perspective. >> i have overrun my time. i will be back. senator hutchinson. >> thank you mr. chairman. the differences in the two bills that have been introduced,

a basic program and the other is a bank that would be more of a revolving loan fund that would require a revenue stream -- my question is would that make the difference in projects that would be put forward? also, would it attract more private sector leverage and funding if you have the bank concept with the revenue stream, as opposed to grants being involved? or do you think there could be cases where grants can be an enhancement? >> that is a good question. i think the important thing to

understand is that there is a need for funding sources for infrastructure. the infrastructure bank that are proposed around the eib model is a bank that makes loans and guarantees and seeks repayment. that does not mean that grants cannot continue. but the idea of an infrastructure bank, which could be used to supplement the chairman's particular project is the way of providing air level -- a level of capital, which will attract people like me as an equity provider and commercial banks to come on top of that to fund the project which could not otherwise be funded. you can see the infrastructure bank as an additional source of capital.

>> i do see a benefit of having grants in some form, as either part of the infrastructure banker separately through the tiger grant program. i think some projects require a piece of the project to be subsidized or supported with grants. once the project is built, the and the project can support itself. and a lot of cases, it is a matter of where the cost is such that you need to have a portion of it in grants to be able to overcome the overall capital requirements. >> thank you. >> let me build on that. i think it is a key distinction and a keyed identifier of differences. one thing i wanted to emphasize

-- in vision or what are believed that there will be any encroachment, this is completely and above and beyond a for. the infrastructure demands from the country -- grants will be needed. tiger and tfia will all be necessary. our bank is structured so as to really be above and beyond that. there is a $100 million limit for the project. it has to be $100 million or more. those are big projects.

there is also a set aside for rural communities. you go down to the $25 million level. they may not have the same kinds of projects. we want rule to be able to participate as much as other parts of the -- we want rural to be able to participate as much as other parts of the country. so there is a mix there. there is no competition with the grant program. given the political mood or climate of washington, there was a powerful feeling on both sides of the aisle, bipartisanly but -- that there's not a lot of stomach to create an apolitical department. there may be different administrations or different attitudes about it. the theory was to make it freestanding with its own set of rules, performing like a bank professional way, without the possibility politics getting

in the way. i think that gives greater comfort to the investor. i wanted to ask you if you would address that question. you put emphasis on "independent. " " i wonder if that is something that is of value to you as a private-sector investor as sonora to take your money. >> absolutely. the institution set up should be seen as something that supplements capital needed for infrastructure programs so the grants are another form of funding coming into the project. but to the basic structure would be very long term debt. i am talking about 40-year debt or even longer issued at a very low rate of interest.

maybe 25 basis points over were treasury can issue money. it is basically a very long term money. that makes it attractive for me, knowing that i can get equity people to come into a project which otherwise would not be feasible. kaulitz is determined has to be done by an independent -- how it is determined has to be done by an independent organization. the appointment must be agreed by congress, but all the applications that come in for the particular projects, whether it is a road in western virginia or a road in california or a road in texas, they can evaluate it from an end and a perspective and they can say this to search to -- this deserves the often need to take this amount of money for 50 years. >> as currently constructed, we

embrace water and energy. so it is energy, water, transportation. >> the project needs broader than transportation. all these things are potential. but where the bank puts its money has to be determined by congress. congress decides the policy of what to be put before the bank. but the individual projects, the sponsors, they will, they project with all the criteria. the bank would decide which ones are creditworthy. >> the adjustment on those skills are based on the revenue stream. >> part. -- correct.

that does not necessarily mean tolls. there is some sort of availability pavement, like used in florida for the miami-ford -- port tunnel. it does not always mean user- fee tolls. it could mean other structure put in place, along with one that is prepare for the west virginia in for sure project you're talking about. >> thank you, mr. chairman. i want to thank the witnesses for coming here today. i believe that we do need to take up the reauthorization bill so people can plan on ever structure in this country. i also want to get back to some basics in making those fortresses. with respect to this fun, do have a question.

and speaking of the national efforts structure bank and representing the public-private partnership, i can tell you that i think the people are very tired of valence. one issue that really leads to my mind in hearing -- tired of bailouts. one issue that really leads to my mind in this hearing is what if the project fails? what would happen if it overextends best bank? what metrics would be used to measure success? how can we assure taxpayers that this does not become another government entity that we end up bailing out that projects and we end up privatizing the profits while socializing the losses? >> that is a very good question. it gets into the debate that you all are having and that we

have had in the administration, whether you are locating it within federal agencies are making it separate, how independent the financial authorities are. the way we work with the credit programs at dot, essentially, congress grants as budget authority and the treasury determines the possible risk. if we give a hundred million dollars loan, then we will take $10 million and the treasury hold onto it. the treasury build up their reserves and that covers the cost of any projects the faltering. -- defaulting. we do a very careful financial analysis. it takes is a long time to do due diligence because we're the public sector. we want to make sure that the taxpayer dollars are protected. thus far, with the federal programs, we have had a good track record. but you are right, you have to design it so there is no risk to the taxpayer.

>> i think this is -- when i think about a project, for example, high-speed rail, why would they private sector to invest in that? can you help me understand what that would be a project you would want to invest in? >> and the florida high-speed rail project was being considered, we had lots of conversations with construction companies, private resources, those who were interested in being part of the project. but the assumption was that it would be structured in such a way that, when the project was first introduced, writer ship -- ridership may not cover the cost -- the operating costs. and ultimately, over time, it

probably would. it would need a bridge to make sure there were not operating losses that would need to be covered by the private sector over that time. there is an example where the availability payments have been used to try to smooth out that development. if it is structured appropriately, high-speed could work. but it is a much more difficult type project. they are dense area. >> if i remember correctly, and having looked at this, there really is only one place in the world where you have actually been able to break even with passenger fare and rail. this is an area where i would be concerned we are investing and we will have the private sector to join in and we would be on the hook for something. it is one of my concerns a in terms of getting back to basics transportation funding. in new hampshire, there are roads and bridges that need to be fixed.

we start allocating money elsewhere. this, to me, in terms of how we decide where the money is allocated, this is a very important issue, i would think, for the private sector on return investment. >> that is right. i highlighted transit because it is very difficult for transit projects to be able to demonstrate that the revenues from the fares does cover the operating cost and able to ensure that safety is not jeopardized. >> and our state and in many other states, local officials spend a tremendous amount of time trying to come up with an infrastructure plan based on local parties, state priorities. if we create -- local priorities, state priorities. how do we preserve the local feed back?

i think the people in new hampshire make better decisions on where to put the funding then someone in washington. that is one of my concerns. i wanted you to address that. >> first of all, to reiterate, i think these types of programs are to supplement regular highway and transit formula funds. this is not to replace that. i will give you the example of the tiger program, which is a hybrid of grants and loans been one thing we did that had never been done before, instead of just having state dot and transit agencies apply, we opened it up to all communities across the country. we got a flood of creative obligations at the local level. -- create applications at the local level. over haf the grants were to

local jurisdictions. one nice thing that an infrastructure bank can do is open up the door to all kinds of communities and different entities to apply. i think it can open the door to more local creativity. the ideas will come from the local level. but, it is true, the models we are discussing is that the decision making is here in washington. i do not think it is to supplant the bulk of the funding. >> i and stand it will be a supplement, but how do we know that it will not be washington's priorities versus the absolute need within that state as to make these decisions? >> i think that as part of the notions -- part of the negotiations that we will have, hopefully. i think we have done a pretty good job of decentralization. they have lots of the economy. we can strike the right balance. >> i want to thank all the witnesses for being here. >> excellent questioning. senator lautenberg. >> thank all of you for your presentations.

it does open up the subject of the private partnerships. it appears that there are a few other routes we're willing to take now that will get us going on our infrastructure problem. railways and runways keep our economy moving. but no one part of our infrastructure is so deficient. we look at a situation that

escapes' attention, in my view. in 30 years, our population grew by 100 million people. it is expected that the next 100 million will happen in shorter time. and the infrastructure was not built for the present population. you wonder how we will resolve it in the future. across the country, one-third of our roads are in poor condition. more than a quarter of our bridges are deficient. and our transit systems are outdated. in my homestead of new jersey, we can confirm the experience around the country. more than three-quarters of our major roads are mediocre. one-third of the bridges are in need of immediate repair. the falling transportation

network impairs job creation, economic development, productivity. businesses cannot succeed when employees or customers are stuck in traffic or when every delay prevents them from putting products in the hands of customers. the development of infrastructure is hoped to put people back to business. large-scale projects are hard to get financed. this bank can offer loan guarantees that complement existing grant programs. if you leverage public funding by encouraging private investment. it will give us a much better bang for our federal dollar. make sure that we remain

competitive in a global economy. i spent a lot of time in business. an early lesson that i learned is that, if you want to be successful tomorrow, you better start laying the foundation today. start repairing the business infrastructure now to take your growth and expansion. if we want to leave their children, grandchildren, a better country, then we need to make smart investments. i think the witnesses for their suggestions and how we can finance our infrastructure repair in a much faster fashion. amtrak has proposed a gateway toll under the hudson river between new york and new jersey to increase high-speed rail.

this project will create thousands of construction jobs, expand access to good paying opportunities throughout the region. can an infrastructure fund that combines grants and loans be used effectively to support the development of these regionally significant projects? >> yes. that is a project that we have been hearing from amtrak about and talking with the delegations about. it is an exciting project with a big price tag. it will take a lot of critter -- creative ideas on how to capture the monetary value of the incredible economic opportunity and efficiency gains that the project will bring and bring that a project to fruition. i think an infrastructure bank

could play a big part in that and potentially be a big piece to it and a grant peace as well. >> our friends on the other side of the capital have proposed slashing funds for surface transportation projects by 35%. what is the effect on progress, on job creation, and the economy if the house republicans have their way? >> i have learned over the course of my life is that there's one basic thing in economics and that is the supply and demand principle. i see a significant supply of labor out there for which there is no demand. this particular bill presents an opportunity to satisfy that and put this supply and demand back. as a principal, eliminating or

declining to utilize this opportunity is a bad idea for the american economy and i think it would be hurtful to ignore an opportunity such as this. infrastructure investment is a proven job creator. back in the '50s and after world war two, we develop the state highway system and it worked very well putting people to work and genocide -- jump- start the economy. this is an opportunity, though as non grand scale, to start the economy in that direction. >> if there is no action in the house and the senate, we are looking at a major, major dislocation in the construction industry and every segment, the number of 600 + thousand jobs has been cited by several

senators this morning. those are legitimate numbers and potential losses that could occur in the coming years if there is no action. it is not just a house proposal. i don't believe they're making such proposals out of hostility in investing in transportation as they say, but the same thing can happen that the senate is unable to move legislation in the coming days. the construction industry has a 16.3% unemployment rate right now as compared to 9.2% nationally for the whole country. there is excess labor out here. the imperative here is to get timely action on this bill, because the consequence, given the flow of money into the highway trust fund, we are going to see cuts if congress does not find a way to keep the program steady.

it is inevitable. >> in my state, our governor chose to decline money to build a tunnel that would have created 44,000 jobs immediately, gets 22,000 cars off the road every day, and a very short- sighted way decided against the possibility of overruns that could have been taken care of through low-cost loan programs. hands, sitting on their waiting to go to work,, -- of delayed schedules -- there is a lot of short-sighted as going

around and we have to get busy. thank you very much. >> thank you, senator lautenberg. you have put more time and energy into transportation than anybody. >> thank you, chairman. you said this would supplement the bulk of the formula funds. i may have missed this in the analysis of the bills, but what size infrastructure banker we talking about here? >> the administration's proposal that we have in the fiscal year 12 budget is $5 billion a year over six years, a total of $30 billion. that was based on proposing a very large six-year proposal in the area of 500 to the billion dollars. negotiations in congress, it's not clear we will get to a

number that big. >> was that your anticipated shortfall the highway trust fund would produce? >> we came up with that number by taking it with the pipeline of projects based on our own experience and that was the number we thought captured the pipeline and could reasonably be run through a program and handled. >> the states do not have the capacity to do this through state bonding authority or the percentage that would pay would be -- explain that to me a little bit? >> states are dealing very much with their own budget deficits and the projections for the next fiscal year are the same for the deficits they had to deal with over the last fiscal year. they are very much focused on trying to close that gap and,

as a result, issued of were bonds is -- theydon't understand why could not retire bonds that the issue. >> i was thinking of net issuance of new bonds to support new project and what it might mean as credit pressure to the ratings agencies. >> but they would not have that from the rating agencies if they committed to pay back these bonds? >> that depends on how to structure. the way i thought about it is like private activity bonds where the government entity, a comes down to repay debt obligations, it is the private sector that is responsible for that. >> the other term that you mentioned, availability payments.

would you define that? >> availability payments is a payment -- the florida department transportation used it to fund a couple of their projects. the idea is they would make certain annual payments that would make up for an estimated shortfall in revenue and there are ways that could be phased out over time in ways that there are more predictable cash flows. it's easier to finance traditional bank loans for infrastructure for commercial banks around the world -- >> it sounds to me like the florida transportation authority would be more like an intermediary paying the bonds off. >> in that case, it is an obligation. >> are there other examples?

i understand totals i'm not sure i get the and the ability of the payment concept. >> i will give you one example of sight of transportation. the long beach courthouse was a project in california built with the idea that the private sector could build it at a lower-cost and operated at a lower cost. but in return for building the courthouse and operating it and being responsible for all of the on going liabilities, shifting the rest to the private sector, the private-sector would be able to get certain guaranteed payments backed by the credit of the city of long beach. it is an obligation for the city on going, but those payments are less than it would have been this they were to finance it on their own and cover the operating cost.

deals outside of the u.s., especially in canada, something getting billed were it would not be built otherwise and having efficiencies -- >> are there examples in canada of someone building a transportation system? i understand the depreciation and i think there is some real merit to that, whether it is a college campus dormitory courthouse or anything else, i don't see how it transitions into a non-toll bridge or expressway of some kind and i guess i about of time. either one of you want to explain that how a non revenue- producing helps this? >> i used this structure and for the london underground, the metro system in london where there was a decision made by the u.k. government to hand over

the capital projects, upgrading the signal, new trains, refurbishing stations to the private sector. in return, government would make these availability payments on a fisk -- on a fixed and a regular basis. so long as the private sector complied with the documents which was to deliver the upgrades in time and refurbish the station and provide an environment for the public which met standards for the contract, then the government would make these availability payments and what the private sector took on was the risk of delivering those projects on time and on budget. if there was a cost overrun, that was taken by the private sector. if it was not delivered in time, the availability payment would not be made.

that is the structure and what it's doing is risk from the probe -- from the public sector to the private sector in partnership with the public sector and the partnership is key to making it work. >> that was an excellent question. >> thank you very much. first, let me ask if i can, as senator kerrey talked about the infrastructure proposal, but can you tell me from an infrastructure standpoint how you treat royal? from my perspective and alaska, have small projects that can compete against these large projects that we will lose every time. >> some of the lessons we learned, in our proposal, we proposed both loans and grants

because we think there are certain projects that clearly have social benefits that make them worth investigating and that is particularly true what we have small populations where collecting tolls may not be feasible. one of the things we discovered -- and another has been a lot of concern in rural areas, we wind up investing a lot of funds in rural freight projects. there's a big need in rural parts of the country to get projects and products to population centers and there is huge economic power to be unlocked thereby investing in freight projects. something like an and the structure bank can have a lot of value in rural areas. speaking of roads, we did a highway 10 project. not enough people use it, but it's the kind of things infrastructure banks invest in. >> is your style of

infrastructure bank or a grant program development -- to use as an example, would that have to compete in this bigger pile with all of these larger projects? my concern is not that you have some for rural, but it gets a very intense -- we need to the cost-benefit analysis, we lose. >> we require that there be a geographic balance and we have a lower dollar threshold for rural areas. i know there is a rural set aside in tiger and we have found it has been very useful and has helped us find terrific projects around the country. it is a decision and you can do it to make sure rural projects can compete. >> let me ask some general questions -- i come from the

background of being a former mayor. we build more roads and in the structure in the last two decades, you name it, we built it. we love building stuff. i love driving to work every day and seeing collins on the road because that tells me something is happening. because of that infrastructure we built, it prepares the city for the great recession we went into. business week rent -- rated the city is one of the most likely cities to recover quickest and forbes rated it as one of the cities with the best opportunities for jobs because of the opportunity for investment. a two-part question -- in the process of private financing and partnerships, how will you handle -- i will take the city as mayor of.

a solid mate -- solid rating, platinum claims -- how do you determined to make sure the fee structures are fair for a client of that nature when you do these large projects? it is good money on your end. how do you manage that? >> i'm being very blunt with you. >> when people came to see me, i loved doing business with them. we were the platinum clients that we wanted the best deal. >> you would want a competitive process. that would insure you were getting them are -- the best market available terms for project. what i am emphasizing is maybe

the bigger project is the user fees or the tolls is not sufficient on a stand-alone basis to make that work. the development of the airport or whatever it needs to be needed level of capital that could make that project work and make it more attractive. that is why i am enthusiastic about a national infrastructure bank as the provider of that level of capital for whatever the project is. at the end of the day, it will be a competitive process and everyone recognizes that. >> the last question -- based on the situation we're facing in the federal government, can you give me two seconds on of we are unable to resolve this in a meaningful way, the debt crisis and how that affects the markets you have to tap into in order to partner with a government sector who wants to build

infrastructure? >> everything is priced of treasury. it would be determined on what the market feels the risk for u.s. treasury and there would be expected to be a small premium for any funding by national infrastructure bank. i hope that answers your question. >> thank you. our transportation infrastructure is in desperate i appreciate the opportunity to get at some of these issues and i appreciate you sharing your that part of the problem is a lack of a long-term funding source that we can make available to pay for a lot of these needed transportation infrastructure improvements.

there are a couple of questions i want to ask. it wasn't that long ago in of the budget committee that we had secretary lahood and asked him about thoughts of long term funding plans. at the time, he did not have anything specific in terms of ideas about how the ad is raise revenue to fund our transportation and the structure improvements. has the administration developed any specific ideas or plans on how we might raise the revenue in some of these infrastructure improvements? >> there has been a lot of debate and discussion within the administration. i would say that it has been caught up in the larger debate with the debt ceiling in dealing with the issues we have there.

i think we're hopeful to be able to put police ideas on the table and find some bipartisan solutions. >> so there is not anything specific? >> not that i am going to put on the table today. >> could you give us an assurance that some of those ideas on the table but not ready to be made public, that to generate revenue for transportation and for structure projects would be used exclusively for that? one of the concerns some of us have had was that they were not used more for infrastructure and got involved in financing other things. some of these things which may include organisms -- mechanisms to finance of the structure projects as opposed to other

purposes. >> i want to be careful what prognosticating how the administration and congress will tackle lot of spending and debt issues we have. we understand the desire to have dedicated revenue for transportation and we all agree there are big infrastructure needs in the country. >> a lot to talk about the proposed creation of a national infrastructure bank. i am concerned that type of fund would primarily benefit larger metropolitan areas while ignoring the needs of rural states. in my own state, we have people who travel on the roadways as part of their daily livelihood's. they would be looking at paying

a large amount in toll fees or other dedicated revenue sources so as to help repay the national infrastructure alone. perhaps you could cut -- you could comment on national infrastructure bank and what if anything congress can do to ensure world states are not penalized due to their smaller population size. >> we did have that in mind when we were designing our infrastructure bank and its part of the reason we chose to grants and loans. the ones you reference would have a lot of public benefits but we are not able to generate toll revenue and make payments to cover the cost of the projects but there is still things we to do. there are projects that would work well in the infrastructure projects. under the tighter grants, we discovered when we look for projects of the country, there

were some in south dakota and threat the plains states. there is a lot of agricultural and energy projects and lowering the cost of getting goods to the ports and population centers can have a tremendous economic impact in rural america. i think they can be monetize of the private sector can help work on those. if you see an economic development project, you'll probably want to use grants. you can design and infrastructure bank and a number of ways. you can lower the requirement saw and what the match might be. there are a bunch of different proposals on the table to ensure rural states in rural areas can benefit from an infrastructure bank. >> if either of you would care to comment on that? >> the importance of having air world set aside so if the proposals are $100 million for a national infrastructure alone, having smaller for that is the way to approach steps

each one should be self- sufficient on its own and should be repaid by the funds generated by that project. >> want to look at this from a bird's-eye view. it makes sense to do that and the structure bank for two reasons -- to their shift at risk or access capital. does anybody disagree with those two reasons? is there another reason that i am missing besides access to capital or risk shifting? it gives us some opportunity to do analysis. they have been doing it for a

long time. until recently, the trust fund was adequately funded but this gives us a chance to improve our analytics skills and to a better job of projects election and projects that will get the most for the money. >> i would echo that because the expertise of the private sector, they have been especially helpful in the large, complex projects, bringing in the financial sector to the table. that has been made great benefit -- >> that seems to imply bringing in other people's capital allows us to have a more rigorous analytical process as to how we decide what projects to build.

why wouldn't we be doing that with all the money we spend on our infrastructure? >> our traditional fund is traditionally at a lot -- traditionally allocated -- >> and the analytical thing in my state is incredibly intense. we are required hearings and input and all kinds of bid processes. it's not as if the states making the decision on this money are doing it by some formula. they are doing it based on priorities and cost-benefit analysis. >> it varies greatly from state to state and some states are not so far ahead and have been used to getting formula funds and not doing be analytics that would benefit at the state level. it's not to say we aren't doing it, but an infrastructure bank gives us a chance to do it

better and running the tigard grant program, we require cost analysis and i would say the state of the art was you've got some who have done a phenomenal job made a good case and some barely knew how to do it all. we have been helping them get to speed but it's an ongoing process. >> if there is something we can do as we begin debate and consider the infrastructure bank that i'm not saying i am supportive of, all of the things you're talking about we should be doing anyway. there is nothing about a analytical process with public dollars -- what ever we need to be doing, if it is all over the map, maybe we need to make that requirement on all the money.

>> the reauthorization proposals we're looking at, we're trying to help states and transit agencies provide a better planning process, but there's a real learning curve going on and some parts of the country are further along. we are taking a harder look at how we spend our dollars. if states and transit agencies are going to improve their game even more, we want to help with that. >> from the government's standpoint, you think it will challenge -- there is only one reason to do that and that is profit, correct? >> correct. >> i have to make a return for my investors. >> the reason the private sector is interested is not because they want to become part of government but because they see an opportunity to return investors' to the point of

profit. as i look at this, the way they make profit is going to be off of the governments that hire them to do this and it is going to be off the taxpayers that access the projects, correct? >> if i may, i would suggest there is an opportunity between the private sector and government side to address and the structure problem and a different way whereby the capitalists spent and deployed and the rest of that spending is shifted in return for a share revenues going forward. >> i don't quarrel that there is something to the partnership. the profit cannily come from one of two places.

it will either come from payments from the government or the fact that the project is managed well so there's a profit margin or it is going to be revenue-generated from the people using the project, what ever is, what does it is built. it is important to keep that in mind because taxpayers will be paying one way or another. they will either be paying through the money we pay to these companies or they will be paying by tolls. sometimes we get caught up in this new idea which is great, but i don't want us to get away from the bottom line which is the folks are going to pay one way or another. this is not going to be a magic bullet that will take away from the need for the public to pay for public infrastructure. it's just going to shift how they pay for it in a nontraditional way.

>> point made. >> thank you. we care a lot about infrastructure in our state. that was brought home to us when we had our bridge collapse, these things matter, so i want to thank you for focusing on this today. first, i want to thank you for coming to minnesota and speaking to our transportation not alliance. i heard that was a good conversation. i share some of the concerns of my colleagues about how megaprojects could dominate over smaller projects and how do we ensure the funding of projects of different sizes across the country wealth and

showing the return goes to earning its national economy? >> it is very important that you achieve a rural and urban balance of a project like this. you will want to make sure you craft legislation and get the balance right. as we discovered through the tiger program and our railroad assistance program, we have made some big loans and some small ones. you can do both. there are slightly competing visions. it is funding projects of national significance. it would be very hard for individual states to tap into existing funds but there are great ideas and very local needs.

we funded through tiger some very small -- >> tiger was a very popular part of that and i was wondering -- there are efforts to personally authorize those grants. be improved as we look separately authorizing the program? >> just going on our experience and some of the feedback we've gotten around the country and for members of congress, clarifying and sharpening in a consensual way with the goals of the program are, that gets exactly of what you're saying. how much is geographic balance our economic return and how much as achieving social benefits and how much we want to do in grants or loans. we have run the program for two years and we're starting the

third and we're trying to find all the processes and to make them transparent. >> [unintelligible] i believe part of that is we placed a big important on multi-modal transportation, the way we run buses and bike paths around the lakes and it's incredible, the way it all works together. you talk about how the national and the structure bank could fit into streamlining the federal funding silos that currently exist. >> one of the examples i talked about was the denver union station project, a transportation livability project that has all kinds of different elements to it and it wound up drawing from four different pots at the department of transportation.

you could encompass all those different elements. we could structure the best possible deal and hopefully in the process to a lot of streamlining and cut down on the time and money it takes for an applicant to successfully compete. >> otherwise, you run the risk of just putting in new programs. >> we would be merging some of our existing programs and to that infrastructure banks. the goal would be streamlining and making it easier for states and communities who want to come out there and apply. >> thank you very much. i will talk to you about the rail spur later. >> you have 20 seconds more. >> i was brief, chairman rockefeller. i have another hearing to get too.

>> this has been an amazing hearing. it may not appear that way to you because we deal with these things all the time. we have not and i have dealt with wretched transportation problems when there wasn't any thing. laying off 10,000 high workers because we didn't have projects to pay for them. all of the sudden, in you walked to my embarrassment, the fact we had not called you three or four years ago, talking that the interest of the private sector to participate in this --

it is something that you actively done and that's a large statement. that is an extraordinary statement. this has been very heartening and a bracing hearing. we have a number of bills and i don't see why they cannot be worked out and put together. i know see anything that would prevent us from passing the bill. we have a very large turnout. we don't have that many so that people came in at various committee meetings, but they really care about what you are talking about and so do i.. let me just ask one final question. having a group inside the