comment. my request is i would like to see you break your format down into money instead of independent, a democrat, and republican. my comment is this, i am a historian and love history. i cannot believe how come my government is a -- these guys have not lost a bottle since alexander the great. my government is telling me we have to trade the soldiers. they should treat us. they have beats every major government and country in the world. host: record to leave it there. those are the final comment on the battle for afghanistan insurgency. we want to thank our guest, anna mulrine for being with us.

we would remind you of the weekly review of magazines. every wednesday at 9:15 we will take a look at a recent magazine article perhaps overlooked article. tomorrow the article is from " the weekly standard." it is a mix of strange bedfellows, if you will, coming together to take a look at different pell grants the government can cut in order to help the environment. that is the topic for tomorrow. go to our web site c-span.org to read the article. thank you for watching. we will bring you live coverage of the joint economic committee taking a look at jobs. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> good morning, everyone. welcome to the joint economic committee. we are pleased to have the panelists here today. i want to commend senator demint, who leads senate republicans on the tour in germany, for spreading this hearing, this important and timely topic. i would yield to senator demint for the opening statement. >> thank you, mr. chairman. i appreciate your work and your staffs work for putting this together. i want to thank all of our panelists for taking the time to be here. a couple months ago in washington, everybody was in a panic over what may happen if we could not borrow any more money. the president mention of the men of the able to pay social security. we talked about reneging on payments to contractors.

we talked about a pretty dire situation if the united states could not borrow any more money. but that debt limit was an arbitrary debt limit set by congress, one that we could change by a simple debt limit bill. my concern is, and a number of americans, is where is the real debt limit? when do we hit the wall where no one will lend us any money and perhaps the fed's cannot print any money? at what point is there not enough credit in the world to continue to finance not only the united states, but all the other nations? under the cbo alternative budget forecast, their model stops working in your beat 24 the's -- 2040's because of the overwhelming debt. i want to take a look at a couple of charts the look at a

dead relative to gdp. there is no way we are going to get that far. my question is can we borrow another $2.50 trillion? the federal reserve is already buying up a lot of our debt already. is there still a market for the kind of debt the united states needs to sell, despite the commitment to reduce our deficit? again, deficit is a washington term. the year to year shortfall we have said we would reduce it to $0.10 trillion over the next 10 years -- $2.10 trillion over the next 10 years, giving american the impression that we are lowering the debt, when all the panelists know that we are going to increase the debt. if we look at our charts, i am not sure we can borrow that much money. what we are trying to determine

today, where is the tipping point for america? beyond which the interest rates will rise sharply, economic growth will decline dramatically. as we look at the potential tipping point for greece and ireland and portugal, the u.s., as a percentage of gdp, we see the united states is right where were these other nations are. is the only thing that makes us different that we can print money and that we are the world's currency? these other countries cannot print their own. hopefully, our panelists will help us sort this out. and what does the u.s. look like when we reach that tipping point ? these are things that we are trying to anticipate. the fed is clearly engaged in an

unprecedented action, including the purchase of trillions of dollars in mortgage-backed securities. since the financial crisis of 2008, the fed's balance sheet has tripled. who without merit and the lettuce by congress, which effectively means we are printing money and buying debt. policies the fed's affect that tipping point? what can we expect? there are a lot of questions and, certainly, we need to know how long the federal reserve can monetize our debt before the world loses confidence in our currency. my challenge to the panel today is, all politics and partisanship aside, our country is drowning in debt.

the plan by this government is to continue borrowing money pour the foreseeable future. any talk of balancing the budget is considered extreme. what does that mean for our country? how much time do we have and what is going to happen when we can no longer borrow money? thank you, mr. chairman. >> the chair recognizes senator cummings for an opening statement. >> i want to thank you, vice chairman, for calling today's hearing, to examine the effects of the national debt on our economy. i welcome our witnesses and extend a particularly warm welcome to dr. lawrence small, professor of economics at johns hopkins university. -- laurence ball, professor of economics at johns hopkins university. the new joint select committee

on deficit reduction reported that if we proceed on the current law, allowing the push tax cuts to expire at the end of the year, by 2021, then owned by the public will equal 61% of gdp, well above the average of 37% recorded from 1971 until 2010. under the cbo so-called baseline under which the bush tax cuts and other current policies continue, debt owned by the public is expected to balloon to nearly 190% of gdp by 2035. the director testified, notwithstanding the long-term projections are under the so- called bush control act, interest control on the debt and lost confidence in our ability to manage our budget would create a clearly unsustainable

scenario. however, the cbo director also told the committee that there is no inherent contradiction between using fiscal policy to support the economy today and imposing fiscal restraints several years from now. he instructed that we want to achieve both a short-term economic boost, and a long-term fiscal sustainability, a combination of policies would be required. changes in taxes and spending that would widen the deficit now and reduce it later in the coming decade. thus, the cbo director confirms what countless economists have been warning congress about. draconian spending cuts will not generate the economic growth we need now -- right now -- to put americans back to work and enable them to compete and succeed. moreover, such harmful cuts are

a necessary to rein in the debt and will only slow our already tepid growth, ultimately reducing revenues coming in through taxes. in fact, one of the major courses of our current budget deficit, a major cause of the debt, is our continued slow economic growth. the recession that started in 2007 is responsible for more than $400 billion of our annual deficits between 2009 and 2011 according to the cbo. therefore, one of the most effective steps we could take to tackle the debt right now is to start growing the economy again, which is also what the american people desperately need and desperately want. according to the council of economic advisers, the national economic council in the clinton

administration, by the way, who presided over one of the most prosperous periods of sustained growth in our history, she says job training, research, development would foster future growth and would help to reduce the deficit. an extra percentage point of growth over the next five years would do more to reduce the deficit during that period and then any of the spending cuts currently under discussion and over the next decade. an extra percentage point of growth would add about $2.50 trillion in revenue. while this hearing is aimed at examining the impact of the federal debt on our economy, i would submit the debt is a nominal factor in our current economic outlook. rather, slowed hiring, low consumer confidence, and demand, skills mismatch between workers and jobs, reduced public

investment, and the continuing foreclosure crisis, are driving our economic conditions and our rising debt, rather than the other way around. until we move to tackle these challenges, an exclusive focus on the debt crisis will essentially cosign our nation to chase our economic tail, a wholly and unnecessary exercise. however, i look forward to panelists.om our wit with that, i yield back. >> two housekeeping notices. the time clocks are not working. we will keep track of that manually. we will let you know when you are coming up on five minutes. i also have a opening statement that i would like to be entered into the record. the chair yields to senator demand for the introduction of panelists.

>> thank you, mr. chairman. it is my privilege to introduce our three distinguished witnesses to provide testimony on this matter of such enormous importance to the american people and to the future health of our economy. our first witness, dr. allan meltzer is currently a professor of political economy and public policy at the carnegie mellon university's tepper school of business in pittsburgh, pa., served as a member of the president's economic policy advisory board, an active member of the president's council of economic advisers, and a consultant to the u.s. treasury department, and on the board of governors of the federal reserve system. he served as the chairman of the international finance institutions advisory committee formed by congress to review the role of the international monetary fund, the world bank, and other world financial institutions.

he is the author of numerous books on economic theory and policy, including a multi-volume history on the federal reserve. dr. meltzer received his b.a. from duke and his ph.d. in economics from the university of california los angeles. next we will be hearing from mr. chris edwards, currently the director of tax policy studies at the cato institute, editor of the cato website. before he began his work at kato, he was a senior economist for the joint economic committee, as well as an economist for the tax foundation from 1992 until 1994. he is also the author of "downsizing the federal government." mr. edwards holds a b.a. and m.a. in economics. our final witness is dr. laurence ball. he is a professor of economics at johns hopkins university.

he previously taught at princeton university and new york university. dr. ball has done extensive research and writing on a variety of economic topics, including the foundation of keynesian economic models, in- depth studies of inflation and monetary policy in both the united states and in high inflation countries with a specific focus on how best to reduce inflation and economic cost of inflation. dr. ball is currently a research associate at the national bureau of economic research. he was previously a lecturer at the imf institute, a member of the federal reserve board academy advisory panel, and a consultant on the international monetary fund world economic outlook. dr. paul holds a b.a. from amherst college in economics and a ph.d. in economics from the massachusetts institute of technology. it is an honor to have all of you here today and to benefit from your expertise on this

subject. >> chair recognizes dr. meltzer. >> thank you, mr. chairman, members of the committee. it is a pleasure to appear before the joint economic committee. my association with this committee goes back to the days of senator paul douglas. it was senator douglas who prodded the federal reserve to stop holding interest rates fixed and promote monetary policy to do much more to prevent inflation. his views eventually prevailed. that should remind the members of their responsibility. today, i will answer the questions that the hearings seeks to answer. they are good question that show the rising concern for the consequences of recent federal observed actions. i will introduce my answers with my explanation on why federal reserve policy is misguided and mistaken and inflationary and inappropriate. there are several reasons. i will give three. first come in running the three volumes on the history of the

federal reserve, i read more minutes and transcripts than any person can endure. with very rare exceptions, notably in the years when paul volcker led the disinflation policy, one looks in vain for a statement of the medium-term consequences of the actions taken at the meeting. the staff and others provided forecasts of the future, but the fomc never charged to reach agreement on the consequences of its actions for the public. publishes forecasts but there is no clear relation between the forecast and the actions. second, concerns at fomc meetings are mainly about the near-term. the federal reserve has little influence over what will happen in the near term but much greater influence on the medium term. the present is characteristic. the fed chairman and some others seem determined to "do something." more about the executive waste an arm of-employment.

the neglect the fact that there is no shortage of money and equity and they have pushed and prodded market interest rates to the lowest levels ever achieved anywhere. the united states does not have a problem of too little equity. there is not much the federal reserve can do by adding reserves or lowering interest rates. the last time they tried it, $600 billion was added, $500 million ended up in excess reserves. the chairman and -- don't the chairman and several others understand that there is a limited amount they can do? pencilled $1.50 trillion in idle reserves. money growth in the past month has been rising at an almost 15% annual rate. i have attached a chart to my paper. here is the chart. it shows the enormous increase recently in the rate of increase in m2 growth, and inflation has

begun to rise as a result. prices are rising and the u.s. dollar continues to sink. the most useful action the federal reserve could take would be the announcement of an enforceable target to give confidence that we will not inflate. third, in 1977, congress gave the federal reserve a dual mandate interpreted as low unemployment and low inflation. it pursues these goals in a non efficient way by pursuing unemployment until inflation rises, shifting to inflation control until unemployment rises, and back-and-forth. that way, it achieves neither. the unemployment -- the great inflation of the 1970's is an extreme example. both unemployment and inflation rose. the current fed repeats that pattern. in contrast, policy from 1985 until 2003 more or less followed several that include both goals.

that gave the public one of the very few years of low inflation and stable growth in the fed's 100-year history. in article one section 8 of our constitution, it gives congress ultimate control of our money. it should legislate an enforceable target. i will amplify inflation enforceable if you wish. now to the three questions the hearing asked me to address. first, given the fiscal policy of industrial nations, will government that crowd out private investment? my answer is yes. today's deficits and debt to raise concerns about future taxes. the prospect of fewer higher tax rate raises the rate of return and business investors expect to earn on new investment. and uncertainty about future tax rates and the persistent increase in regulation of health, labor, energy, and finance, has deterred investment

and has slowed recovery. based on current uncertainty, many investors forecast and wait. cash is their friend. government budget and regulatory policies deterred, crowd out investment, one of the most infective things the congress could do. pass a moratorium on new legislation for the next five years except in national security. >> the five-minute time limit has expired. would you conclude your testimony? we will have a chance to pursue further in question and answer. >> let me say only this about the tipping point. why wait for a tipping point and crisis? we know the debt is now 100% -- approximately 100% of gdp. that does not include the unfunded liabilities, does not include fannie mae and freddie

mac, does not include a number of other things. so there is not a point that we can mark down and say after this crisis occurs. we do not know when the crisis will occur, and the experience of italy, greece especially, tell us the markets suddenly changed its mind without warning and without prior notification. so we should not wait until that to happen. we should begin. we have ample warning that we are on an unsustainable path. that unsustainable path, to respond to congressman cummings, is to say that we need to announce a plan that will reduce the deficit in a credible way. not beginning by taking everything off the table today, but by announcing a plan that will put us on the path that we have to be on if we are going to restore the long-term growth rate of the united states with

low inflation. >> thank you, doctor. i should note the testimony of all three witnesses will be submitted in full. the chair recognizes mr. edwards. >> thank you, members of the committee. federal spending soared over the last decade. the cbo projects federal spending will rise 24% this year to 34% of the economy, by 2035, unless we make serious reforms. as your chart showed, federal debt will explode to almost 200% of gdp by 2035 unless we make reforms. some economists think it is ok if america raises taxes and spending in the coming years because they think we have a uniquely small government in this country, but that is no longer the case. if you look at oecd, total spending in the united states are now is 41% of gdp. that is only 4% less than the

average spending of 45%. we used to have a 10 percentage point gdp advantage in terms of smaller government, so that has shrunken down to 4%. so sadly, we are becoming another average bloated welfare state, which will damage our economy. one of your charts showed, the u.s. federal debt, 101% of gdp right now, higher than the oecd average of 78% of gdp. if you look at the growth rate over the past four years, our debt has grown the sixth fastest out of the oecd countries. there is a lot of crisis in europe, but we are certainly getting to that level of fiscal responsibility. without reform, government re represent have a deep spending, which would create a dismal future for young americans with

fewer opportunities. historically, our high standard of living has been based on a relatively small government. it would be set to lose that. there are three basic arms -- harms that all the steps of greats. the first is that additional spending, in my view, sec's resources out of the more successful private sector economy, puts it into the government sector. if the government is already spending $4 out of every $10, it seems to me marginal spending in the government sector will have a lower negative return. in the 2008 book, a public financing professor went through the whole federal budget and look at the spending. he figures the spending that we do in the u.s. these days has lowered overall income by 25% so we are above the tipping point of optimal levels for the government in terms of economic growth.

the second basic harm that all of this deficit spending is doing, of course, creating deficits, which is deferred taxes that will pinch the economy down the road. economists look to the distortions caused by the tax code as damaging the economy. this is called deadweight loss' beer when you raise taxes, you create more distortions in the economy which reverses -- reduces gdp. the third effect is high debt. that is creating financial instability and economic uncertainty. we can certainly see this in europe. a number of economists now have written about how 90% seems to be the tipping point for debt as a share of the economy. above that, economic growth starts to slow. here is what a lot of people are missing in the debate. when you look at the long-term cbo projections that show the rising debt and spending, it looks bad enough, but it is actually worse than that.

the alternative fiscal samaras our benchmark projections. they do not take into account the rising debt and rising spending to gdp. and in a special analysis, the cbo looks at how that rising debt suppresses gdp, and it is pretty scary. according to the cbo, u.s. real incomes could rise for the next decade or so and then could stagnate and then start falling. this would be a reversal of american history. last year's cdo compared paul ryan's road map, which keeps spending at today's level, nurses these alternative fiscal scenarios. they found by the 2050's, u.s. average incomes will be 70% higher under the road map plan than under the alternative fiscal scenario, because of the buildup of debt. some fear that spending cuts in

the short term would hurt the economy. i would only point out that we have had $5 trillion of deficit spending since 2008. the most enormous keynesian stimulus you can imagine, but we have had a recovery since world war ii. if you look around the world at real-world examples, canada, sweden, other countries that have cut their spending -- for example, can the that dramatically cut their spending in the 1990's and did not depress the economy. the economy boomed for 15 years even as spending was cut dramatically. i think congress should turn its attention to major spending cuts as soon as we can. at the cato institute, we have all kinds of ideas for cutting every government department. i do not seize spending cuts as painful medicine that we should fear. it would be a positive boon for economic growth. >> thank you.

the chair recognizes dr. ball for five minutes. >> members of the committee, thank you for this opportunity to share my views on u.s. fiscal policy. other witnesses that emphasize the dangers arising from government debt, and i agree reforms are needed to put that on a sustainable path. i will focus, however, on the cost of controlling debt by cutting budget deficits. this will be largely there elaborating on a point raised by congressman cummings. i will argue cutting deficits reduces economic growth and raises unemployment in the short and medium run. these costs are especially large if deficit reduction is too hasty and occurred during an economic slump. opinions about the short-run effects of fiscal policy vary widely, as we all know. most economic textbooks teach a fiscal tightening slows the economy by reducing the demand for goods and services. some disagree with this view,

suggesting tightening is expansionary because it boosts confidence. both sides of the debate have reasonable arguments. if you want to know who is right, we have to look at the evidence. in my view, the evidence is clear. cuts and budget deficits have adverse effects that last for five years or more. if congress raises taxes today, its actions will slow economic growth and raise unemployment until at least 2016. this conclusion is supported by numerous studies. and the debate, not all. how will focus on research performed over the past two years at the international monetary fund, were that many view as the best available on the effects of deficit reduction. i testimony describes as research in the 10th, and in these remarks, i will summarize it briefly. the imf looked at 15 countries from 1980 through 2009. they identified a total of 173

years in which governments reduced budget deficits through spending cuts, tax increases, or a combination of the two. the research finds, on average, a deficit-reduction a 1% of gdp raises the unemployment rate by 0.4% after to debut years. -- two years. workers without jobs for 26 weeks or more. making matters worse, these average effects of deficit reduction are likely to understate the effects of today's u.s. economy. in a typical episode studied by the imf, the country's central bank response to a fiscal tightening by reducing short- term interest rates dampened the rise in unemployment. currently, the federal reserve can of reduced rates because they are already near their lower bound of zero. in this situation, this suggests the cost of production are twice

their normal size. to better and standees findings, let's consider one hypothetical fiscal policy. the deficit reduction of 3% of gdp. i picked this number because the cbo forecasts deficits of about 3% of gdp from 2014 through 2020. it% cut, deficits would fall to relatively 0. how would this affect unemployment? the evidence as a 1% cut of gdp rises on employment by about 0.8 percentage points, but interest rates near are -- are near zero. this means a 3% cut in my example would raise unemployment by 2.4 percentage points, with the u.s. divorce of 150 people -- million people, and an additional 1.6 million families would suffer the consequences of lost jobs. the dimension another important finding at the imf study. recent political debates have focused on the choice between deficit reduction for cuts and

government spending and for tax increases. this choice matters a lot to the beneficiaries of government spending and to people who pay taxes. in one way, however, this choice is not important. the imf performs separate studies of spending cuts and tax increases and finds the effect on short-term growth and unemployment are similar in the two cases if interest rates are near zero. the question is, can any policy rein in debt without slowing the economy? a possible answer is a fiscal consolidation in which spending cuts and tax increases are back loaded in time. this is related to congressman cummings' idea of something more stimulative in the short run begets debt under control in the long run. under such policy, the government would commit to lower deficits in the future without sharply cutting the current deficit. as one example of how this might be done, one could imagine cost- saving changes in entitlement

programs, such as a higher retirement age, that could be phased in over time. with any luck, a major spending cuts would occur only after the economy has recovered from its current slump. that's a reduction would be less painful than in part because interest rates would be above zero and the federal reserve could ease monetary policy. thank you again for your attention. >> thank you all for your testimony today. we will begin a round of questioning. the question from senator demint is what is the real detriment for america? the answer seems to be it is dangerously near and not in our control. market actions and perceptions change quickly. countries that act prudently and head of the crisis are in a better position. my question is, do you think there are some lawmakers in washington in denial about the

seriousness of our debt crisis? temporarily, the cost of borrowing for this country are low, being asked by -- inside and outside -- by the quantitative easing program, the european crisis. our borrowing costs are temporarily lower. once the true costs of america's borrowing is revealed, do you think there could be more serious action by some in washington to get this debt crisis under control? dr. meltzer, mr. edwards? >> i believe that steps taken are preliminary steps. that is, to get $1.50 trillion in reductions is just the beginning. what we need to do is give people confidence that their

future is going to be bright. we do not do that by throwing a few dollars at them. we do that by giving them confidence that we are going to improve the future by doing things like we did in the past. unlike mr. ball, what the imf models leave out, if you move resources from low productivity goods -- it might be desirable for people to receive transfers from the government. i do not dispute that. but those have very little low -- very little productivity use. if we transfer sources to higher productivity use, we raise optimism. if we cut the deficit, we convince people their tax rates are not going to be higher in

the future. the imf model does not allow for that, does not take into account the product change and the not take into account the beneficial effects of an expected a lower tax rate. those are important conditions. let me close my comments by saying two things. if we look at the history -- period of the -- history of the post-war period, there were three things that did us enormous good. one was the kennedy-johnson tax cuts. the chairman of economic advisers said the most effective part of those tax cuts for the business tax cuts. that the biggest bang for the buck. the second big fiscal change that worked well were the reagan tax cuts of the early 1980's, again in 1986. the third policy that gave people policy were the clinton

tax increases, which pressured people that their future tax rates were not the way to go up. that they had seen what they would have and would not have any more. that is important. give people confidence. that is what the public desperately needs at the moment. confidence that the policy the government will put out will be sustainable and productive. >> i think your question goes to the right point, because the u.s. is special, because we are a haven for international capital, american policymakers have been able to get away with recondite deficit for far too long. if we were a smaller country like australia, a crisis may have already happened. i noticed in a story yesterday on bloomberg, italy has just

been downgraded. one of the things that s&p noted was because they have a dysfunctional political system. that seemed to be what is going on in the united states. again, going back to canada in the 1990's, they hit the wall at 80% of their gdp. we have been skating on for so long. partly because we are in this special situation. japan shows that you can run a long as a zombie economy for a decade or two. the real damage is ultimately the spending. we have to get spending under control. nafta has been the key to success in places like canada and sweden, where they have been able to cut their deficits. >> i think the key is to restore business and consumer confidence by getting our financial house in order.

just adding onto what was just said, dr. meltzer, and i can stand you correctly, when you said when president clinton raised the taxes, you did not see that as a negative thing. correct me if i am wrong. you saw it as something that created a level of certainty? you say that certainty is more important than some other factors? is that accurate? >> [inaudible] >> is your microphone on? >> we really have the benefit of the end of the cold war. we were able to cut spending. he was able -- mr. rubin was there, being a fun and person from wall street.

-- being a fund person from wall street. does that mean that a tax increase now would do what a tax increase did then? i do not think so. >> ok, let's pick up on that, dr. ball. after the cold war, economy peaked. we created millions of jobs. going back, they have steadily declined, not withstanding the implementation of a historic low tax rates during the passage of the 2001, 2003 bush tax cuts. this reversal of growth have led some economists to describe the time between 2000 through 2010 as a lost decade for america's middle class. i find that to particularly -- i find that particularly troubling, the government using

austerity measures during a downturn having a lasting impact on income and employment levels, and that the bulk of these attacks on middle-class and working people. specifically, i am concerned, if this committee on deficit- reduction concerns the record $1.20 trillion in savings only through spending cuts rather a balance of revenue and cuts, this could result in a lost life time for millions of americans. for example, those who are five, 10 years away from retirement. if, thread the last decade, working americans had watched their incomes stagnate or spiral down, and 25 million more americans are unemployed or underemployed, are you concerned about the detrimental impact cuts a $1.20 trillion in i will have on the middle class?

and the recent report that we now have 46.2 million people living under the poverty level, at $22,000 for a family of four. >> absolutely, i am concerned about that. there has been a stagnation of middle-class living standards. that has a variety of causes, but there is no question of fiscal contraction right now would exacerbate that. one thing that i did not mention in my testimony, another research funding. if you look at how total income in the economy goes down when there is a cut in government spending, it is disproportionately labor and wages as opposed to capital income. there is every reason to think there would be a shift of the income distribution away from workers as well as the fall on total income.

as far as total unemployment. i do not think anybody needs a lecture on how terrible unemployment is. there is a lie research but it is pretty obvious, losing your job is especially terrible during an economic downturn. it takes a long time to find a new job. we have almost half who are unemployed for six months or more. i could go into some of the social science research of what that does to a family's health, divorce, performance in school. i am sure all of you understand that. >> we constantly hear, get rid of this regulation, that regulation. i wonder, when we get rid of all these regulations, does that guarantee that jobs are going to be added? in other words, you take away safety measures in many instances from the public, is it

easier to make more money? is it a guarantee that we will then see jobs expand? >> absolutely not. there are a lot of pros and cons on the cost and benefits of regulations. as a way of dealing with the current slump, 9% unemployment, that is really a non-factor. what we have is a classic short fall of demand. normally when that happens, the federal reserve that with that by cutting interest rates. if the economy did not recover, cut interest rates more. what is uniquely problematic about the current situation is interest rates have hit zero, so the fed has run out of ammunition -- at least its usual type. we need to be creative in thinking about another way to get firms spending on investment

to get consumers to spend. >> congressman cummings, may i add to that? >> briefly. >> cutting regulation and giving people assurance of the future taxes does a great deal. what it does is, if you are a businessman and want to invest, the first thing you learn in business school is, go out and learn the expected rate of return. you cannot do that because every week there are new regulations for health care, finance, labor, environment. the president is out campaigning for higher tax rates. so you do not know what you are going to face, so you sit on a bundle of cash and wait. we have never seen so much cash in the hands of banks and businesses, as we do now. so we have to ask ourselves, why

is that? the answer is because they are dreadfully uncertain and a lack confidence about what the future will be. they cannot estimate what the expected rate of return is. if they invest, they create jobs. most of the jobs that are created are created by firms. >> thank you. senator demint? >> thank you, mr. chairman. dr. ball, you referenced and imf study a number of times. is it fair to assume the study includes many nations where the government work force is as large a percentage as the u.s.? >> yes. >> so in determination of when you are cutting government spending, those nations would have a higher unemployment because of that, because that spending directly affects the

government work force? >> i do not think that follows. that is very careful in trying to measure if we had a spending cut as a certain amount of gdp, the average effects on output and unemployment. >> we have seen with our deficit spending over the last few years, generally, maintaining government employees, teachers, others, but it seems to me, if deficit spending is good for the economy, cutting that spending would cause higher unemployment. using a study where most of the nations have a greater percentage of government workers as part of the work force, it may not be necessarily accurate -- do you not see the american economy, our free- market capitalist system as different from most other nations in the world? >> this study includes canada, most of the world's advanced countries.

that is an interesting thing that they could follow up on, looking at the different types of economies, but i think we are talking about general principles of economics at i think would apply to australia, the u.s.. >> a lot of people want us to be more like european economies that are more centrally planned. that is part of a different world views that we are dealing with here. let me ask a question to the whole group. we are clearly in uncharted territory right now. we could have different opinions about that, but the federal reserve interventions are unprecedented. stimulus spending are at unprecedented levels. the bleak fiscal outlook that we are dealing with is unprecedented. the we can almost nonexistent recovery, the spike in levels of

stimulus spending is unprecedented. how do these factors affect the nearness to the tipping point? i know we cannot determine exactly where that is, but i am wondering where we are going to borrow the money from? we are projecting a trillion dollars a year that we have to borrow or print. where is that going to come from? are we not in such an uncharted territories now that we need to do more than just sound an alarm? am i just unnecessarily seeing a bleak situation? mr. edwards, i will start with you, dr. meltzer, i would also like to get your opinion. >> we do not know where the tipping point is, where the next financial crisis is. recent economic research points out that other countries are sort of hitting that wall in

different places. japan possum debt is 200% of gdp, has been for a couple of decades. they are in a unique situation because most of the savings of that debt comes domestically. as the cdo points out in their long-range predictions, in the future, if we keep this up, we will be producing gdp, but a bigger and bigger chunk of that will not be going to americans but to foreign creditors. that is why our standard of living will be suppressed by this buildup of debt. i must say, hitting the tipping point -- that is not the end of the story. ireland hit the tipping point but recent news reports are indicating that they have taken very good policy actions cutting spending and on the brink of recovery. they are in a much different

situation than greece even though both countries have these massive spikes in debt. ireland has taken the right policy courses and they are headed in the right direction. again, i do not think the biggest issue facing you is where the tipping point is. it is stopping the bleeding as soon as we can. >> dr. meltzer, quickly. i am almost out of time. >> ireland did not have a large debt. it had a large debt because it assumed the bank of the private banking system. it was private debt assumed that public. take the case of italy. that is a good case for us to study. it went along for decades of low growth and high deficits over 100%. when it joined the ecb, it hit some of its debt, but it was over 100%, instead of the 60% required. suddenly, that same situation gave rise to a loss of

confidence. that was the tipping point. why did it not occurred two, five years earlier? i do not think anyone can answer that. >> thank you. senator mall they need -- mulvaney is recognized. >> i have learned not to get in a battle of wits when i am woefully under armed. it has been a long time since taking economics. i will try not to make of a fool of myself. do you believe there is such thing as a tipping point in the debt? >> absolutely. i think all three of us agree that there is but we do not know where it is. it would be prudent not to find out. by no means do i want to say that we should not be very concerned about long run sustainability. >> that is sort of what i was hoping to get. i think one of the things that all three of you could agree on,

if we get past that point, it would be much worse than the situation we find ourselves in today. is that a fair statement? >> probably, because the u.s. is special, because this is unprecedented -- it is the kind of thing that we do not want to learn about. >> that is one of my frustrations with the classical keynesians. they seem to lack a long-term outlook. it is always quarter to quarter, year to year. we have sat in this room, this year, with a board of excerpts -- experts regarding entitlements. this was a bipartisan panel. the window of opportunity that that window gave -- that broad group gave us was two years for

the most conservative, five for the most progressive. when i read your testimony, we lack any type the mid to long- term outlook. that we are simply looking at the next quarter, and an effort to boost gdp. you go to the end of your testimony. you talk about why printing money, expansionary policies, may not have the same type of inflationary outcomes that many members of this board fear. businesses generally do not monitor the fed's balance sheet and do not base their pricing decisions on changes in the monetary base. i used to run a business. i can assure you i did not watch the federal reserve more expansionary policies. what i did what was my costs. when my costs went up, i had to raise my prices. i can assure you, i was not watching the fed. the brokers in food and fuel

certainly were. as my costs went up because of expansionary policies, i had no choice but to raise my prices or to go out of business. you had a tremendous inflation -- hyperinflation without an overheated economy. driven almost entirely by the printing of money. fairly low productivity. we had tremendous inflation. one of the things i fear when i look at your proposals is that we are underestimating the risk of inflation and hyperinflation. take a minute and tell me why i should not be too worried about that. >> first of all, on the fiscal issues, you talk about the long run and short run. in the long run, we are all dead, something that people are all embarrassed about now. the long run is important. there is a lot of agreement about the dangers of the debt.

but we need to be realistic about, if we are realistic about cutting the debt right now, there will be major costs -- >> if we believe we were closer to the tipper point -- closer to the tipping point rather than further -- let's say we are the two years, you are the five years. is it not rational to take the steps we are proposing? >> maybe everybody could even agree, it is addressing -- there is the cdo chart of the debt going off. that is primarily of quntum programs. in a perfect world, congress would get together and have a friendly discussion and figure out some moderate compromise on how to figure out entitlement programs. that would solve the long-term problem without giving a big negative jolt to the economy today. if we address the deficit just by willy-nilly spending cuts

over the next decade, maybe -- i am not going to say whether that is overall a good or bad -- but there will be higher unemployment. there will be costs. we should be realistic about that. >> you mentioned willy-nilly cuts. just going in, cutting randomly may have a different result than cutting specifically. several of you mentioned canada. if you look at their history, it appears there cuts focused on what transfer programs and not infrastructure. would you agree that the premise of a wealth transfer program may have less of an impact on the unemployment and cuts to infrastructure spending? >> i think that is possible because infrastructure spending has a substantial effect on unemployment. on the inflation issue, that is something where maybe i do differ from others. i feel inflation worries are quite unwarranted. again, without the long economic

debate, historically in the u.s., inflation, when the economy is overheating, has taken pressure off. the unemployment has been low, workers push for higher wage increases. firm's work to and set their prices. an overheated economy is the last thing we need to worry about right now. >> thank you, doctor. thank you, chairman. sorry to go over my time. >> dr. chambers. >> although we have had debates in disputes over the statutory debt limit, the statutory debt limit is an arbitrary number and the real debt limit is when we reach what will we are all today calling the tipping point, but the push back i get from some people is that people say we are really a long ways from that, look at what has happened with

treasury debt today, look at the 10-year treasury dropping right around to and dropping at some point right around 1.9. there is a tremendous appetite for treasury debt. the interest rates on treasury debt is dropping dramatically, and this is an indication we are a long ways from the tipping point. would either of you like to respond to that? >> first, i would say the size of the unfunded mandate, which is not included in most real numbers we talk about -- not in the 90%, not a 100 percent, is six or seven times the size of the deficit. that put us at an enormous amount that is just as the chart shows. it is medicare and medicaid expenditure that will cause us the problems we have.

social security is a minor, but important part of the problem. it pales into insignificance compared to medicare and medicaid. -- pales in insignificance compared to medicare and medicaid. there are a lot of things we could do that do not require taking away primary benefits to people, but changing them. for example, and there are many examples, we have to ask why do we spend 50 percent of the medicare money on people who within -- who are within six months of dying? there is no co pay attached to that. if we attached a co-pay, we would reduce a lot of -- >> just because i have time, how would you respond to the people that say in spite of all of this that we have considerably more debt we can run up.

if you want to look at where the pressure is coming from, look at the fact the dollar has depreciated about 15 percent against the weak currency. by an even larger% like the weak currency against the japanese yen. you gave the example of germany. spain has 20% unemployment, prices are rising. britain has a high and of limit rate, prices are rising. there are other sources other than the labor market to give you an inflation, and we are going to get them. >> there are these gigantic negative risk out there that something big and bad will happen to the american economy,

and we do not know what it is. go back and look at the january cbo projection, they did not predict a recession. they actually projected growth would be strengthening in coming years. byre born to be surprised the next big recession factor. what if we have a gigantic recession a few years from now, tax revenues would plunge again. unemployment compensation costs would soar. and we would be in the spiral downward of debt and for economic growth -- poor economic growth. the risk factors are all of the negative side. european countries of a horrible economic problem, worse than ours. the higher the debt load becomes, the more risk of an international contagion, the

more we are all at a tipping point. europe to go into another deep recession that cause the deep recession here. the risks are all on the ugly side, i think. >> does anyone want to comment on the thing the fed is discussing to change the maturities of the debt they hold? >> it will not do much. they tried it back in the 1960's. they had a big experiment and did not work. why? if you think about it. if you suppress long-term rates and raise short-term rates, what do you think the market people will do? it will go the other way. >> my time is expired. thank you. >> the chair recognizes dr. birch this-- mr. burch of texas

>> you are not meant to speak today. >> probably with good reason. your referenced above with ago about the cost of medicare for patients in the last months or weeks of life. i will tell you as someone to practice medicine for a number of years, the principal problem is a lack of transparency of the part of the patient. they do not tell us when the last two weeks begins. along that line, you talk about the cost drivers contained within medicare and medicaid, and you talk about perhaps changing things so they do not take away future benefits. i will submit within the health- care well, there is probably 1.3 trillion dollars in immediate savings that will not take away future benefits, but that would be delayed the implementation of the affordable care act, which

no one's too seriously consider -- which no one seems to seriously consider. is that something this congress should take of this serious consideration? >> yes. >> thank you. we also talked about cash on the sidelines. i have talked to a member of my community bankers, not just in august recess, but going back this past year and longer come in the community bankers tell me they are hampered by the facts that they must keep the loan to deposit ratio under 80% or they will invite a visit from some type of bank examiner, and that is it may not be pleasant, so they take pains to not go -- not touch the last 20%. as a consequence, they are not making many of the last 20% of deposits. the community is deprived of the loans that the 20% of deposits could create.

do any one of you have the sense that that is a bigger problem of what has been talked about before? >> if i may comment, i think that is a problem. depressed lending by community banks is one factor holding back the recovery, and perhaps regulators could change attitude a little bit or think of creative ways to and courage lending and perhaps recapitalize community banks. >> we a kind of gone the other way in the past 18 to 24 months. rather than making regulations perhaps clarifying them, we made the more obscure. we frightened people with what is the future regulatory environment they will encounter. is that one of the reasons the cash a sting of the sidelines? >> that is one of the reasons. that is generally regulation. as the speaker said so well, you

could move the plant to china but you cannot move to south carolina. that sounds funny, but at the same time it really tells us a serious thing about what regulation does to the attitude of business? >. >> the president is talking about raising taxes to create jobs, and yet this is the same white house but just this week and said lockheed and forward to tie 1ll f16's and you cannot build boeing aircraft and south carolina. american airlines is buying non- american produce jets. the 18 power plants are going to close in texas on june refers because of the cost to air

pollution role is going to be a significant debt burden on jobs. he argues the environment affects one way or the other, but the white house will not make a decision whether they say yes or no. they just will not make a decision. the problem, as i see it come is not that the taxes are not high enough, is that the white house is a risk of birth -- risk averse they're free to act. do any of you agree with that? >> i agree completely. when you do not know what the future is going to become a cash is your friend. >> there has been a misguided focus of serve ways in my view. micro economics is extremely important. if you go back and look at what margaret thatcher did, sure, she got the macroeconomics in order, but she did a lot on the micro

economic side. all of those things that are hard to quantify the impact on the economy, but there is no doubt that the fast growth economies are getting macro and micro economics right. >> i would like to second that. i work with her. she was a real leader. she was willing to make tough decisions. >> we agreed to undergo a second round of questioning by mr. cummings. to go to what extent are deficits be driven by slow economic growth and what impact will this have on the ability to reduce the debt? and the proposals, the most recent job proposals presented by the president, i wanted to know what your opinion of those

might be, and do you feel they would be helpful? >> i think there is no question the main driving force behind the big run-up in the budget deficit is the economic slump. someone else referred to the were tax revenues, higher unemployment insurance. it is a very strong economic regularity that deficits go up in recession. the stimulus program added to the debt, but it was secondary compared to the recession. if we can find a way to restore growth, that is the best possible deficit reduction plan. anything which retards growth will be somewhat self-defeating as far as the fiscal situation because of the effects of growth of the deficit. as far as the president's jobs

plan, it seems like a step in the right direction. it still seems we face a huge problem. it is not clear any of the measures we have are really sufficient. we may have to either really try something more radical or except we will live with high unemployment for a while. >> did the jobs plan cost $200,000? my wife was not an economist and listen to that and said why don't we give $150,000 and the head of the game. we're not agree to get out of the problem by spending $250,000 for jobs. >> one of the things that has always bothered me about all of

this is you look at something like infrastructure, and in maryland they stay with the sinkhole developing every eight minutes. we have bridges falling apart. i told some people the other day, you can erode from the inside, died from the inside if you're not educating your people, not innovating, it cannot be competitive. at what point -- you have to spend, spend carefully to get the economy going and get people moving carefully. at the same time, you cannot die in the process. by the time you get out of the best of you do not have a country. >> i agree. i agree with the infrastructure in the united states is that.

i live in pittsburgh. i will match to bridge for bridge and i will have a whole bunch left over. >> if you think you are going to take confidence -- concrete in bridge layers -- bricklayers, you're kidding yourself. building a bridge is a big job and requires people who are trained in steel. the president said but stich the unemployed construction workers. they use heavy equipment. you have to learn how to drive that. that will not be a solution. we need to do what we can about infrastructure. that is a constructive thing. we have waited way too long to do something about it. education, we really tried with education.

the gap in income between the poor and rich is driven mainly by the fact that technology has changed. i was a corporate officer or director. if you do not have an education, you could not read the computer. i wish i thought i knew what we needed to do. >> think you very much. >> thank you. senator demint is recognized. >> i want to thank congressman cummings, dr. ball for presenting the alternative view today. obviously we have a big difference of opinion in washington about what we need to do to fix the problem.

i frankly do not think i am looking at this through a political prison. i am thinking of it as a guy who was in business for many years. i consulted with the number of other businesses, so my political perspective is really not a political perspective. by any perspective our nation is back -- bankrupt. we have a negative cash flow projected continuously. most of our operating capital is barred monday. every new program we suggest has to be borrowed or printed. our fate is in the hands of our creditors, and that is a worrisome situation. i do not know how we can get around that.

they happen to be the ones making things happen to take more money from them and giving to the people that are creating the debt does not seem to make a lot of common sense. just like the business revenue is down and they decide the best way to get out of that is raise prices, that is what we're talking about doing here. our businesses down cover revenue is down, so we want to raise prices to work effectively the customers, those who are quitting revenue for us. that is a difficult thing to swallow when we know and our economy -- and our economy where 3 percent of americans are repaid over half of all the taxes. they are the ones creating the jobs, providing investment capital, and frankly, that will not solve our problem. if you look at the data for the past 10 years, the increase in the that this is mostly attributable to an increase in spending. that includes a lot of

discretionary spending. so security has not contributed to the debt at all. if we have not are 3.6 trillion from social security, what would be a lot more in debt than we are today. this is not on social security completely. the difference is the government is the primary stimulator of the economy, versus those of us that think america was so professional critic was so prosperous. 40 percent of those who have income over 200,000, 40 percent of income is small business income. i understand the need to balance revenue, as well as spending cuts, but we can get new revenue by making the economy grow. frankly, if you look a 20-year data, you can raise the taxes as much as you want, but the

revenue will be about 20% of gdp from 18% to 19% of gdp over time. i appreciate the panelists to help us talk through this. to me, this is a situation where all of you have said let's not wait to find out, because all this will take is for china to say they will not lead us more money and the fate that keeps us up. that is what we up to a minute, the only thing keeping the dollar up and what the economy we have the league is based in the fact that the other economies are worse off than we are right now. thank you for helping us talk through this period to you and your committee staff, i appreciate the work you've done in the folks to of into questions, and i hope we will follow up with some the size of action. >> of what to think both parties

for engaging. i appreciate insight and thought provided by our panelists as well to borrow from the president's current speech. it is clear the real debt limit is upon us now. we a to act to clear the debt now. with that, the meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> this is one of a number of

hearings recovery today of the c-span network. of course our congressional coverage. the u.s. house is doubling in at noon eastern. time set aside for short speeches.

the legislative work starting today at 2:00 eastern on five bills dealing with veterans health programs. children's hospital education, off his of programs. but coverage of the house at noon here on c-span. the military ban on gays serving openly in the military ends tomorrow. this afternoon defense secretary will join mike will lead in explaining how it will be handled. the new stock of live at new -- live at 2:00. this afternoon to live at 2:00 and author talks about his recently-published profile of sarah palin. it is book tv live this afternoon. >> william jennings bryan, one of the best known speakers of his time in the first politician to campaign from the backs of road cars and automobiles ran for president three times and

lost, but he changed political history. he is one of the 49 featured in c-span new series, "the contenders." learn more about the series in the upcoming program at c- span.org/the contenders. >> president obama is national economic director allied the president's jobs plan recently before the american action network, an advocacy network that was treated by john mccain advisor, douglas holtz taken. the comets run about 35 minutes. -- comments run about 35 minutes.

>> thank you for inviting me. i am -- good news is i am not here to deliver a prepared speech. i am here to talk to you about the american jobs act and give you a sense of the rationale for why we put forward the american jobs act and why we chose the components that together make up what we feel is a very strong and powerful initiative to jump- start growth and job creation in our country. we face today a serious economic challenge, a pivotal economic moment that deserves a serious economic response as part of an economic growth strategy.

we already knew we were digging out of the worst economic whole our country has been in since the great depression. we now know more about how deep the hole was. if you were to look at the blue chip in november of 2008, the projections for the economy is the fourth quarter of 2008 and the first quarter of 2009, it was that it would average of the loss of growth of 1.65%. that is what the obama transition team was looking at. we now know that actually over those three-quarters growth averaged a loss of -8.9% in the fourth quarter of 2008 and -

6.7% of first quarter of 2009. those are the worst economic quarters since they started doing quarter economic data and 1948. other than the period of the mobilization -- demobilization, it is the worst two quarters of economic performance our country has seen since the great depression. so the challenge, which we all knew was enormous, with new and more updated information, we realize how even more serious and precarious the situation was at that time and our economy. we also already knew, particularly from those like ken

the coming back from a financial-induced recession is a tougher and harder ride back than a normal or more typical recession. it means, as the president said thursday, you just have to stay at it. you have to dig and stay at it and try to do more of what is working and less of what is not working, but for god sakes stay at it until we get this recovery at a pace and momentum that can start making of more serious dent in unemployment and more positive impact on job creation. we also already knew that while unforeseen event out of your

control can surprise you on the upside, they opted surprise you on the downside. for this recovery, that happened last summer with the problems increase, and we have seen it this year as well. even in march of this year, a blue-chips were projecting a 3.3% growth for 2012. very positive growth still for the second half of this year. many of the top forecasters believed growth in 2012 was estimated to be over 3.5. we have faced a combination of had lived that have changed of where the economy is.

the good news for democracy in the middle east did not translate into necessarily positive news at the pump for the typical american consumer. in december we were looking at $3 oil gas per gallon. as i do not have to tell anyone, many americans have seen $4 per gallon and higher at tides, and even now averages higher to $3.60 and $3. we have an unparalleled supply disruption. it was of parallel because virtually no one had projected that even a major event as herbal as the earthquake and tsunami were that it could have this kind of impact globally, but we of seed once again how interconnected we are.

three serious concern about europe still dominate the downside risk of the global economy right out. four, in the lives of war is perhaps the most unfortunate because the what the that was in our control, we have learned painfully how harmful it was that our country went through such a public time of government of this function with a prolonged threat of our first deed of the the history of our country. with that, we now see that the blue-chip estimates " to be 2.2%. there are a significant amount of forecasters who believe particularly if we do not expect any of the measures, that we could be below that at 1.5 or 1.7. these are very troubling

projections, and i think it is safe to say with these type of economic challenges be faced by the american people, doing nothing is just not an option. with these type of headwinds faced by workers and working families and 9.1% unemployment report to it -- at 14 million people out of work, simply sitting on our hands is just not an option. the up side benefits of bold action that could help get this recovery more momentum are two significant and profound for anybody to responsibly argue that they should just say no or

favor visualization over bolder and stronger action on job starting jobs and economic growth. we do need a 3-for economic growth and jobs strategy. -- we do need a three-part economic growth and jobs strategy. we need to continue to invest in our future and winning the future in treaty and education and taking the steps that laid the foundations for the private sector, the engine of our economy to grow to be more innovative to produce the high- wage jobs of the future here in the united states. that second, we also need to have a plan for long-term fiscal soundness to provide a long-term confidence that this is the place to long-term investment in job creation.

the third, and not less important, but a powerful effort to jump-start jobs and growth right now. the american jobs act is central to this strategy. one is a powerful measure to jump-start job creation and give more bloodshed to our economy. it is paid for, it is part of long-term strategy. and third, that many of the things in the american jobs after also essential to the type of long-term investments we need to do for greater productivity for greater innovation for a more competitive work force. we made a decision to not

about our own economic projections. our view has been that that is a tough call whether to do or not to do. there is a lot of benefits and doing so, but often our projections get more politicized, and issue often becomes a distraction. at this particular moment we decided to rely on what outsiders coming independent analysts would say. while there is a range, what is absolutely in, and all of them is what is the significant difference this would make. mark zandi, the chief economist at moody's, estimated 2.2% growth, right where the blue chip is. they predicted it the american

jobs act was passed, growth would be 4.2% in 2012. a 2% growth differential. job growth would be 1.9 million jobs higher. that is 158,000 jobs per month differential. 158,000. it is clear that others such as macroeconomic advisers, were not quite as high. the route 1.3% growth. it would not surprise you to know that i favor his analysis, but whether it is 110,000 additional jobs per month or 158,000 jobs per month, whether it would make projections of growth go from 2.0 to 3.3% or 2.2, there is simply no case for

not trying to pass the american jobs that were not trying to find a significant effort that we could take to the other to give this economy meant to cover protect against the risk of further unforeseen event or downside coming in to offer the hope of greater momentum, greater job growth, a greater economic confidence and more customers by taking this type of action. yesterday we put forward legislation that said how we would pay for every penny. as you saw, it called for limiting deductions at 28% for higher-income americans, those making over $250,000. it also called for reducing

corporate tax expenditures that are harder to defend. i am not totally sure how one defends why if you buy a private jet you get to depreciate that faster than that someone is engaged buying a commercial jet, which is very central to the economy, and companies that employ tens of thousands of people. those of the types of things we put in as paid force by the american jobs act. -- paid ford by the american jobs act. the way the legislation is written, it says here are the recommendation the president wants to take so that we can get the benefits and the first year for 2011/2012, partially 2013,

and here are the way we would insure that over 10 years it is paid for, completely paid for. the measure the and also says that if the joint committee meets the deficit target that was set by law and the budget control act and chooses to pay for the american jobs act of love and meeting the target, then the measures we put forward would essentially true for off. this was our way of making very clear we're willing to step up to the plate in detail precisely how we would pay for every penny of the american jobs act, but we also created a mechanism where there is a bipartisan agreement to pay for it with a different mix of policies.

that we would not only allow that, but that the legislation would by definition put that alternative pay force into action. in doing this with both put forward, met the test of being specific on how we would pay for it, put forward to the country for what our preference would be, but we also created a process by where if there was a bipartisan agreement to pay for it a different way, that was also a way of getting the american jobs at done. i will say the following about pay force we putas forward. one is that is a reduction is never easy. it is never without controversy and never without asking someone to sacrifice and some way.

firms been the president's principle that sacrifice must mean that shared sacrifice, and that means choices. the president put forward choices he would make. we think it is more important to put forward a fiscally responsible plan that could mean up to 2 million jobs, up to 2% of groswth. we made the view that that is more important than according giving the most well-off two or three times higher deductibles than the typical deductions for the typical american family. we made a decision that we would rather support putting people back to work, fixing schools,

putting teachers back to work, and we would protecting corporate deductions and oil or private jets that are just not affordable in the current national situation we're in. the second point i would make is the president " forward this proposal to cap deductions at 28% in 2009. later the gang of six, virtually every bipartisan group came forward and said one of the ways we should have deficit reduction is to have reform of our individual tax expenditures. the president was there earlier with a proposal that does reform our individual tax expenditures, and does so in a way that is most fair.

obviously as the president has said, we're not only opened, we will obviously encourage a tax reform process that will worse expenditures it does so in a way that could both lower rate and lower the deficit, but this proposal as a stand-alone measure to pay for the american jobs act is completely consistent with the bipartisan call for reforming the tax expenditures, and i think many who might have not supported this completely it to those of nine will take a second look now that the issue of tax reform or reforming tax expenditures has come in to stronger focus. now, we obviously -- one final

thing i would say before sang a little bit about some of the component is that the plan we have put forward, the plan to both have a powerful american jobs act that can jump-start job growth in the immediate term with a long-term plan of investment in the future in fiscal soundness that will bring our debt down as a percentage of the gdp is a plan that works best together. it is complementary, not contradictory. create the economic momentum with a powerful jobs in growth job start. it is as complementary as good

pitching and good winning is to a good baseball team. it is very hard to reach your fiscal goals if you do not -- if you are not willing to take the necessary steps to ensure that this recovery gets the momentum it needs. it is also harder to get the long-term benefits of economic confidence if the powerful jump- start is not also combined with commitment to deal with your long-term fiscal situation in a way that does not hold back or offset in the 2011/2012, the jumpstart and increase in demand that the american jobs act is designed to encourage.

in putting forth a plan, we obviously put forth an agenda. i will not at this moment go through the agenda, but they're obviously tax cuts to help americans of businesses hire and grow. two, putting americans back to work. 3 tax relief for every american worker in family. about the points rationale for some of those items. as i mentioned, in december of 2010 when we passed parallel tax relief, we were looking at gas prices of $3 per gallon. the 2%. a tax cut was being very rigid was a very important measure. it provided a significant buffer for american consumers and gave

them extra money in their pocket to deal with the higher gas prices, and at times higher food prices that were not foreseen at that moment. it turned out to be a very of corte buffer and very important insurance policy against what could have been of more harmful it to consumers spending from the higher gas prices that virtually every american face at the pump. as we now look forward with current projections and current gas prices and the need to insure strong demand and a more customers in the shops of more small businesses, we felt it was economically necessary to offer a temporary is even larger temporary payroll tax relief. we put forward 3.1% payroll tax relief, which essentially cut the payroll tax in half for all

american workers. that would lead $1,500 for the typical family that makes $50,000 -- that would mean $50,000 -- $1,500 for the typical family that makes $50,000. it is a very of the gatt measure in the sense that you are building on an existing structure in a way that puts more money in the pockets of every worker on a biweekly notions, biweekly way. again, it is elegant and that you are able to build all of the existing structure and put more money in the pockets of american workers and their families in an extremely efficient way. while this can only be a temporary measure, we feel the new head winds that our economy has faced justify not only extended but expanding.

of the employers' side, small businesses, we spent a lot of time looking at this and analyzing this, and i think we came to a couple of conclusions. one, there is significant differentiation in the company -- country between the largest multimillion-dollar companies in the millions of small businesses and on tour and doors -- and entrepreneurs, many of which two of phase the perfect storm of the economy. of the largest site, but many companies are sitting on enormous amounts of cash. some have estimated two trillion dollars total. smaller companies, many of them face a perfect storm. they are way more dependent on bank financing and have been hurt more by the tightening its standards, particularly for working capital. many of them rely on their home or office building as

collateral, and that deterioration has hurt their capacity to get financing and to even meet the cash the they have. we felt if we regard to do a payroll tax cut of business that the right way to target that would be to target it at the smaller companies. by doing -- by cutting the payroll tax cut in half for companies -- for the first $5 million of wages, but we felt that was an official at with a to target the overwhelming amount of businesses of the country that have wages 5 million or less. this would still go to every company, but there is no question this would have a major impact on a 98% of companies small and medium stars -- size businesses that have 5 million

and wages and less. for them in extra cash could be meeting -- the extra cash could be very meaningful. we believe this could help small businesses keep people on the job and make it easier for them to hire. we also want to make sure it was part of an overall start strategy to increase demand. many of the small businesses need the extra relief for inventory, for equipment to fix repairs, all of the uses of the funds would be positive for this economy. then we said to all businesses that if you are going to have higher wages did you did the previous year, if you are either agree to hire more people or give raises to your existing workers, of that increment, that amount that is over what you did the previous year, we will give

you a full payroll tax holiday. this has been found by many economists to be one of the most efficient measures, particularly for job creation. now, it is because that even if one or two of the businesses make the choice, or this is the factor that pushes them over the ine in excel rating the higher, that alone makes it a very good bang for the buck, in addition the demand this insert into the economy. obviously a major part of the proposal was putting people back to work while modernizing our economy. today the president is now speaking about one of those pieces, which is rebuilding and modernizing schools. our proposal put forward a $30 billion proposal. it was designed to modernize over 35,000 schools for science

labs and internet-ready classrooms. in designing this one of the things we did was get those at the school district level greater flexibility in how to use their funds than has normally been the case and many school construction proposals. why? schools are like a lot of families, not everyone is ready to do a major reconstruction. probably everyone at your home has something you would be ready to fix. likewise in the schools, while there is some need in some schools that would be ready for two or $3 million a significant renovation and that would be critical for the integrity of the children going to school there, many others face terrible inadequacies in their

physical infrastructure that could be dealt with with much less. by giving flexibility more money would go up quickly and we could do more to invest in our long- term education goals. just one or two things that are worth mentioning. the gao found on 48 percent of schools that had a high degree of children in poverty, that when asked whether their school and met functional requirements for laboratory science and the choices were yes, partially, or not at all, up 48% wrote not at all. it is just a terrible plane that we all go to conferences here and talk about the importance of science and talk about having a stronger work force, stronger

initiative, and then in half of our schools with lower-income students, they do not even have adequate science lab facilities. that is an outrage. that should be an outrage. this would give a school district the capacity to take that on, to take on having internet-ready classrooms, to find ways to save money with more energy efficient modernizations and modifications. the second point i would make is that there is nothing noble or fiscally efficient or pro- spending cuts about allowing ongoing deferred maintenance. if you, in your home, decide to cut back as i have not on by a nfl direct tv access, i will save money. i will not get to see the detroit lions play, and they won

their first game, but you would save money. if you simply do not fix the broken window, you are just deferring the increase in spending to a later date, and you are probably -- and it probably means or increase spending later because of the damage it does. we have to under 70 billion in deferred maintenance in the schools. -- 270 billion in deferred made its in the schools. the idea that this would be above expanding -- big spending, as opposed to start investment, it just does not listen when you look at the details. the second thing to mention that as if there is there is a $35 billion initiative for teachers. i think if you look at our

economy right now every month of the of a limit report, every quarter on gdp you see the same thing. growth in the private sector, and that it is being pulled back by a contraction in the local government and state sector. you see this every time. since january 2010 the private sector has added 2.3 million jobs to the economy. state and local government has obstructed -- has

the majority and minority leaders for morning hour debate. the chair will alternate recognition between the parties with each party limited to one hour and each member other than the majority and minority leaders and the minority whip limited to five minutes each but in no event shall debate continue beyond 1:50 p.m. the chair recognizes the gentleman from california, mr. dreier, for five minutes. mr. dreier: mr. speaker, i ask unanimous consent to revise and extend my remarks. the speaker pro tempore: without objection. mr. dreier: mr. speaker, it was a great sadness that we received the news this past weekend of the passing of one of my longtime family friends and one of the most dedicated public servants i knew, that is senator percy, who passed away at the age of 91. senator percy is someone whom i first met when i was a kid at

summer camp in colorado. and tragically his daughter, valerie, had been murdered and sharon, percy, rockefeller, who served with great distinction as head of the w.t.a. board and many other civic duties here in washington, d.c., but i am met senator percy when i was at valerie lodge. and at that moment, mr. speaker, i saw someone who was clearly very dedicated and extraordinarily principaled. and his entire life was dedicated to public service and doing everything he possibly could to ensure that life was better for all around him. and i came to congress a little more than a decade after i had met him, when i was at summer

camp, and he immediately took me under his wing. he made the pilgrimic from the senate here to the house of representatives and visited me in my office several times and i took my first trip with him to mexico and it was the u.s.-mexico interparliamentary conference. i remember very vividly nearly three decades ago -- well, three decades ago what he said, mr. speaker. he talked about the challenge and the relationship between the united states and mexico, and he characterized his remarks as it related to his twin daughters, sharon and valerie, and in that speech he said so many people talk about twins and the similarities. he said, for me the greatness is to look at the differences between the two. and he carried that personal message as he referred to the challenging relationship between the united states of america and mexico. and i was struck with that. he was chairman of the senate

foreign relations committee and i was privileged to serve two terms here in the house while he served in the senate, and i want to say to his wonderful wife, lorraine, and to all of the other children and relatives and friends of senator charles percy, he led an amazing life and one that was an inspiration to me. i will greatly miss him. i yield back the balance of my time. the speaker pro tempore: the gentleman yields back the balance of his time. the chair recognizes the gentleman from oklahoma, mr. boren, for five minutes. mr. boren: i ask unanimous consent to address the house for five minutes and to revise and extend. the speaker pro tempore: without objection. mr. boren: i mourn the loss of norma johnson who passed away on september 14, 2011, at the age of 90. ime, as we all knew her, was a very close friend to the boren family, and i can remember

seeing her face at some of my earliest campaign events. she was always there. she was the wife of glen d. johnson sr. and the mother to glen d. johnson jr., the former speaker of the oklahoma house of representatives and now our current chanceler for higher education. -- chancellor for higher education. she served her son and husband both faithfully. i know her son will miss her. ime was a civic leader and a dedicated public servant. she was a member of the okema chamber of commerce and past president of the american legion and a member of the p.e.o. in 1999 the city of okema put her in the okema hall of fame. ime was a true inspiration to her beloved oklahoma.

again, we are all going to miss her. so many of us, i know, she has family scattered across the state of oklahoma, particularly in okema. her son and many, many other oklahomans who she has touched. again, we will greatly miss her and i yield back. the speaker pro tempore: the gentleman yields back the balance of his time. the chair recognizes the gentlewoman from illinois, mrs. biggert, for five minutes. mrs. biggert: i ask unanimous consent to revise and extend my remarks. the speaker pro tempore: without objection. mrs. biggert: mr. speaker, i rise today to pay tribute to a man who served illinois, our country and people from other nations around the world for decades before his death this weekend at age 91. that man is senator charles h. percy of illinois. a list of accomplishments as a senator, a statesman and a larger than life political

figure are well documented. others have articulated these things far better than i could today and i'm confident that history will recount them as well. but, mr. speaker, what i wish to convey today are the warm and wonderful stories and the testimonies about chuck percy that have only come to me from those who knew him and loved him and those choose views and sentiments i hold in the highest regard. their stories are not only the well suited for publication are statements on the house or senate floor, but they are funny, warm, endearing and genuine. they reflect the love of incredible -- they reelect the incredible love of life. these volunteers, former members and political leaders cannot address the house about him today, but i can and it is my honor to do so. they are some of the finest leaders of illinois today, the state comptroller who launched

her first campaign for office years ago after serving as a percy campaign coordinator. the estate treasure and u.s. senator mark kirk who served on the youth for percy brigade. former congresswoman and u.s. labor secretary, lynn martin, whose very first campaign as a volunteer was to help elect chuck percy. and you heard representative david dreier on his reflections being with chuck percy. if you talk to them they will say the enthusiasm and commitment to make a better state, country and world are what motivated him to answer the call and launch their own political careers. his energy and enthusiasm, his openness to offer views and his compassion h passion for improvement were infectious. they will tell you about a dark moment of loss or sadness or disappointment in their lives. when he was there for them with a loving phone call or note, he was an inspiration to all of them.

their former illinois governors, jim thompson and edgars. he saw in them the makings of outstanding leaders and they succeeded in their own right. he never looked over his shoulder, worrying about those who might challenge his own leadership. he embraced them and encouraged them and made them a success to his success. unlike others in politics today, his generosity to others was boundless and without the slightest hipt of envy or -- hint of envy or competitiveness. with chuck percy there was no zero some. there was only pluses for everyone. they also gave the other leaders outstanding -- there are also the other leaders outside of illinois. the former h.u.d. secretary and ustr ambassador carla hill who first headed percy's alliance to save energy in the 1970's and when it became clear to percy that our reliance on

foreign oil was unsustainable. there are former senator fred thompson for whom percy saw a brilliant prosecutor and future star of the senate. there are those who went on to become leaders in their own countries like the late prime minister of india, gandhi, and president of lebanon, hirari, both who were cut down by assassination. there are federal district and appellate court judges and a supreme court justice whose service to our country might never have been possible were it not for the fact that chuck percy believed in them and believed that the cronyism and corruption in judicial selection must end. he saw in them a commitment to the law, the constitution and justice and with them helped to transform the illinois bar from one of those -- the most corrupt in the country to one of the most respected.

and last but not least there are thousands of staff members and volunteers whose lives were forever changed and guided by this dear man whom they referred to simply as c.h.p., or the senator. they are a network of individuals -- they are each to each other as they are to the public. they went on to do great things because of the confidence he inspired them and his belief that everything is possible. if only you want to work hard enough for it. they are my constituents and volunteers. they are my chief of staff, kathy lighten, and chief of volunteers and many others. and all the outstanding people that i met through their fellowship. they are hundreds of illinois and washington businessmen, lawyers, teachers, home makers and, yes, even reporters whose lives were forever changed by

this special man to one who would say, there was no one, no one quite like chuck percy. so today, mr. speaker, i want to say to them and to the percy family, lorraine, sharon and senator jay roger, mark and leslie and all of their wonderful children and grandchildren in the family that our thoughts and prayers are with you. we thank you for sharing this wonderful man with us, with the people of illinois, america and the world. i yield back. the speaker pro tempore: the gentlelady yields back her time. the chair recognizes the gentleman from north carolina, mr. butterfield, for five minutes. mr. butterfield: let me thank the speaker for yielding this time this morning to pay tribute to some great americans. i want to join my colleague from illinois, mrs. biggert, in recognizing the extraordinary life and work of charlie percy. he will certainly be missed. also want to extend condolences to the mondale and kennedy family who lost a young

daughter this weekend at the young age of 51. but, mr. speaker, i come to the well today to pay tribute to another great american, to a friend in north carolina who has lost a long and courageous battle to breast cancer at the age of 51. mrs. cassandra ward. she was also the wife of mr. everrett b. ward. for 29 long years they were married. he is a well respected public servant in north carolina with our state department of correction. excuse me, the state department of transportation. cassandra was a career educator in wake county, north carolina. many of you will recognize that as our capital city of raleigh. she worked for many years in the wake county public schools. the epitome of educational excellence, cassandra touched the lives of countless

individuals who have now become productive citizens in our communities across america. cassandra was employed by the wake county school system beginning with youngville, elementary, henry adams elementary, dillet drive elementary and finally forest pines elementary school. she was a life-long member of the north carolina association of educators. cassandra ward, mr. speaker, was a graduate of williamston high school in martin county, north carolina. also, a graduate of st. augusta college in our capital city of raleigh which is a historically black college there in the raleigh community. as a member of davey street presbyterian church in raleigh, cassandra was a church leader, not only a member but was also a deacon in the church. she advocated that the church

served the least of these in our society. she was a member of a great sorority, the alpha kappa alpha sorority. in that capacity as a member of the alpha theta omega chapter, she served and chaired many committees, particularly the black family, black heritage, health, social and systemly relations, salvation army and christmas stuffing committee. those were a lot of committees, mr. speaker. she was a very active individual. . she also found time to be associated with sigma phi fraternity. she was what was referred to, it took me a while to figure it out, but she was an acousa of gamma sigma, of sigma pie phi

fraternity. she leaves a very, very loving family. in addition to her parents and her has -- her husband, she leaves three siblings, johnny lloyd jr., jarvis lloyd, and one loving sister that she was extremely close to, crystal lloyd williams and her sister-in-law, felicia hardy, and her husband dr. james hardy. and so, mr. speaker, i want to thank you for the time. it looks like i failed to mention one or two other relatives. while i have a few seconds left i would like to do that. she is also survived by other relatives and friends. and especially her very special nieces and nephews, johnny lloyd iii, alicia hardy, jarvis lloyd, and ebb any, and janney, and mary williams, and young lady named gabrielle williams. they all comprise the wonderful familiar of cassandra lloyd.

i ask my colleagues today to join were me in honoring the life and work of this great american, can sand a lloyd ward. thank you, mr. speaker, i yield back the balance of my time. the speaker pro tempore: the gentleman yields back the balance of his time. the chair recognizes the gentleman from massachusetts, mr. frank, for five minutes. mr. frank: thank you, mr. speaker. today is a very important today in our fight to achieve full equality for all americans in the face of prejudices of various sorts. and to commemorate i want to read an extraordinary document. it is head lined don't-ask, don't-tell repeal. it's an official communication. today marks the end of don't-ask, don't-tell. the law is repealed. from this day forward gay and lesbian soldiers may serve in the army with the dignity and respect they deserve. our rules, regulations, and policies reflect the repeal

guidance issued by the department of defense and will apply uniformly without regard to sexual orientation which is a personal matter. for over 236 years, the u.s. army has been an extraordinary force for good in the world. our soldiers are the most agile, adaptable, and capable in history and we are ready for this change. over the last several months our leaders, soldiers and department of the army civilians have discussed, trained, and prepared for this day. the president, secretary of defense, chairman of the joint chiefs of staff have certified that repeal is consist tent with military readiness, effectiveness, unit cohesion, and recruiting and retention. your professionalism, leadership, and respect for your fellow soldiers will ensure that this effort is successful. at the heart of our success is adherence tormy values. these standards not only infuse every facets of our you culture and operation, but also guide us as we adopt a change.

loyalty, duty, respect, self-less service, honor, integrity, and personal courage are not mere words to us. they are the very principles by which we live, train, and fight. accordingly, we expect all personnel to follow our values by implementing the repeal fully, fairly, and in accordance with policy guidance. it is the duties of all personnel to treat each other with dignity and respect while maintaining good order and discipline throughout our ranks. doing so will help the u.s. army remain the strength of the nation. it is signed by raymond f. chandler iii, sergeant major of the army. raymond t., general, united states army chief of staff. and john mchugh, secretary of the army. parenthetically our former colleague on the republican side. mr. speaker, we have a history in this country of prejudice being enacted, and through the efforts of many people the

policy embodying that prejudice can be overcome. and as we debate any single effort to overcome prejudice, we are told that the effect of diminishing that prejudice, the effect of repealing that rule, will be chaos, will be disorder. will be social unrest. and it is never true. seven years ago the state i am privileged to represent in this house established same-sex marriage and there were predictions of doom, predictions that this would be a terribly upsetting factor. none of those predictions have come true. not a one. as we debated last year, the repeal of the unfortunate statute which said that brave and patriotic, gay, and lesbian bisexual and transgender members of the armed services would have to lie about who they were, would have to hide who they were or else lose the right to serve

their country, a right which some evade but for which they were prepared to fight, we once again heard prediction that is this would be disruptive. that it would cause diminution of the ability of our grave men and women to serve their purposes -- brave men and women to serve their purposes. let me predict today, mr. speaker, that every single one of those prejudice also three and four years from now have been proven as wrong as the predictions that same-sex marriage would be disorganizing. we will now see gay men and lesbians serving this country openly and proudly. as they have been serving this country proudly but unfortunately not openly for some time. and i hope that people are now making note of the predictionings that were made -- predictions that were made before this house, in the senate, and in the country about the negative consequence of don't-ask, don't-tell because they will soon be shown to have been wholely -- wholly false. finally i want to commend

sergeant major chandler, secretary mchugh, this is a very profound and important document. they are acting in the highest pra digses of their constitutional duty -- traditions of their constitutional duty, patriotism, and respect for our constitutional principles. i welcome this statement and i believe it is going to be proven to be a harbinger of a situation in which the full integration of gay and lesbian and bisexual and transgender members of the military goes forward with no negative consequences, with all the positive consequences that come from respecting people and abolishing prejudice. the speaker pro tempore: the chair recognizes the gentleman from illinois, mr. davis, for five minutes. mr. davis: thank you, mr. chairman. i ask unanimous consent to revise and extend my remarks. the speaker pro tempore: without objection. mr. davis: mr. chairman, i rise this morning to pay tribute to a

great american who lives in the state of illinois, who represented it and the country well. senator charles percy. i was a young school teacher comminet activist and i also was an individual who interacted with lots of people who were very sin -- cynical about government, politics, whether or not there was any potential for change. and so we had an opportunity to see in action one of the most forceful individuals in public life. one that you didn't describe necessarily as a democrat or republican. you didn't characterize them as a conservative or a liberal. you really thought of senator percy as simply a good, solid

united states senator who represented well not only his constituents but who provided leadership for the nation and the country. i think i remember that kind of town hall meetings because senator percy would hold those. and although he was a republican by political stripe and many of the people where i lived and interacted were democrats in terms of political stripe we would just turn out and senator percy's town halls to know what was taking place, what was going on, what was happening, and so i personally owe a tremendous debt of gratitude to him.

for helping to shape my own political philosophy. some of my political ideology. some of the things that i dream about and hope for and work towards. so i extend condolences to his family, wish them well. and know that america is a better place because chump percy served in the united states senate and served all of the -- all of america. i thank you, mr. speaker. and yield back the balance of my time. the speaker pro tempore: the gentleman yields back the balance of his time. pursuant to clause 12-a of rule 1, the chair declares the house in recess until 2:00 p.m. today.

the so-called overpayment or prepayment was mandated to ensure that the postal system had all the reserves necessary for their own health care, retired health care and for their own actual retirement. this is an agency that if it's underpaid now as it shrinks, clearly it will continue to shrink, you and i will be on the hook for tens of billions of dollars of payments that they should be making today. host: the postal workers union -- guest: oh, no. you can't list all them. host: the agency says that it needs relief from the requirement that it prefund its

retirement health care benefits. the president said no other federal agencies required to prefund its health benefits obligations and very few private sector firms do so. guest: we have a law. you wouldn't be willing to be in a pension plan that was essentially will pay later if we stay in business. more importantly, he's right. this is the only agency to do this because this is an agency that's allowed to gain its own revenue, send its own benefits. current benefits are actually higher than the rest of the federal work force. this is also an agency that wants that independence. and we want them to have it. the post office after all is a business unit. it is $65 billion business unit that simply isn't making a profit and it's primarily because they haven't made the changes they need in how they do business and how many people work there. it's not that they can't make a profit. it's not even that they're paid too much. it's that there's too many postal workers and they know

it. guest: they're losing $10 billion because they are not able to make a profit, including paying into their own health care. simply having them not pay into their own health care would be like bypassing medicare payments or social security payments and somehow assuming it takes care of the problem. host: you have your own bill to address this issue. when do you expect it to be on the floor? guest: we expect to mark it up on the 22nd in subcommittee. it will be on the floor after that. shortly after that. the difference between the bill is ours is a reform strategy. it is a business turnaround. it makes the assumption that we

want to treat the employees of the postal system fairly but that we don't want to keep 200,000 more workers than are needed. the five-day rule, just to make you understand the difference between six days and five days. first off, the post office used to be seven days a week and twice a day monday through friday. this is not the only time -- first time it's a cutback. it is expected to save $7 billion or less. so it's not the solution alone that there have to be other solutions. if you don't change the number of workers you don't save nothing. host: susan collins, republican from maine, ranking republican on the homeland security and government reform committee has this to say about cutting back to five days a week. >> the postal services plan to move to five-day delivery, it's not without significant downside. it would harm many businesses

unless the postal service can mitigate the impact. it would force industries ranging from home delivery medication companies to weekly newspapers to seriously consider other options. and once these private firms leave the postal service behind, they won't be coming back. and the postal service will suffer yet another blow to its finances. host: congressman, she disagrees with you. guest: no, she wants to maintain the status quo. she has her own bill. more importantly, she's not wrong that every single reduction in service will in fact affect somebody. it will. i think she stresses the point beyond reasonable about medicines and so on. if you absolutely need medicine delivered on saturday you're

probably going to use a special express mail. you won't hope it arrives on saturday in a normal two or three-day delivery. more importantly, her offered solutions are temporary. the president's solutions is temporary. they are designed to get us two to three years of still losing money but in denial. quite frankly, we either have to be united states of america and reset this agency to make money the way it was supposed to and can or we're greece in denial of have many to many federal workers. my proposal doesn't mandate going from six to five. it has over $10.6 billion worth of savings out of about $18 billion that are possible. if they choose to continue six-day delivery they simply have to make some of the other changes. 109 million have a box or they

go to their curb and they get their mail. if you have this delivered to the curb and somebody else is having it delivered to the chute, it is costing $5.5 billion. meaning we can save more money by having people go to a common mailbox rather than someone waubing all the way up to their door. that change alone saves more than all the other proposals that people are talking about. that's the kind of thinking the post office has to have. host: here's what the american postal worker union says about your proposal and what you're advocating. congressman darrell issa who likes to portray himself -- has a website that bashes the postal service using, you guessed it, taxpayer money. it is intended to generate support for legislation sponsored by the congressman that will destroy the postal service as we know it.

and testimony before the committee on april 5 in 2011. apwu's president said this is costing more tax dollars than the postal service gets in tax dollars. guest: well, first of all, that's not true. the postal service gets a few million dollars. which i would like to end too. the postal service said, stop giving us the few million dollars. we'll take care of special needs, the blind and a few other items and let us run our post office in a good way. you know, i have a budget. few million dollar budget and i choose to use it to push the reforms that i think are appropriate. nothing wrong with that. but i will tell you something. if you go to our website for the oversight committee what you'll find is a little dial activity where you can decide what you want to cut. and based on independent c.b.o. scoring you'll see how much you'd save and what people are finding is they go there and

they start figuring out to to save $10 billion and they fairly quickly start having things that makes sense to them. we score them. we want to know the priorities of those who go to that. i suggest all the union workers for all the various unions can go ahead and go there and figure out how to save $1 billion out of a group of options. i'll let you drift off. host: the solar panel company was in the news last week. the ners committee took up the -- the energy and commerce committee took up this loan guarantee program. they are in the media today. and then we saw the story from amy in "the wall street journal" on september 15. representative michael turner, republican of ohio, has asked your committee to look into light square which is another solar company. how -- what are your plans?

guest: we have agreed to look at this broad scandal differently in the energy and commerce committee. we are not the committee determining whether solar or wind or hydroelectric winds but we are looking and realizing that starting in the bush administration, although this loan was turned down in the bush administration and brought to life under the obama administration, there's been this attitude that somehow government can weigh in with loan guarantees and pick specific winners and losers. we see that as back door, easy way to end up in corruption in government because people picking winners and losers include henry waxman. one of my colleagues. chairman. it includes the president. it includes people who come to the white house 16 times and are the largest bundlers for the president. you look at that and say, hold it. this is another reason that crony capitalism, getting involved in government using its power to pick winning companies in a capitalist

system is dangerous because they're going to pick winners that they ideologically or in some cases because they support their candidacy want to see win. host: so are you investigating? guest: we are investigating because we are looking at it not for one company or two companies, we are looking at the system, the corruption that seems to be indemic in both ideologically picking winners but this is an unfixable program of politicians who quite frankly need to raise money to win election or the people to work for them, you can't have them selecting winners or losers. in the case of the president's people, in the case of henry waxman clearly had people who saw a link between their campaign contributions, their ideological bent and these companies. host: another topic. news corp. murdoch's company. they are calling you to look in the scandal. you were on fox saying this is being looked at by the justice

department. this is being looked at by the senate. this is about another country. it's not good for us to start picking on the media. first, just because the justice department is probing an issue guest: well, when a left-wing blog wants to make a quote, fine. i'll take it on its merit. here are the facts. there is no credible allegation with any specificity of any wrongdoing by an american unit. secondly, the justice department, no friend of rupert murdoch and fox news, is investigating. third, the democratically controlled senate is investigating. are we monitoring this, are we staying aware of this? absolutely. but with the resources, and you mentioned taxpayer resources, if i don't have any kind of a smoking country, i don't have any kind of an on-the-record

credible allocation, i have a left-wing blog not saying i should have listened to one of my democratic minority members demanding that we do it, there's a lot of resources that take to do it, we are happy to look at evidence that comes along. and if we see any credible evidence let's do it. what i've said and it's extremely important to your listeners and c-span, we take very seriously looking behind the door of journalistic practices. we have to be very careful. if there's wrongdoing we have to get to it but we can't simply go and say, you know, you are getting leaks from inside the administration and that's criminal. well, let's go and investigate it. you can imagine how quickly this could degrade into constantly investigating. this would be investigated by the justice committee as a

crime. host: the 9/11 commission was not a foreign matter that was hacked. guest: i understand. you can read the left-wing blog. the justice department, criminal investigators are looking to see if there's any merit to it. we're happy to have them find out fairly quickly whether there is. understand that's fun. but i'm investigating the justice department who put 2,500 deadly weapons in the hands of mexican cartels and the justice department is turning their nose up and going, we're not really going to deliver you on subpoenas. so when the justice department wants to do something, let them do it. when they don't want to do something, like not prosecute for related murder, the people that traffic these guns to the mexican cartels that led to brian terry being gunned down in arizona, then that's where our priority has to be. my job is to prioritize. this is perfectly good to monitor and see what happens. i intend to. but i'm not going to go off

bashing fox or cnbc or c-span because some left-wing blog wants us to. this is the most important issue that comes before us, are we doing what we need to to ensure the protegs of the first amendment? the answer is we're watching the justice department to make sure they do a full investigation. at the same time i want to make sure what the justice department did wrong that led to the death of a border patrol agent is properly investigated. i want to see that when the president and his cronies are picking winners and losers in the private market, in this case in the solar panel matter, that it wasn't because there were large contributions given to them. this isn't partisan. every chairman has to make this decision. over in the senate they have made the decision to investigate one thing. senator leahy has completely ignored and she's a friend of mine but completely ignored brian terry's death. he let senator grassley twist in the wind without any

cooperation. our committee has been taking on what the senate won't take on. host: you are a friend to the fast and furious program. guest: we are referring to fast and furious. they are saying it's not a program but an operation which led to 2,500 deadly weapons in the hands of drug cartels. host: we want to talk about regulations. show our viewers what henry waxman had to say who was our "newsmakers" guest. here he is. >> well, the republicans don't believe in regulation of any sort. they call regulations job killers. that's a good little phrase and they got it from their spin meisters. but these regulations are so much more beneficial than the cost. they had to go through a rigorous cost benefit analysis at e.p.a. and the office of management and budget. when we stop these mercury from the old power plants, mercury can cause children to die and

could cause those who live disabilities. there is a tremendous public health crisis we pay. the only cost for regulations are the costs to comply with them but the cost of not doing these regulations are often many more multiples of the cost of getting the job done. so they want to repeal the relations, it seems to me. they'd like to repeal the clean air act. they'd like to repeal the protection of our environment. if the government insist that industries do what's necessary to protect the public from pollution from the sources that they control, none of us are going to do it. host: congressman, what did you hear? guest: what i heard was henry waxman, served with me since i came to congress nearly 11 years ago, he pushes regulations strong and hard.

he's out of step with the president. the president said he identified 500 regulations that needs to be changed. they need to back off on the ozone standard. there are a number of places in which i think the president is beginning to realize that excess regulation or the uncertainty of regulations seemingly coming out of nowhere quickly are really causing investors not to make investments in america. is henry waxman wrong? yes. we have to protect the air and water. at the same time, there have been plenty of shortcuts which our committee exposed which there is a requirement for more public comment, there is a requirement for weighing the cost and benefit. it's been bypassed. so we agree with the president. not so much henry waxman. host: all right. frank, republican. you are on the phone with

congressman darrell issa. caller: congressman, i want to know something about the fast and furious program. guest: well, i think -- host: we're listening. guest: frank, is there a specific question on fast and furious? caller: i know you from watching you in the hearings that you're a no b.s. guy and i want your assurance that you will make sure that this investigation gets done completely and thoroughly because of the datf and their road operators. i see some people like them because i am a gun owner in this country and i just want to know if -- when and if you find out how high and how far this went up are you going to prosecute the people that were involved in this? comboip except for the word prosecute i'd be with you. we'll expose and we'll do our

best to see if they are prosecuted if appropriate. we are trying to figure out every place the system should have said, stop, don't do this, broke down. when you get to, if you will, the last and highest, it's because we need to make sure there are assurances in the system that this won't ever happen again. i use examples of iran-contra. looking back, there should have been people saying, stop, don't do this, long before ollie north was able to launch this program, control it for months. this was the same thing. this was a dumb idea, ill conceived and the question is, why, for what ideological or other reason people bypassing the normal safeguards and let it continue. i want to know, senator grassley wants to know and the mexican attorney general wants to know. you have to understand, she has never been fully briefed. she wants to understand why you would do this to her country and she has over 200 separate

crime screens she's dealing with many people murdered as a result of these weapons. host: chris on our democratic line in buffalo, new york. caller: yes, representative issa, while a member of congress while in the majority did you ever try to initiate any investigation against the interests of dick cheney and george bush against halliburton or oil and energy interests that they had? host: congressman. guest: glad you asked this. when we were in the majority under chairman davis when i was a subcommittee chairman i began an investigation of mineral management service that this was a dysfunctional company, one that began partying with lobbyists, doing alcohol and even illicit drugs. one that showed they were not protecting us in the gulf and they couldn't even account for the money. and we were pushing then with the i.g., that they needed to

fix this organization several years before the tragedy in the gulf. so not only was i investigating and pushing but i am as frustrated as many people are that you can't get the reforms you need to prevent disasters in the future when you have bad government and you're absolutely right. i also led the push to try to deal with these failed leases in the gulf that led to a great many oil and natural gas companies paying little or no tax even as the price skyrocketed. again, when we were in the majority well before it was in fashion. host: ok. jeff, an independent in cleveland, ohio. caller: good morning. guest: how is the weather in my hometown of cleveland? caller:-run. guest: figures. caller: i wonder if you never look at foreign countries? solar panels, stacking the deck against american companies but we're stacking the deck against all american companies when we allow them to bring in and we

put huge tariffs on anything that comes? guest: jeff, you're right. i grew up in cleveland and saw that auto and rubber and steel were king. they really created things. those jobs are to a great extent being reduced or eliminated. one of our problems is in free trade we try to get a no barrier, no barrier. but when we don't have free trade and we have little barrier by comparison and they have a lot of barrier we haven't had a good reaction. i'm one of those people who believe that getting to no barrier, no barrier is a good deal. but i don't think we need to allow companies continue to have tie tariff on our goods just because we don't have a free trade agreement. that's one of the factors that's been missed in the whole discussion is those who want free trade should also be demanding if we're not getting it and getting it quickly then we need to raise our barriers to match countries that are in fact close to a fair import of

the areas where we are productive and able to compete. and whether these boeing aircraft or financial services or in fact some of the things that are being produced in my home city of cleveland, ohio. host: congressman, i want to give you a chance to respond to this headline in cbs news' website. liberal group files ethics complaint against you. guest: well, you know, the association is not only frivolous but it's one of those things where a blog was set up. they are spending hundreds of dollars to attack the chairman of the committee which is me. they try to get it planted in newspapers. even after "the new york times"

had to correct repeatedly false statements, they then come and do something that happens roughly once a week which is some group will allege something to the outside ethics council. here's just a summary. goldman sachs, apparently my relationship with goldman sachs is i had a mutual fund that bore one of its names. merrill lynch, apparently my association is i have a brokeage account there. understand i came to congress having done well in business, having sold d.e.i. holdings. i don't own it. my foundation owns some stock in it. i welcome the allegations. as a matter of fact, i'm considering asking them to go inside the ethics committee to consider it. have i done anything wrong? i'm sure there's a typo on some entry as far as the various holdings and so on. i don't own any individual

corporations. i only hold mutual funds. now, those mutual funds are from goldman sachs or merrill lynch or blackrock or any of these others, that doesn't make me an investor in them. additionally, they made allegations that i had a connection with toyota when i was being as tough as i could be with toyota. some of the products i made until 11 years ago could end up being installed in a toyota. i never was a direct vendor to them. i never got any money from them. so you make these allegations. that doesn't make them true. more importantly, i think this is a wonderful distraction. i appreciate the left is going to do it. i'm sure the right is doing it. we have an ethics system. i expect the ethics board to do their job and i welcome it. host: being on the outside looking into it? guest: the outside, the o.c.e. looks into every single one. host: the office of congressional ethics, i just want to be clear. guest: it's something under

nancy pelosi which i think she regrets because it doesn't have any safeguards. it's where someone can make an allegation. i have done nothing ethically wrong. have i been smeared? yes, i have been smeared by "the new york times" and they've corrected it. they make allegations that are simply not true. host: have you talked to anybody on the inside ethics committee? guest: that would be none of anyone's business but i tell you i am considered, as i said a minute ago, i'm considering asking it being moved there and just -- it wouldn't be anyone's business. the ethics committee is supposed to do its evaluation privately and fully because we have that committee for a good reason and the reason is anyone can make an accusation. there are 320 million americans. they can go to the o.c.e. and make those allegations. it should be a known supporter. they are not making it with

clean hands and they are making it based on allegations. just because you create allegations and even you repeat them even after they've been debunked doesn't make them true. host: welcome to the conversation. caller: representative issa, i think you should take that as an act of courage. i hope you will keep up your investigation with fast and furious. i think you should look into the company that was invaded by the justice department because the republican owner there was doing what all the other guitar makers were doing, that the democrats are not looking into the democrat owners. also hope that you will look into that where they showed up at this door and say i am a failed black farmer and handed out checks for $50,000. even though some of the actual black farmers said they were lying. there was so much chicago politics coming out of this white house. i hope you will find who tried

to persuade this general to per injury himself. -- perjure himself. guest:le pigford situation is we paid out a lot more people than ever existed. that's concerning. there is a bus accident and you get 75 claims out of a 35 passenger bus you begin to see a pattern. let's bear in mind that the legitimate payees we voted for in congress, we are concerned, there are too many people those that were properly impacted. that's a problem when government starts handing back money. going back to gibson guitar, you have to take the opportunity when my company was resold, gibson guitar was the other bidder. it was sort of interesting. i didn't -- my foundation owned a little stock. i watched it and then two weeks later they were rated. so i have to tell you, that's

one where i sort of looked and said, yeah, we need to make sure it's properly investigated. i need to sort of humerusly, yes, the owners are prominent republicans. yes, they made a bid on the company i founded many years ago. yes, i want to make sure that nobody questions whether i'm doing this because, quote, they were a bidder in the company. on the other hand, i hope they didn't have this raid because they did bid on my company. and i suspect they didn't. host: how do you balance that? you've been in the papers noted as one of the wealthiest members of congress. you were success before you came here. made some money. so how do you balance what you did in the past with what you're trying to do now? guest: first off, what do you is change. when i was a businessman i ran my business every day. i managed by wandering around. i was hands on. that was my style. before i ever sold, before i ever came to congress i made a decision to sell the company. i put it up for sale.

i sold it. i was still running it until the day i was sworn in. i made the disconnect of never being an operational manager. most board meetings, which i attended on behalf of my foundation, i did over the phone. when something else came up, i thad the guys maybe after 30 minutes and said goodbye. i left the board when the company was resold because i thought they gotten all the transfer knowledge they were going to get from me. i will miss it. i miss hearing directly what's going on in the company so you can understand the troubles that people have in the praste sector that -- private sector that companies see and government doesn't. i made a decision, we don't own any individual stock. our charityible giving is through our foundation. the mutual funds we hold are all widely held. i fake the advice of a brokerage company and the only individual assets i own are some pieces of real estate and we make it a practice, we b