thursday, under the circumstances, any member of the house, in any one member among the 435 can object and that would be the end. the bill would not be able to be taken up that day, in which case, since the government is about to run out of money, the house leaders, republican leaders would have to come up with a new plan. the house would probably, the session friday or over the weekend to pass this four-day bills and keep the government operating. while there is an expectation this would all be taken care of quickly, expediently, there is no guarantee. and the mill won't run out of money? >> there will be the money for fema and subsequently the seven- week bill will have additional money for fema and the federal government. >> what is this whole exercise and debate over the continuing

resolution say about the ability of congress to come to an agreement on $1.20 trillion in cuts by the debt reduction committee by the end of the year? >> we have been reminded that nothing is easy in this congress. we have a democratic-controlled senate, republican-controlled house, each of them have their prerogatives. we have a democratic president at the white house who has his own interests. republicans were elected last year. they took control of the house and i wanted to make change and they take every opportunity to deliver on their promises. the democrats often object. we have seen on this debate on the continuing resolution including the money for fema, disaster assistance, that is often a problem to move and a

thing. therefore, the $1.20 trillion deficit reduction bill is going to be tough theme richard cohen, covering congress and the spending debate for " congressional quarterly." thank you for that update. we will have present obama's back-to-school speech coming up live at 1:30 eastern here on c- span. until then, from this morning's "washington journal." >> "washington journal" continues. host: mina kimes is joining us from "fortune" magazine and wrote a piece on --n the october edition. we show r viewers the cover of that and you write 0% of freight rail is owned by about four companies. 40u did that happen? who are the big four? and what impact has that had?

>> well, it sort of starts in the 1970's. at the time, there were dozens of large railroads, but the industry was in basically disarray. there was about 1/3 of the industry was either in bankruptcy or close to it. the infamous bankruptcy, biggest corporate bankruptcy ever happened in the 1970's, and part of the reason the industry was suffering aside from the trucks and that was that they were overregulated. the government controlled the rates they could set so they were able to earn small returns on capital and as a result not investing in their tracks, so you have an industry that's large and competitive but not doing well, then in 9800 -- in 1980 a period of major mergers kicked off.

in 1980, there were 40 class i rail leads to declined to seven and really four burlington northern, santa faye and northern pennsylvania in the west and host: what happened after that? you wrote congress stepped in with its legislation. then what happened guest: well, the railroads then did quite well and gave them permission to set their own rates, shed workers. and they passed on a lot of those stivings shippersut were able to grow their businesses, become more efficient. as they merged they became more efficient and great dl more profitable. in particular in the last six to seven years they have become very profitible. i mentioned in my story that since 2004 their profits had

gone up by something like 120% and talked about union pacific the biggest railroad whose profits had increased by 25% over each year for the last five years. host: you also wrote the railroads are writing that they are free market success stories but suppliers think there's a cartel going on. so explain 3w0e9 sides of this issue. what are suppliers saying and what do the railroad industry folks say? >> with all this con some dation, there's suppliers that have held to one railroad. 1/3 of the shippers are in this situation. as a result these railroads have pricing power over them and a lot of them have seen their rates go up, for some, a great deal. so on the shipper's side y

have companies saying look, i'm essentially being monopolized and this company has the ability to charge more. something should happen to make them compete more. and on the other side some are saying if it ain't broke, don't fix it. the industry has been doing well and a bright spot in american infrastructure today largely because they have invested $480 billion of their own money into their frastructure. so their stance is if you make us compete mor or adjust regulations, our returns will decline and we won't be able to invest? >> yes. that we take money and reinvest in the rails to keep them safe. and we won't do that if there is going to be further

regulation. >> exactly. and that's clearly a common sfons more regulation, if you regulate us more we won't be able to iest and our customers will suffer in the end. that's something we've heard before from a number of industries. it is potentially true in some ways, in large part because they do have to invest so much of their money into infrastructure. >> how much? >> i think there's a study that estimates over the next 15-20 years, something like $90 billion and they are currently investing at a pace to attain that. host: well, the association of american railroads has responded to your story and contacted "fortune" magazine and said that there were a number of inaccuracies in your story. how has "fortune" responded to their criticism? guest: i think all of the points that they made, which we

addressed to them, were not inaccuracies so much as interpretations. as one example, we talk about how railroads are currently allowed to engage in agreements called paper barriers saying you, the small railroad, can only do business with me. in the story i said that these were secret but the railroad lobbyists pointed out no,. they are not secret. you can do thisnd this and this to find it out. but effectively, i woulday that's secret i have. and the regulatory commission doesn't know how many of these exist. >> host: they also said in the letter that they takessue that friar 190 there were four but they said all toad there were only 80.

-- all told, there were only 0 that -- host: whether or not that rule is the same is a matter of smantics. because if a railroad is making slightly less and they are a class i it doesn't mn the at least there wasn't competition. host: they also take iss with the writing that railroads in july, unparalleled set of antitrust exemptions. guest: i stand by that assertion, because i was really surprised to learn about some of the assertions that the industry enjoys. i think a lot of people would be surprised.

and 20 state attorney generals have have written protesting these and the american bar association on antitrust laws so effectively, there are a few things. one, the rail roa are gone and ship eshes are not able so seek legal recourse outside. another issue is mergers are approved of this transportation board and the department of justice has no ability to intervene, which i believe it's very unusual. 2 aline industry, for example, is not in that situation. if.o.j. can stop mergers. as i pointed out in my story, one of the last major mergers was the marriage of union pacific and southern pacific. pardon me, and the department

of justice actually wrote a letter criticizeding the merger and advising it not to happen and pointed out that it might cost consumers and businesses something like $800,000 a year and the s.p.d. pointed out. so also the trucking and maritime to name a few -- if you want to read more of the viewpoint of the association of american railroads, we're going to post what they sent to "fortune" magazine along with this artic. but i want to go back to the splires versus railroad part of the controversy and talk about wh congress is doing or not doing. guest: there are really two

congressmen leading the charge on this issue. one is senator herb kohl who has a railroad antitrust enforcement act. essentially what that would do is undo all these antitrust exemptiont. he has been pushing that through for some time and spart one who fwoonts to the reform the regulatory agency who oversees the railroads. host: we're talking with mina kimes. if you're a democrat dial 202-737-0001 and replicans dial 202-737-0002 and

independents 202-628-0205. you saidf the carrier is true and charging above 80% of their t courts and pointed out in my story over the last 10 years, they have only issued 14 decisions on the matter despite that fact that there have been hundreds of complaints and the railroad said this is theavet there's not that many complaints and that it's not as serious an issue as shippers make it out to to be but the shippers say no. it's just t hard to prove everything and the burried season on the shippers that they are rude and paying

complete with tracks and hiring consultant the costs are too much. host: let's hear from stephanie, the democratic caller we're talking with mina kimes of "fortune" magazine. caller: you've already adessed on the monopolies that are occurring between them, i think the competition is at the bedrock of capitalism. it's not just here. it's in the oil companies and inhe pharmaceutical companies. and i think the writers are letting the public know what occurs in the railways and all the products that are put --

host: well, let's talk about the competition. is there competition? guest:y. there's defitely competition in some cases, the big four and southern east do compete with each oth for business and put out a lot of data showing this. hower there are cases where they could compete but do not this has obviously been a case bicase basis but some the points that the fewer companies there are in the industry the more businesses will opt not to compete. host: and so because they are exempt from these antitrust laws, then there is no issue with competition, is that correct? guest: in some cases, yes. some of the practices that they are able to do because of these

exemptions, could be deemed anti-competitive. host: grand forks, your call? caller: i see the headline being flashed on the screen. railroads, cartels or free market? that sgests to me that somehow free markets are associated with competition or excessive markets, but that's absolutely not true. it's a free market ideology. i don't subscribe to that myself, but the free market ideology is literally what leads us to a cartel, because free marketers don't want antitrust intervention, which is government intervention into the consolidation of their industry whether it's the railroad or banking industry or anything else. warn bift is a big player of the railroads and recently on

the charlie rosehow and talking about two fwoig fail banks. that means you're not subject to the personal pressures or responsibilities that you take, because you have a backstop from the government. >> host: mina kimes? >> iuess this is in troords what you're talkingbout. it's definitely an issue at play. the railroads should be allowed to set their own rates and should be allowed to sort of operate freely to an extent. but they also have so compete, i think, to ensure that there's balance between them and their customers. and th with with regards to your point about warren buffett. i think that, you know, because if and it's been a very luke aretive ack decision before and

he does like to purchase companies with purchase power. host: mena, -- man mean, this quotes the association saying railroads will hire 15,000 conductors, engineers and yard workers this year. host: what about competition from trucks and trucks on the highway? guest: well, railroads definitely compete with trucks all the time and other forms of transportation like barges and the like, there are times where it's onlyconomical and safe to ship by rail.

on a case-by-case basis there's situations in which rail is the only option for some shippers. host: so for some, they have set their business up around the rail system? why is that? guest: exactly. that was an issue that taylor my story around dupont, the huge chemical producer noting they to i think because their rates had been lower in the past and they had expect expectations, they had sometimes ingesting lls of dollars you've called question between the industry and

suppliers. four class action suits have been brought accusing the railroad companies of price fixing. gues although it's a waiting class confiation that involves a group of shippers, potentially 30,000 suing the railroads over allegedly colluding to overcharge them for fuel. the trial is still have said is one, the two wearned eastern railroads started to use the same surcharge systems at approximately the same time making it easier for them to implement these systems, and a number of documents had also been read in trial to suggest that the railroads were aware of the success of these systems did depend on cooperation. >> but as an i grew up going to

different plas right on the job and they used to run trains about every hour or so. they had large, long trains. and now i'm up in age and travel all over the united states in the military, and i see all these 18 wheelers. the roads are -- the interstate highways are being pretty well damaged by the 18-wheelers, and the volume out there is unreal i'd say 90% of the railroads are gone since i was a child. i can't see why the rail reds can't compete with the 18

wheelers when one train moves many 18-wheelers. host: that's like going from d.c. to boston on one gallon of few. man mean can you speak to the callers comments? guest: sure, because i think part of the reason why you haven't been seeing trains is because they have shed a lot of tracks and merged and increasingly they are prefering to do long hauls of commodities like coal and grain. so in certain parts of the country you might not be seeing them much anymore although overall they are getting the market share that trucking agencies a.

host: do you know what the rket smare? guest: it's been pretty even. host: from missouri? caller: railroads right now are probably doing three times the amount of business with less than half the employees. so that's -- host: alan, how do you know that? >> i just retired from them. host: from the railroad? caller: yes. host: do you mind telling us what your salary was? caller: it was $80,000 to $120,000. host: did you work on it for how long? guest: too many years. on call 24 hours a day. seven days a week you don't know when you're going to work or when you're getting off. enough to life but the railroad. host: alan, why do you think the change in the industry over

the years? >> money. and they have reached now three miles long. host: and what is the impact impact of that? caller: well, for the public, if anything goes wrong, i would say disasous. but for the railroads it's making money. it's either coal or truck trailers and grain. host: is that what you snoved caller: yes. host: were you a conductor? caller: engineer. i know this american railroad has statistics about its employment that there are about a 65 freight railroads that the number of frate rail -- number

of freight rail is up. caller: i think to talk about competition between railroads is affirmative louse. it's a private mon op limit we don't expect our highways to compete and make a profit. we should let it be handled by the government. we've been doing that for some time. our knew the miss approximately lines have been run by the government for quite some time also. that was -- railroads were a huge controversy 150 years ago, and there were a lot of arguments that they should be nationalized, the transcontinental railroads, they are natural monopolies and cannot compete and folks will look at people like henry

george who argued just like the mu the miss approximatelyis, highways. think they should be operated by the government otherwise we're just going to continue to have the same problem and it's not new and we were talking about this 150 years ago. host: mina kimes? >> i heard that in my reporting that hey, railroads are a natural monopoly. they are private companies but heavily regulated, so yes, they have monopolies in a lot of cases, but the at the se time there's a lot of checks and balances to make sure customers are not being gouged. host: i want tgo back to the class-action lawsuit that is going on and you said they have not classified tt yet but

when might that be resolved? what court is looking at it, and also what sort of conspiracy to fix prices that do they point to? when it comes to prices, fees, where do they think the conspiracy lies? guest: i think the case is about a fee called a fuel surcharge that they started to implement in the early part of the deck tied deal with rising fuel costs and these surcharges themselves are not illegal and are widely used even in trucks. but what they are charging in the lawsuit is that the railroads colluded to implement a special kind of surcharge, so before 2003 or so, the price of fuel was baked into a

weight-adjusted index sort of moves that price soup that they were paying more for fuel. this applied to the overall co of the contract, some shippers groups did studies and estimated they overcovered $6 billion worth of fuel between 2003 and 2007. host: greg, a republican in sarasota, you're next. caller: yes. i have a background in phosphate, moving phosphate by rail through the state of florida. some of our challengesere that up front rail companies would want you pay to put this on your property. once you've paid, then whoever had it, they negotiated for a

strong position. host: he was breaking up there. a little bit difficult to understand but did you hear him? guest: i had some difficulty making out what he was saying. host: moving on to an independent. caller: mina kimes i was shocked reevently when our passenger rails finally got the ney in our new york dwrire refurbish and get new passenger cars to find out there's not a passenger car manufacturer in the united states of america. we had to go through canada, taiwan and singapore to get bids. how does that translate over to the freight railars? is there, besides tm moving freight, is it generating that other kind of business in the united states? do they manufacture their own

locomotives and freight cars? guest: that's a great question. . i have to admit i don't know the complete answer. there's a cottage that supports this and provides equipment. as for whether or not the majority of cars are manufactured here, i don't know. one interesting thing i know is that increasingly more shippers are being called on to own these cars rather than the railroad, a means of pushing costs towards them indirectly. host: the association of american railroads breaks it down as far as what is being shipped on the railroads. 49% is coal. farm products make up 9%. chemicals 8%. food products and waste and ore, etc., make up what the railads are shipping across the rails. caller from brian, texas. caller: yes.

i would like to they to the listening audience. there are only two main channels throughout all human existence. think about it. number one is communication. number two is transportation. and if either one of these is monopolized to the extent that they have all the abilities to do anything, parned me, i've always loved the train. i think it's one of the best transportation things we have in this country. but now you know that it is dominated by the gasoline companies. they don't want the railroad companies to prosper. but it would be a safer -- it's safer. the trucking industry has just beat the highways to pieces. it's costly. it's costing everybody more money for the trucking industry. and the news industry has been bought out and owned/3 by

rupered measure -- by rupetrupet. rupert murdoch. host: it's said monopolies cannot survive. someone else else will always jump in. name one monopoly that contradicts this. scott hesterman also wrote this -- guest: sure. well, i think we talked earlier about how not all shippers are able to use trucks or barge as competition, and sometimes rail is the only feasible option. with regard to the free market and someone always jumping in, i don't think that's the case

with the rail industry. you have people disrupting your southwest airlines and your jetblues, but you and i cannot start a railroad and lay out billions of dollars worth of tracks easily, so there's a large feet in secures it from threats. host: republican from georgia? caller: yes. i'm a retired manacturer and logistics manager and had a lot of experience with railroads and track car-type movements. but i think the railing roads are our key to returning to manufacturing in the united states. it will be -- great for our -- i think also the inventory task

and most companies have to be -- also i think pricing in der to be real competitive and helpful to our economy, pricing has to be reasonable and profitable. fuel charges are way ave the 190's level. so all that needs to be considered. but i think we need the to have more private support and also more governance support of railroads. baz that's one of the key factors -- because, that's one of the key factors that's going to return the united states to manufacturing. and spur moreobs and help our economy. host: mina kimes? guest: sure. well, i think you make a good point about railroading and manufactureers and i think it

is ithe interest of this company to make sure there's an even plague field. the railroads don't exist in a vacuum. there are dozens of other industries impacted by these rules. so while they may be benefiting from the current system, for every dollar they safe, a dollar is being paid out by another system so 23409 only are the railroads competing but shippers have the means to compete as well and do well. host: does the shipping industry have its group of lobbyists here in washington as well to help them with their charges? guest: they do. there's a group called consumers united for rail equity, a bit smaller than the

rail equity. largely composed of chemical producers, manufacturers, coal shippers, and utilities pay a lot in raiweight. caller: i've had a lot of years with negotiating with railways and j.b. hunt is also a big player in the rail line. a lot of things i would say, first of all, unless you are a manufacturer or shipping, -- or shipping a lot of freight, railway is not a viable option for you. the way we're set up especially in the supply chain where companies are running leaner and leaner, the railroad does not fit the in-time model anymore. also you have to look at where

are you located? where are your products coming in? unless you have a ton of products coming in from the west coast, i'm not sure it's the best way for you. since i started in the industry, it's really if you're a major shipper or manufacturer here in the united states or you're shipping a bunch of cars in, the customer we're looking for is anything else out of the lines, you don't fit the rail model. host: did you move to snarlse what did you do? >> -- to airlines? what did you do? >> i worked for a large engine and car manufacturer, and we used rail a lot, because we had consistent freight that came in the cntry from a consistent spot and knew what time of the year i needed to buy all this

equipment, if you look at wal-mart and look at where their warehouses are placed, it doesn't fit the model so they know that. so unless you're moving greens, coal, cars, the rail -- roads are not fitting into your business model. host: any indication that the railroads want to expand? you talked about in the 1970's and coness in the 190's, shedding lines that wen't possible? >> absolutely. guest: i think they are definitely looking atx panneding their capacity. our highways are not in great

shape, so i think they are expanding or looking to expand in the next years so in order invest in their infrastructure, they need to earn sufficient returns. host: tyrone, can you make it quick? we're running out of time. caller: yes. i just wanted to ask her, didn't this start back in the 1970's? i was originally with con rail and as it was established, what happened was we ended up being one company, so that meant seven companies made one company. we started to get out of the local freight, because as manufacturing started to do a lot of closing, all youad was straight through rail. so wouldn't that be a lot of this that the government ended up making seven railroads one. and i think that was a very

hard hit on railroad workers and on the industry. that's why southern owns a lot and doesn't have to maintain the yards. guest: yes. you're right. i think it's a combination of the fact that all the railroads didn't contribute to the shedding of workers and lines. i believe your first point was railroads are no longer serving manufacturers, because manufacturers were shutting down. but i don't think that's what we're seeing today. i think a lot of manufacturers do want rail service, but the question is what is the appropriate rate if they are not shipping huge quantities of coal and such. host: here's the cover right here. there is her story.

>> here on c-span, we are a lot of benjamin banneker academic high school in the nation's capital, a school that opened in 1981. president obama is set to deliver his third annual back- to-school speech at the school. it is a school that was featured it in newsweek recently as some -- as one of america's best i schools for 2011. president obama is speaking today before the students in prepared remarks. the president will urge students to pursue an education after high school. he says that in tough economic times, the country needs their ideas and passion. this comes on the heels of changes to the note child left behind act that the administration outlined last friday telling states of they would be able to get some relief from some aspects of the note child left behind accurate they should apply and follow some reforms and changes from the obama administration.

it is likely we will see arne duncan at today's event. this is live coverage on c-span. [no audio] [no audio]

[no audio] >> benjamin banneker middle school provides a rigorous academic for college. president obama will speak at his third annual back-to-school speech.

[no audio] [no audio] >> ladies and gentlemen, to introduce the president of the datasets, please welcome student government association president, john a owens. [applause] >> good afternoon, special guests, faculty members, and my

fellow students. i am the student government president and a proud member of the class of 2012 at benjamin banneker academic high school. i am privileged to be here today, welcoming our nation's president, barack obama. we are very proud that the president chose benjamin banneker as a venue for his third annual back-to-school speech. benjamin banneker is one of the top public schools in the district of columbia, celebrating our 30th year anniversary as a magnet school, having maintain 100% graduation rate and college acceptance rate. [applause] as benjamin banneker achievers, academics and extracurricular activities are important including giving back to our community through multiple service and activities. i attribute my success to my parents, my school, and my

strong work ethic and self- determination. i am an architectural engineer that would like to pursue my studies at nyu next year. currently, i am interning at an architectural firm. since my freshman year here at benjamin banneker, i have been fortunate enough not to have been faced with a painful dilemmas that an increasing number of our nation's students face daily. recently, i was a recipient of the 2011 congressional black caucus foundation as a scholarship. the topic chosen by the cbc focused on positive initiatives to increase graduation rates amongst minorities. throughout my paper, i pointed out self-determination. if it is to be, it is up to me because we are the controllers of our own destiny. on behalf of the benjamin

banneker achievers, i would like to take this opportunity to thank the administration, teachers, counselors, and other staff members for their unwavering support. value and appreciate your effort and we have achieved academic success and are destined to set high marks. today's presidential address will be memorable and historic for all of us. we feel honored and are humbled today to represent students all over america as we look forward to another year. without further ado, off from president to president [laughter] let me invite you all to sit back and enjoy and enjoy the wonderful words of counseling and encouragement from our president of united states, barack obama and secretary of

education, arne duncan, thank you. [applause] >> hey! thank you, thank you very much. everybody, please have a seat. oh! well! madam president, that was an outstanding introduction. we are so proud of you for presenting this school so well. in addition, i want to acknowledge your outstanding principal who has been here for

20 years, first as a teacher and now has an outstanding principal, i need tet berger, give her a round of applause. -- anita berger. [applause] i want to also acknowledged mayor gray of washington, d.c. give him a round of applause. [applause] and i also want to thank somebody who will go down in history as one of the finest secretaries of education we have ever had, arne duncan is here. [applause] it is great to be here at benjamin banneker high school, one of the best high-school not only in washington, d.c. but one of the best i schools in the country. [applause] we have also got students tuning

in from all across america. i want to welcome you all to the new school year. i know many of you have already been in school for a while. here at benjamin banneker, you have been back to school for a few weeks now. everything is just starting to settle in. it is just like for all your peers across the country. the fall sports season is underway, musicals and marching band routines are starting to shape up, i believe, and your first big test and projects are probably just around the corner. i know that you've also got a great deal going on outside of school. your circle of friends might be changing a little bit. issues that used to stay confined to hallways are locker rooms are now finding their way onto facebook, twitter [laughter]

some of your families might also be feeling the strain of the economy. we are going through one of the toughest economic times we have gone through in our lifetimes, in my lifetime, your lifetime has not been that long. as a consequence, you might have to pick up an after-school job to help out your family. or maybe you are babysitting for younger sibling because mom or dad is working an extra shift. all of you have a lot of your place. you guys are growing up faster and interacting with a wider world in a way that old folks like me frankly did not have to. today, i don't want to be another adult who stands up and lectures you like you are just kids. you are not just kids. you are this country's future. you are young leaders. whether we fall behind or raced ahead as a nation is going to

depend in large part on you. i want to talk to you a little bit about meeting that responsibility. it starts, obviously, with being the best student you kenbei. that does not always mean that you have to have a perfect score on every assignment. it does not mean that you have to get straight a's all the time all of that is not a bad goal to have. it means that you have to stay at it. you have to be determined and you have to persevere. it means you've got to work as hard as you know how to work. and it means you've got to take some risks once in awhile. you cannot avoid the class that you think might be hard because you are worried about getting the best grade if that is a subject you think you need to prepare you for your future.

you've got to wonder. you've got to question. you got to explore. every once in awhile, you need to color outside the lines. that is what school is for. , discovering new passions, acquiring new skills, making use of this incredible time that you have to prepare yourself and give yourself the skills you will need to pursue the kind of careers you want. that is why when you are still a student, you can explore a wide range of possibilities. in one hour you can be an artist in the next and author, and the next scientist or an historian or a carpenter. this is the time were you can try out new interests and test new ideas. the more you do, the sooner you will figure out what makes you, live, what stirs you, what makes you excited.

if you promise not to tell anybody, i will let you in on a little secret. i was not always the very best students. that i could be when i was in high school. and certainly not when i was in middle school. i did not love every class i took. i was not always paying attention the way i should have. i remember when i was in eighth grade, i had to take a class called ethics. ethics was about right and wrong but if you ask me what my favorite subject was, it was basketball. i don't think ethics would have made it on the list. the interesting thing is that i still remember that ethics class all these years later. i remember the way it made me think. i remember being asked questions like what matters in life or what does it mean to treat other people with dignity and respect. what does it mean to live in a

diverse nation were not everybody looks like you do or things like you do work comes from the same neighborhood as you do? how do we figure out how to get along? each of these questions lead to new questions and i did not always know the right answers. those discussions and that process of discovery, those things have lasted and are still with me today. every day i think about those same issues as i tried to lead this nation. i am asking the same kinds of questions about how do we as a diverse nation come together to achieve what we need to achieve? how do we make sure that every single person is treated with dignity and respect? what responsibilities do we have to people who are less fortunate than we are? how do we make sure that everybody is included in this family of americans? those are questions that date back to this class that i took back in eighth grade. i still don't know all the

answers to all these questions. if i just tune out because the class sounded boring, i might have missed out on something that not only did i turn out enjoying but has ended up serving me in good stead for the rest of my life. that is a big part of your responsibility is to test things out, take risks, try new things, work hard, don't be embarrassed if you are not good at something right away. you are not supposed to be good at everything right away. that is why you are in school. the idea is that you keep on expanding your horizons and your sense of possibility. now's the time for you to do that. those are the things that will make school more fun. and down the road, those will be the traits that will help you as well, the traits that will lead you to invent a device that makes an ipad look like a stone tablet or what will help you figure out a way to use the sun

and wind to power a city and give this new energy sources that are less polluting or maybe you will write the next great american novel. to do any of those things, you have to not only graduate from high school, and i am in the amen corner with principal berger - you will have to graduate high school and continue education. you have to not only graduate but you have to keep going after you graduate. that might mean for many of you a four-year university. your president wants to be an architect and she is interning with an architectural firm and she knows what school she wants to go for other folks, it might be a community project for a professional credentials and or training. the fact of the matter is is that more than 60% of the jobs in the next decade will require more than a high-school diploma.

more than 60% -- that is the world you were walking into. i want all of you to set a goal to continue your education after you graduate. if that means college for you, just getting into college is not enough. you also have to graduate. one of the biggest challenges we have right now is that too many of our young people and role in college but don't actually end up getting their degree. as a consequence, our country used to have the world's highest proportion of young people with a college degree and now we rank 16th. i don't like being 16th. i like being number one. that is not good enough. we've got to make sure your generation gets us back to the top of having the most college graduates relative to the population of any country on earth. if we do that, you guys will have a brighter future and so

will america. we will be able to make sure that the newest inventions and the latest breakthroughs happen here in the united states of america. it will mean better jobs, more fulfilling lives, and greater opportunities not only for you but for your kids. i don't want anybody listening today to think that you are done once you finish high school. you are not dumb learning. in fact, what is happening in today's economy is that it is all about lifelong learning. you have to constantly upgrade your skills and find new ways of doing things. even if college is not for you, even if four-year colleges not for you, you have to get more education after get out of high school and you have to start expecting big things for yourself right now. i know that may sound a little intimidating. some of you may be wondering how you can pay for college. or you might not know what you want to do with your life yet.

that is okay. nobody expects you to have your entire future of mapped out at this point. we don't expect you to have to make it on your own. first of all, you have wonderful parents who love you to death and what you to have more opportunity than they ever had which means don't give them a hard time when they ask you to turn off the video games or turn off the tv and do some homework. you need to be that is what i have been telling sasha and malia. we are taking every step we can to ensure that you're getting an educational system that is worthy of your potential. we're working to make sure that you have the most up-to-date schools with the latest tools for learning.

we're making sure that colleges and universities are affordable and accessible to you. we're working to get the best teachers and to the classroom as well. so they can help you prepare for college and your future career. let me say something about teachers, by the way. teachers are the men and women might be working harder than just about anybody these days. whether you go -- [applause] whether you go to a big school or a small one, whether you attend a public or private or a charter school, your teachers are giving up their weekends, they are waking up at dawn, they are cramming their days with extracurricular activities, then they go home and eat dinner and then they have to stay up past midnight sometimes grating your papers, directing your grammar, and making sure you did

that algebra formula properly. [laughter] they do not do it for a fancy office. they sure do not do it for the big salary. they do it for you. they do it because nothing gives them more satisfaction than seeing you learn. they live for those moments when something clicks, when you amaze them with your intellect or your vocabulary. they see what kind of person you are becoming. and they are proud of you. and they say i had something to do with that, the young person who is going to succeed. to have confidence in you that you will be citizen then leader who will bring this into tomorrow. your teachers are pouring everything they got into you. and they are not alone. but i also want to emphasize this. with all the challenges our country is facing right now, we

do not just need to for the future. we actually need you now. america needs young people's passion and ideas. we need your energy right now. i know you are a good because i have seen it. nothing inspires me more than knowing that young people across the country are already making their marks. they're not waiting. they are making a difference now. they are students light will california who is helping low-income school students start their own business. he is raising the money doing what he loves, dodge ball tournaments and capture the flag the games. he is helping other young people be able to afford the schooling that they need. jake bernstein, 17 years ago

from a military family in st. louis, worked with a sister to launch your web site devoted to community service for young people. they help but volunteer fairs and put up an online database and helped thousands of families find volunteers ranging from maintaining nature trails to serving at a local hospital. last year, i met a young woman named amy chow from texas. she is 16 years old. during the summer, i think because somebody in her family had known of this, she decided this she was interested in cancer research. she had not taken chemistry yet. so she taught herself chemistry during the summer. and then she applied which she had learned and discovered a breakthrough process that uses light to kill cancer cells. 16 years old. it is incredible.

she has been approached by doctors and researchers to want to work with her to help her with her discovery. the point is that you do not have to wait to make a difference. your first obligation is to do well in school. your first obligation is to make sure that your preparing yourself for college and career. but you can also start making your mark rate now. a lot of times, young people may have better ideas than us old people do anyway. we just need those ideas out in the open, in and out of the classroom. and when i meet young people like yourselves, when i have said and talked with you, i have no doubt that america's best days are ahead of us. soon enough, you will be the ones leading our businesses and leaving your government. you will be the ones who are making sure that the next generation gets with the need to

succeed. you will be the ones for charting the course of our history. and all that starts right now. it starts this year. i want all of you who are listening as well as everybody out there to make the most of the year ahead of you. i want you to think of this time as one in which you are just loading up with information and skills and your trying new things and practicing and honing all of those things that you will need to do great things when you get out of school. your country is depending on you. so set your sights high. have a great school year. let's get to work. thank you very much, everybody. god bless you. god bless the united states of america. [applause] ♪ ♪ [captioning performed by

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♪ >> follow the president's comments later on the c-span networks and in the video library at c-span.org. later tonight, more "road to the white house" coverage starting

at 8:00 p.m. eastern. the wife of gov. rick perry will be speaking. and then an romney. achman who spoke earlier today. later, we will bring new newt gingrich who will be announcing his campaign platform tomorrow. we will be live in new hampshire on friday at 6:00 p.m. eastern and texas gov. rick perry will do his first town hall meeting in new hampshire. >> we should always start with the assumption that, when politicians or ceo is saying something, they're not telling you the truth. they may be telling you the truth, but the burden should be on them to prove it. >> he is an eagle scout, directed and produced three of

the time 10 grossing documentary all time, and also a best-selling author whose latest is "here comes trouble." callaven't opportunity to " -- you will have an opportunity to call and e-mail and tweet michael moore on sunday at noon. >> he is one of the 14 men featured on c-span's new series "the contenders." a preview of what some of our other big is about him matter what special website, c- span.org/thecontenders. >> janice cultural trends run the risk of slowing the economic rise of the country. she was joined by former british

secretary david miliband. this is over an hour. >> this is a remarkable generosity of spirit that marks both the united states and china. we would like the europeans to chair this first session. this with a diplomatic skill the keyword euro does not feature anywhere at to the chair. and here to try to help facilitate the discussion over the next hour or so of this panel. house trying to think of the framing or theme of this conference and series of panels. what came to mind was one of the commentaries mean in the wake of the 10th anniversary of 9/11. one commentator said that historians will write about the

last case, not "war on terror," but "made in china." chinese leaders stress that 150 million people live on less than $1 a day. the gdp is one-tenth the u.s. level. that is true. but i think we all know that the last 30 years of reform and opening up have brought a revolution to that country and bring a harbinger of the enormous change for the world. it is a harbinger because there is another revolution coming and change in china. 400 million more people are moving to cities.

30,000 new skyscrapers. billions of dollars devoted to clean technology. they pointed out that, by next year, chinese research in nanotechnology will exceed the u.s. level. this is a veritable second revolution, really. on this panel, we will try to bring some light to what is driving the changes. in henry kissinger's recent book, he reminds us of the chinese concept of shid, understanding matters in flux. we try to understand the nature

that, the flux of personnel. 2012 is an important year for the american presidential election. chinese leadership, which knew the cultural revolution, but not the founding revolution. new leadership which was born into an isolated china becomes a leadership in an age of a connected china. and a leadership whose children are global citizens educated at universities around the world. the flux in possibility, -- the flux and policy, too. different phrases used by chinese leaders, a new chapter, but the underlying message is clear. the next years will be governed in a different way than the last.

with substantive shifts, the speed of growth, and the quality of growth, domestic consumption emphasized in contrast to dependence and saving to welfare, which will be very important to the chinese economy. i think one of the most remarkable things about the chinese leadership, one of the most impressive things, is how self critical they are. this is not a country blind to the enormous challenge it faces. economic inequality has a very significant role in the new five-year plan. the eastern europe by -- the eastern environmental sustainability, seven of the national targets relate to low- carb and development. i look forward to the day when the u.s. has 12 of -- seven of its 12 national targets in

development. i was in china in march. there is no question how deep the rhetoric in a particular area permeate into the system. as i ask myself about going low- carb and, when i went to a reception at the british embassy, the head of the climate change unit of the chinese central bank attended. why does the central bank have a climate change in it? there is an obvious link between food prices and climate change. does not every single central bank had a climate change unit to? i thought that was a very interesting death of engagement. -- depth of engagement.

i want to make three points that will emerge in the discussion. the first is the innovation in the chinese economy. the political significance of the phrase "1 china" is obvious. but there are many china's. cities and regions make their own way, making their own relationships, and using some freedom to develop a distinctive parts forward. when they hope the weekend tease out is how far is that pluralism in the chinese system. last week, a very senior chinese energy leader said that the lesson of the unocal farrago was

the partnership is the way for. i hope we can explore what business partnership really means and in which it is a two- way street and not just a one- way street. question ofthe international cooperation. the chinese leaders confer about the weakness of the system at the moment. the power vacuum on the international stage, i think that is of concern to chinese leaders. the traditional realm of foreign policy, security, etc., there is great caution about pressure for anything that looks like external interference in internal affairs. but i do sense that, on issues of international economy, there is a chinese willingness, even hundred, to engage more

practically. -- even hunger, to engage more practically. whatever the significance of those issues, i don't think there's any other place to start than the figures of the chinese economy today and tomorrow. we could not have two better for that subject. they will each speaker and then we will have a conversation and then we will open a to the audience and we hope you will contribute questions. i will ask ben rosen to introduce a topic. >> to get this started, let's say. .- let's see

good morning, it is a pleasure to be here on the front end of what will be a loaded day, a terrific conversation around the topic of china and the world economy. really, that is the topic of our panel to get started. it was so critical to have david as the moderator. otherwise, the topic would be the global china and the american economy. here we have the global impact that we are here to look for. i will highlight three themes in terms of how china is impacting the world economy. i will touch on china in terms of consumption in the world, in terms of production in the world, and in terms of investment flows in the world. before i get to those three specific points, i will set the table a little bit with a few basics on what is going on in china and what it means. this is the slide that gives

rise to the question is john of the new math in the world. -- is china the new math in the world. as recently as 2000, china was half the size of germany in gdp terms. as recently as 2005, china was at two-thirds the size of the japanese economy. that was just a few years ago. but the slope of this curve, the extraordinary rapidity that it has boomed up past these peer competitors of china is only recently gone by to become the world's second-largest economy forces us to ask what are the

implications in the near term. but maybe the investors have arrived at the table. we are not entirely an armature yet when we talk about china's position in the world economy today. -- in our maturity yet when we talk about china's position in the world economy today ther. there is considerable distance to go. increasingleven in the decade as china moves toward parity with the united states, we will now be able to forget that the average chinese today is just as half as well-off as the global average purfling, let alone americans and europeans -- let aloneurflinearthling,

americans and europeans. we are talking about a nation that is 21% of all the people on earth. it is 3.5% of global outbound direct investment flows, which is a true indication of globalization. exporting with the help of the wal-mart's of the world, being invested in a significant way the united states, this is a very different thing, marks a significant level of globalization. the fact that china still has a long way to go is not exactly the bad news. that is the good news. that means there is a tremendous amount of built-in structural growth before us that, unless china comes off the rails, it is likely to deliver most of the growth we see in the world

economy in the years ahead. this is the quarterly gdp growth performance of china. there have been some really pronounced bearish specs about what will happen with the chinese economy in the next few years. the internet to be bad things. china managed to continue to deliver world-beating gdp growth during the most dramatic events the economy has seen in a century. we have to take stock of that, give that credit, and your best to understand what is that contributes to this extraordinary growth. if this stays on track, i will probably agree that it is a political risk to china rather than economic risks that are more likely to give in the way of these dramatic 23, 2057 areas of china as truly the biggest

-- 2030, 2050 areas of china as to the biggest economy in the world. it cannot be done in the next 10 years. this is china's share of marginal global growth. for all the new growth in the world economy, how much of it is just coming of china versus the rest of the world? that blue line used to be -- that is us, where we used to be. the united states used to be an outsized chunk of marginal global growth. whenever i expected to make for a living a she, i had a chance to make this year. but in terms of growth opportunities, and a plant with more and more people and higher and higher expectations, that means expectation on the

margins. china and india went through the roof. now we are reverting back to what the long-term pattern should look like. it is not the extraordinary contribution that china was responsible for in the midst of the crisis. but it is not the pre-crisis that neither were the o.c. be was the most important pulling the card. now we're looking at china as the most important contributor to growth going forward. so there are three things to consider as we work through the topic of china in our lives. first is china as a consumer. my colleague at the petersen incident where i spend half my time has suggested that china will eclipse the united states within a decade. if we were to measure china in purchasing power parities, we

can see china crossing the united states in global waste. china, with its currently 9% to 10% headlining domestic product growth, that is mostly industrial, not in a consumer economy. so when we look at consumer shares, we still have about 2035 for china to become a large chunk of global consumption as the united states is in the world. depending on what part of economic activity we are looking to we may have a longer wait crown china as the master in any component. "made in china" is absolutely the most exciting story in global production of the past two decades or three decades let's say.

but remember that what china does is only in the middle of the production chain, if you welcomed what is described by the red line is what china ink desk. it manufactures stock. in our modern economy, the lion's share of value created is not in the manufacturing process any more. it is a upstream of manufacturing where we anticipate how consumer needs will be different two more from what they're today. and innovation to me to those future demands. it will be about transforming our energy systems and how we manufacture things anyway in which china is not a heavy weight on. we will come back and talk about intellectual property. likewise, on the other side, downstream, much of the value -- this laptop is not the manufacturing and assembly that went into it. it is the brand value. i see intel. i see windows.

this is where most of the value in this machine is created. that is downstream of what china inc. does today. it will do tomorrow, but it will not do it overnight. increasingly, it will do it by investing around the world. technology is something where china has not been able to do well itself. in economies were china is not well represented today. the third thing i want to put on the table for discussion is china's outbound direct investments. taking off from an extremely small base, we have chinese investment in north america. clearly now going through an inflexion. we are living at exactly the moment in which chinese firms are no longer just shipping to us across the pacific but are ready to come across and be stakeholders in our communities. and that brings with it extraordinary opportunities and

also tensions and challenges that our politicians and our firms are actively working to meet today. it's not just in one or two little industries getting cherry picked off, either. it's in manufacturing and in services. high-tech, and in low-tech. one of the most active areas for chinese investment in dollar terms is in electric utility. which duke is right in the center of this story of extraordinary surprise in chinese readiness to be a part, to be an investor in an industry like that in the united states. today. this is what chinese outbound direct investment looked like in twee. just a handful of deals in a handful of states. unfortunately too many people here in washington think that this is where the story is today. this is where it was by 2007, and this is where it is today. over 300 deals, five or six or $7 billion a year of deals now being done. growing at about 130% a year.

that says something about us that we are open. it says something about china ink that there is enough money to be made back in china. do you want to put money at work, at risk across the pacific ocean in the united states in the kind of market you never invested in before? something different is happening. we need to talk about it, understand it, and make sense of it. i think today will make a good down payment on that conversation. thank you very much. >> thank you. that's excellent. let's go straight on to liz. >> thanks very much, david. as ben suggested, i was tasked with sort of outlining some of the socio-political down sides of 30 years of largely unfettered go go economic growth in china. i thought what i might do, though, add a little twist to that and highlight what i see as five trends in sort of socio-political dimensions that i think have actually acted to

spur economic development and growth in china over the past 20 to 30 years, but now may be an inflexion point and maybe transforming into obstacles or drags on the chinese economy. and i think will require chinese policymakers to rethink sort of the balance between opportunities and challenges that these trends may present. so i'll run fairly quickly through what i think are these five overarching trends. i think they'll also help to set the stage a little bit for the panels that's going to have toward the end of the day. so the first trend i would highlight is demographics. i'm sure you have heard a lot about this, but i thought i would flush it out a bit. up until now china has been the best feature of a demographic dividends. with more people entering the labor force every year, coupled with high savings rates, it's been able to use these to sort

of fuel its economic growth over the past 20 to 30 years. because of the one child policy, the demographic picture in china is going to change quite dramatically in the next 20 years. just to give you a few numbers, by 20130 the number of people -- 2030 the number of people in the cohort in their 20's is going to drop by 35%. while the number ages 55-60 will increase by 60% and those over 65 is going to jump by 100%. so what does this mean? but the truth is that it's the younger workers who are generally the best educated. who are the most technologically proficient, and usually the most able to adapt to sort of the rapid pace of economic change, in particular in this kind of global -- globalized world. it's going to put increased

pressure on the health care and pension systems which as of now are quite ill-equipped to deal with that. and it's interesting point that nick made, he's one of the really great demographers who works on china, he said what we are witnessing as a result of this one child policy is the entire transformation of the kinship structure in china. we tend to think of it simply as one child, two parents, and four grandparents. sort of a difficult challenge. no siblings. but in actuality it means no cousins and no aunts and uncles. so this kinship, this extended family that has defined chinese socioeconomic life in many respects for thousands ever years is now being revolutionized. and i think we have to think about the implications of that. so the upshot i think for the demographic challenge that china's facing is that you're going to have fewer people entering the work force who are going to be able to drive the economy. at the same time that you are going to have increasing need for them to be able to support

the elderly. and what is to come, people will say china will be the first country to be old before it is rich. the second trend that i see as -- helps to fuel economic growth in the past but maybe perhaps now posing more of a challenge was the cracking of the iron rice bowl but now the failure of really to sort of develop compensating social welfare net. of course when at the outset of the reform three decades ago, the government, beijing, relieved the state-owned enterprises and others of their economic burden of social welfare net, providing for the housing and education and general welfare for their workers. certainly that was a boon to those enterprises. clearly allowed them to manufacture at much lower costs. at the same time the government forgot to replace the social welfare system with anything

else. and it has been part of the platform of the president and premiere, the harmonious society is all about redressing these imbalances and sort of developing social welfare net. but i would argue they haven't really made any progress to date and only in the past two years or so has started to invest in a way that might make a difference and to sort of put owl policy initiatives that might make a difference. the jury is still out. some of the discussion surrounding the fact that it looks as though workers may have to contribute half of their wages in order to pay into the pension scheme, the insurance scheme, and the medical care scheme suggests that this could be burdensome. but again i think this is still in the -- in many respects in the development stage. what i find interesting, though, is this issue of social welfare is heavily on the shoulders of china's wealthiest as well. perhaps a number of you saw the

study that was done by china merchants and they surveyed about 20,000 people who made more than $1 million, $1.5 million u.s. dollars. had more than $1.5 million in assets and found that 27% of those chinese had emigrated and an additional 47% were considering emigration. i think this was also published in the "washington post." why is this the case? some of the most successful people in china today. they cited the same exact reasons that the poor people are concerned. they cited the health care system, education. they want to have more children. and they want clean air and they are concerned about food safety. all of these sort of social welfare public goods, types of issues. so the upshot of the sort of failure to develop an adequate social welfare net is, first, you're going to have difficulty achieving the kind of rebalancing of the economy that

the chinese leadership is quite focused on right now. but you're also losing talent because of it. ok. the third trend i'd like to point out it was mentioned by david and that is the issue of environmental deggra -- degradation and pollution. it's clear over the past 30 years this extraordinary economic growth in china has occurred on the back of the environment. so there's been very poor implementation of environmental regulations and laws. very lax oversight. and again it's allowed china, contributed to china being able to come the low cost manufacturing center of the world. if you don't have to treat your wastewater, you can dump into the river next to your factory, it's less expensive. in the end i think what we are seeing and have seen over the past five, 10 years is the environment is beginning to bite back into the chinese economy. china has done a lot of their own work on this issue.

the numbers are all over the place. environmental protection says the cost to the g.d.p. from china from environmental degradation and pollution is roughly 10%. very difficult to measure. nobody knows if that's accurate. if the chinese ministry environment is putting it out there it means it's on their minds and a serious concern. there are public health concerns. the issue of social unrest. you can barely open a newspaper even here in the united states today without reading about another environmental protest whether in the rural areas or in the urban areas in china. and there's the issue of the reputation, anybody who goes to beijing these days, one of the first things you always talk about is how is the pollution? somedays you have blue skies, some days you don't. it's constantly in the minds of people who go to china. if i would pick the thing that's most serious for the chinese leadership when it comes to trends and environmental degradation, it would be the growing water scarcity and land degradation. if you don't have enough water to power your factories, to run

your factories, or to water your crops, you really are facing harsh constraints on economic growth. fourth trend i would point to is the most overarching and perhaps the most critical it's sort of one i think dan was alluding to that is the limited nature of political reform today in china. if they try to think about how this has fueled chick growth, i think in two different ways, first the lack of transparency, the lack of official accountability, the lack of rule of law allows for things like illegal land grabs and violation of intellectual property rights. poor product quality. and all of these things in a way also permit low cost, rapid development. sort of not to be counter intuitive, but i think china has benefited, chinese economic growth has benefited from these sort of opaque and corrupt nature of its political system.

at the same time i think that top-down nature of china's political system has been beneficial as it has been for many sort of catch-up economies. like japan and taiwan and south korea in the early days. because you have the ability, hopefully, to allocate capital, at least initially, efficiently, to target, to develop fraps, etc. now, however, as dan mentioned, china wants to move up the value chain. wants to be an innovation economy, maybe they can accomplish some of this simply by going out. i think you were suggesting part of the way china will do this is by accessing technology in companies and other things that are abroad. but i think it's clear from their whole indigenous innovation push, they want to do that at home, too. developing innovation economy demands a different kind of political system. it demands openness, demands transparency. quality products. it demands rule of law to enforce intellectual property. in a survey of entrepreneurs in

china, they said they believe corruption has only gotten worse over the past years. and it's very detrimental to entrepreneurial spirit and economic activity. in the worst case, of course, the chinese political system contributes the same, the scandals, or the train accident, or in sish juan -- sess juan, the loss of life because of shoddy construction. that's another issue the chinese leadership will have to grapple with more directly than it has perhaps today. and the last point is the rise of the internet. this is advance, discussion is pretty exciting, internal china probably one of the most exciting areas of change been the country. obviously it's a hotbed of economic activity. i was reading a piece recently

that was describing sort of what's going on. this platform has 800 million products for sale. it has -- sells 48,000 products per minute. it has 370 million registered users. it's really extraordinary what has happened in just a few years in terms of e-commerce in china. at the same time the internet is transforming into a virtual political system and bringing to the chinese people in many respects everything that it can't get from -- they can't get from the real political system, which is to say transparency, official accountability, and the rule of law. i know i have gone over my time. so i will -- you are not supposed to nod. but i will simply conclude by saying -- >> astonishingly it's been well worth it. >> i will simply conclude by saying that i highlight these trends because, again, i think they have contributed to fuel chinese economic growth, but i think they may be at a point now where they may have some

constraints and for the chinese leadership may provoke a pretty serious rethink on issues as fundamental as the one child policy, the system of governance, and the balance or distribution from investment from hard to soft infrastructure if they want to maintain this growth. >> thank you very much. that was really -- i just want to probe three or four areas and then ask the audience to question you. can we start with this question of whether or not the official pronouncement, the five-year plan, the ideas that are being laid out represent continuity for the last 10 or 15 years or actually represent a shift? i think i'm right in saying you have written about the continuity that the current five-year plan repeats the targets of previous ones. how do you see the policy dynamic and maybe dan comment on

this as well. explain your position about the balance between continuity and change. whether it's pivoted towards welfare domestically, towards growth as meaningful. let's hear dan on that. >> as i suggested in my remarks i think the jury is out. this five-year plan represents an intensification of the desires of the previous five-year plan. i think, yes, there is an emphasis, more of an emphasis this time around, but i'm somebody who looks to see what rolls on the ground. i'm less interested in what the targets are and what the promises are and much more interested in the results and what emerges after or during the five years. so that's why i say the jury is still out. what beijing says often does not go right down at the local level. and it may play out very differently from the targets as they are set.

certainly the effort to improve the environment has been ongoing for the past five to 10 years. the level of investment has not changed. right? it's still roughly 1.3% of g.d.p. which places it someplace in the middle and lower areas of developing countries. so look at the level investment. factor out the corruption that's going to make some of that investment go to the wrong places. and then try to decide whether or not you think you're going to see fundamental changes in the direction that the five-year plan seems to promise. >> there's a lot of continuity in the rhetoric in terms of what the party's all about, how the system works, and what we are going to do next. one sees a lot of the same themes. change and emphasis, more emphasis on harmonious development. more emphasis on the urgency of addressing a whole list of things that liz underscored.

where i think there's less continuity is in the more advanced parts of china, recognizing that they are now at an inflection point. that growth as we know it is now turned into diminishing marginal utility. you cannot any longer ring the same kind of high quality and high rate growth out of an economy once it gets to $12,000 per capita, which is where shanghai is. you cannot do it that way. intangible intellectual property has to make up a much bigger chunk of growth once you get to that point because there's simply no more process and production savings to be found by cutting off water treatment and all those other things that china has done in order to deliver this kind of growth. we are at an inflection point. we see the inflection in the readiness of firms to go deal with the difficulties of investment in new assets abroad

in no small part because margins are starting to not be so exciting for them back home. we have continuity in terms of rhetoric, in terms of reality for corporate china i think we are already into inflection territory. and in the discourse in china there's some confusion and divisiveness between the left and the right in terms of whether china is doing what it needs to do to manage this transitional period. >> ok. we'll go to more representatives here in chinese businesses in the u.s. and you put up some striking figures about chinese investment in the u.s. i noticed that when in the launch of your report, american open door, secretary locke said it's great we have so many chinese businesses investing in the states, but there is an imbalance. and we look to the die when the chinese is as open to us as we are to them. what's your reading of what he said? do you buy that argument?

how did it seem to you? do you see the imbalance he pointed to? >> now ambassador locke has tremendous experience with this issue. you can argue it either way, really. you can say because american multinationals were ready to invest in china 50 years before china opened to foreign investment, right? they had been there. many of them were born in shanghai in the 20's. this wasn't a new story for america ink when 1978 and 1980's rolled around. so not surprisingly there's now $$50 billion of american foreign direct investment assets in china, at least. maybe more. whereas there is only maybe $14 billion of chinese asset in america. so who is more open here is an issue we can debate. but what then second now ambassador locke meant was that the process is actually more straightforward on the u.s. side. much attention is given to the sipous process, committee on

foreign investment in the united states. compared to almost any other regime applied to international investors, the system the u.s. maintains is fairly straightforward. it's looking for national security issues 99.8% of the time. now, the point .02 matters a lot. investing in china is not straightforward, either. in fact, in many ways it's much less predictable. the interesting thing about this question is that now that chinese firms in significant number are investing in america, people are going to start looking at how the chinese regime works on their side in a new way, and asking, is there really a sort of parody between how we treat one another's companies when they come to do business? this is about doing business. >> liz, you have written a quote, the world needs to ensure that china respects the interests of others as it seeks to meet its own needs. unquote. how? >> what was the context?

sounds like i could have said it on so many different things. >> you were talking about china's economic move overseas, about how its companies were globalizing. >> ok. >> you were also making a point about multilateral systems. it's got to be mutual respect. >> so when we are thinking about china's goings out strategy -- can i make one point on the previous issue? i think one of the difficult things in china is that it's still in the process in terms of investment, it's still in the process of developing a lot of rules and regulations. it's tried to figure out what it wants to do in terms of standards. i think that can make it much more difficult for foreign investors. oftentimes china will put out a kind of rule or policy announcement or green dam or whatever it might be. and then when the international community descends in beijing it

backtracks, mutate, more of -- morph, they are applied differently. part of the challenge in terms of investing into china has to do with the fact that it's still in a period of transition as it figures out how it wants to develop its own economy. and that's not something that's played to the u.s. much. maybe it will looking forward, but i think to date it hasn't. in terms of chinese, companies going out and sort of living up to what they demand of others, what i think i meant by that was really as we see chinese companies go off into latin america and africa and asia, that in many respects they are not bringing best practices. and that, in fact, when it comes to environmental standards and labor and safety standards, you find that a lot of these -- not even enterprises, but a lot of other chinese enterprises from the provincial level, are bringing their own worse

practices in this regard. it's hard to expect that these companies are going to behave better abroad than they behave at home. and yet that is what the chinese government asks of multinationals that come into china, right? that they maintain the -- that's not to say they always do, but oftentimes chinese capacity is a little higher than some of these other developing countries. and i think initially they have a lot of leeway, but more and more people in these countries are protesting this kind of sort of chinese corporate labor and environmental, etc., practices. that's really what i was referring to. >> and the suggestion of how influence can be -- how chinese approach can be changed or influenced, you think it should be through a little level or

business-to-business level? >> i think there are a lot of things china could do in terms of signing on to transparency initiatives and other best practices. but i think they are not quite ready to do that. i think it has to come in both sort of levels. both the political commitment but also a firm-to-firm commitment. and perhaps things will change as chinese firms break into markets in europe and the united states where ostensibly our political capacity is much stronger and will demand higher standard. so that may be another way in which those companies pay higher standards and bring those standards to the developing markets as well. >> one of the side effects for china of getting so much done in such a short period of time over the past 30 years is that, and the commercial space, one often says that all chinese companies

have original set. this has been well written. when it means is that if you look deep enough into any chinese registered firm, you can find some regulatory corners that were cut, a few licenses that had to be rushed to get something done. and environmental impact assessment that maybe was done by the mayor's brother and didn't fully consider what dumping that in the river would do. and so it's one thing in china where the chinese network and fabric of relationships and political considerations provide some kind of predictibility on whether those firms are going to be shutdown due to regulatory problems. as soon as they leave that environment,ance they leave planet crip ton and come to earth -- cripton and come to earth, it's a different set of rules. it's not necessarily the government that will use that against them. it's short sellers. they'll use the fact they maybe misstated what their assets are back home as a way to attack the

trading value of their equities. let's see if they are foreign listed. so this is not something the chinese government can negotiate. you can say, wow, we'll make sure none of our firms of tens of thousands, hundreds of thousands of firms have these kinds ever irregularities embedded in their corporate balance sheets. this is not something that can be handed over. it has to be done by gradually, steadily improving the regulatory environment and standards in china over time. the only way for china to do that as liz has documented is not by some edict or slogan but by actually doing it the hard way. by enforcement. by giving courts the job of making sure that firms obey by their own rules and regulations and that that is earnestly and sincerely implemented. >> panel six this issue can be picked up notably in respect of africa whether she's issues come to the fore. before we ask the audience to come in i wonder if we could

just address an implicit idea in the title of this session. because an impliesity rivalry assumed in the title of this section. you and i were talking last night about the book by professor ed steinfeld playing our game, whose argument is the model of chinese-american rivalry is wrong. his argument is that china is powering innovation in the united states and therefore not just a positive force as a new export market but a new kind of partnership. and his argument is based on quite detailed look at the integrated nature of global production across companies and across boundaries. why don't you both say this about this very fundamental issue of whether or not we should see threat or opportunity in the change that's under way in china. >> there's been much angsted on whether or not there was the beijing consensus, gain, that

would explain why china's developed so quickly in such a short period of time. i have always found it to be silly. when i look at china i saw tariff levels cut from 50% to 4%. i saw barriers to foreign investment that went from a mile high to the most open developing country in the world. there's $1.5 trillion of foreign direct investment in china coming back to how we think about it was a fairly i.m.f.-friendly approach. too friendly, to go go capitalism without learning the lessons of the left, frankly that the world had learned a hard way over 100 years, that you do have to respect worker rights and the environment. these things will come back and they are bills that will have to be paid overtime. i think it is a very different

conclusion one draws if one starts with that in mind. >> i think it is enormously problematic to pit the united states and china as economic rivals. i think the media in particular has a tendency to do a rush job bond -- a rush job on there are enough global challenges that need to be addressed and it's just the wrong way to frame the s -- a future for the united states and the rest of the world. >> we have about 10 minutes for questions and comments. do we have a microphone or do people just shout?

tell us who you are and i can repeat the question that is not loud enough. >> [inaudible] [inaudible] >> ok just a bit more about the scope for -- >> the total chinese investment

we have seen in america so far, compared to $2.4 trillion, it's nothing. but that's not the bad news. that's the good news. that tells us we have an extraordinary story ahead of us to come if and things stay on track that they have so far shown themselves locked into. given where china is as a global investor today, a total outward investment of around $300 billion to 2020, given where china's gdp is going, we should see anywhere from $1 trillion to $2 trillion. how much of that could come to beg united states? traditionally about 15% was coming to america. whether america will be as attractive in 2020 as it has been in the past is up for us to

decide. you can have for and of that -- you can have foreign investors come for the fire sell -- a fire sale because the assets are no longer useful or because the economy is best to be part of. which of those narratives describe the opportunity for the u.s. is up to congress, our leadership, and businesses to figure out whether we can get maximum american opportunity back on track. >> there is a microphone coming to you. >> how about the wholesale political, the retail rivalry, our economy is better than your economy. when does it china start translating its clout into how the economy works?

how do they begin to influence as a bailout the europeans, what do the conditions imply for them and they turn from domestic to global? >> i think they have already started to do that. they have made their voices known in the imf in 2008 when they started to talk about the potential for no longer having a global dollar economy and also making an international currency. from that moment for word, they started to begin to shape the dialogue there has been a lot of discussion going on about their currency, i would call it trading -- capacity building on this issue. i think they are shaping the

global economy enormously, again from all of their foreign investment drop the developing world. they are exerting a profound impact on the way business is being done, exporting their labor. we may put transparency and a good governments conditions -- the chinese camp it labor. you have tens of thousands or hundreds of thousands of chinese now working in africa, for example. there are a lot of ways china is shaping the global economy. richa's economy, resource- countries are being fueled. these are moribund economies in the developing world and it is only because of china's economic growth they have come back to life. i think it is enormous. >> i agree.

i would only add that the ways in which china is impacting all of our markets, economies and markets, comes quite a bit before china's official willingness to take responsibility for how it is impacting those markets. it is one thing to say without beijing excepting a role for itself in terms of international currency matters, something like a plaza accord or international alignment or a willingness to say more than 4% of gdp current-account surplus is too much -- that was too much to ask china to commit to. they are having this impact by virtue of their private and state-owned company impact on the world. but they are not there yet in terms of accepting an international responsibility for themselves. they are of two minds as far as

whether it is in their narrow self-interest to accept those kinds of obligations as a major player. >> let me just add this from an international perspective. there are reactive powers and proactive powers in the world. certainly in traditional foreign-policy, outside its own region, china has been a reactive power and will probably remain such. the question is whether it will go from being a reactive power to a proactive power. the second question, is a move from being a veto point to an action point? china has had a veto on the un security council but it does not like using a loan. having the confidence to use your veto is not the same as having the confidence to take action. this is now the debate the new leadership in china is going to

have to embrace in a very serious way because although there is no such word as stakeholder in mandarin, responsible stakeholder has the difficulty, there is such a word as responsible. i talked all about responsible solvency because of one has to recognize political legitimacy, but the international responsibility, existing for what you do in your own borders is absolutely key. the dialogue i have had with chinese leaders have suggested a willingness on the economic terrain to go a different way because of the nature of independent -- the time for one more question. >> if you take the premise that

diversity is good and look at the homogeneous nature of china and think of africa and other areas where they need to go and the united states as more of a melting pot, how do you think you will impact their ability to be more of a world power beyond just economic? >> by saying dave launched a global 1,000 gallon program to look outside the borders of china to bring in the best minds, particularly in science, the best minds from around the world, and i've had a conversation, in fact last night, and a big has been enormously successful because they have not developed the infrastructure in china yet that makes it that appealing for a lot of non chinese scholars and great thinkers to locate

themselves more primarily in china to do research. but i was talking to somebody involved in technology and has been a creative force and who is chinese. he says it's never going to work because the non chinese cannot understand china and the political culture, they are not chinese. i was taken aback, but there are two different minds within china about how much they want to except from the outside world. it has always been the case, and how much they want to retain what is unique about the country. the same will hold true in terms of how they interact with people coming into the country and how open they want to be in a globalized world. taking advantage of the best of the world has to offer, the way the united states does. >> china is about 92% hawn and

japan is about 90% japanese. our 700,000 americans working for japanese companies in the united states. and around a world by japanese nationals. i do not think the mere fact of how much and 80 in china necessarily determined how internationally minded the chinese nation can be. there have for thousands of years been for an ethnicities and cultures represented within greater china. some would argue 50% of china's territory is not even classically chinese but a more international baseline than many of us think. but i do think the power of chinese culture is so strong that it is taking some time to get accustomed to the notion that other cultures in the

world need to be seen on a level playing field as things to be understood, not just relationships to be bought or built. when one talks to a lot of chinese firms nowadays, they say tell me who i need to partner with and do i need to talk to to get this done. you don't need one relationship to do it. there's not a relationship consultant. you need to learn what understand to mean to employ and understand americans working here in america. going to take decades or more for you to do that and you'll have to do it in brazil and england and everywhere else you want to operate. there are no easy answers. you've got all the things you need which is an underlying competitiveness and products the world is interested in, but now you have to do the hard stuff which is not so easy even after 30 years of 10% growth. >> let me add use my position as a chair and have the last word. i spent last week teaching in

the stanford business school and i was really struck in the nba program and the ph.d. program, the dissemination of the chinese government and firms to sponsor chinese students to study abroad. 85,000 chinese students in the uk alone, which is an extraordinary commitment to understanding the rest of the world. i think there is a parallel commitment on us to try to understand china better. that's not just about everyone learning mandarin. it's a deeper question of what it means to understand history, cultures and mores and norms of the country. in that sense, the person to person contact of this era of globalization is unprecedented. the university possible brings about. if business can come in on the

back of that, it will build the sort of understanding and relationships that are important. what i think is striking as an outsider is while there are fears in both countries, there is also a recognition in elite circles that this relationship has to be made to work. and it's about more than a singular relationship of two, 10, or 20 leaders at the top of the society. the notion of a network relationship, preferably not to the exclusion of the rest of the world is something i think is a very important theme of this conference. i think we have had a great start and i'm grateful and we're going to have a coffee break. thank you. >> he founded several labor unions and represented at the socialist party as candidate for president, running five times. the last time from prison. eugene debs lost, but he changed political history. he is one of the 14 men featured in our new weekly series "the

contenders. that's friday at 8:00 p.m. eastern. get a preview and watch some of our other videos at our special website for the series >> of that later in the summit, we heard about the relationship between the u.s. and china. the chairman of the china-united states exchange foundation said while the relationship between countries has improved, work is still needed. she was joined by former u.s. trade representative, carla hills. this is about 45 minutes.

>> she is going to introduce a very special guests from hong kong today. we're going to have a conversation about american- chinese partnership. she was the trade representative from 1989 to 1993 in the first bush administration. she also served as the department of housing and urban development and was the assistant attorney general. she's currently the chair of the national committee on u.s.- china relationship and the co- chair of the council on foreign relations. please welcome carla hills. [applause] >> thank you. it is a pleasure to join you. our topic this morning is american-chinese partnerships. what works and what does not? no one has given more thought to this subject that our very distinguished speaker this morning he has achieved a well-

deserved recognition in both the public and private sectors. currently, he serves as vice chair of the 11th national committee of the chinese people's consulting conference and is the founding share of the china u.s. exchange foundation, which has funded many significant exchange programs to enhance u.s.-china relationships. prior to their version of hong kong to china, he served as a member of hong kong's executive council. for more than two decades, he served as chairman of the orient overseas container, a major shipping company. and from 1997 to 2005, he served with great distinction as the first chief executive of the special administrator reason -- region, winning that post by a

very wide margin. he is no stranger to their united states. he has served as a member of the board of overseers of the hue -- at the hoover institution, a senior fellow of that asia center as an international scholar and member of the enter national advisory board at the council of foreign relations. born in shanghai, he studied in hong kong and britain, graduating from the university of liverpool of a bachelor of science degree. he has received many honors, including hong kong's -- hong kong's highest award. and the contrary degree from the university of liverpool and hong kong's university of science and technology. he is much in demand when neck and -- when he comes to that united states, so we're very fortunate to have him with us today.

as confucius is reported to have said, when friends visit from distant quarters, is that not delightful? it is indeed delightful for me to welcome a very old friend and man of extraordinary talent and achievement to the podium, the hon. chee hwa tung. [applause] >> friends, ladies and gentleman, we have about another 45 minutes, and i would like to leave as much time as possible for you to question both myself and carla and to have a meaningful discussion

together. the title of the conference today is about u.s.-china business partnership, what works, what does not work. i would have preferred much more to talk about u.s.-china partnership, what works, what does not work, but since it is about economic partnership, maybe i start on that basis and beyond that we can talk about the other aspect of it. i actually think the u.s. china economic partnership is a great partnership. it is working, but there is a lot more work to be done so that it's full potential can be realized. why do i say it's working? i want to read to you and op-ed

which was published last year in october by the president of procter and gamble. of course, he said unfortunately, the basic reality has been lost in much of the political debate about china, which has succeeded on a false assumption that china's growth must come at america's expense. the fact is, american and job growth is increasingly linked to china's economic growth. we should be encouraged by this a linkage. china has 1.3 billion customers whose incomes are rising, demand for projects and -- products and services is accelerating. and, china is a country where american companies large and small want to do business, and we are the fastest growing major

overseas markets for exporters is china. they also went on to say, the case about procter and gamble is we have been marketing our brands in china, and there are many of them call very famous brands and household name to see in america. they started in 1988. today, procter and gamble is the largest consumer products company there. the largest consumer product company in china. it is an american company and a largest consumer product company in china with sales of $5 billion and a strong record of profit growth. none of this has come at the expense of american jobs. to the contrary. our china and other international business, many

high skilled jobs and that united states, engineering, research, development and logistics, one in five of our 40,000 procter and gamble employs supports our business outside the united states. 40% of 15,000 employees in ohio work on international business. the single fact is that in the fast developing market like china needs to secure high wage jobs here at home. there is no question doing business in china is challenging. we've had to deal with counterfeiting and disputes with local business partners, but we have found engagement that has generally resulted in positive results. we are committed to being an

growing in china for generations to come. to ensure american companies can contribute to succeed in china, which would drive economic and job growth here in the u.s., we must maintain healthy commercial relations. is neither in china's or america's interest to encourage conflict. we need to understand the full range of our economic relationship and reduce -- resist the tendency to isolate issues like currency valuations are trade evaluations from the broader and more complex interests that bind us together. i just read some lessons to it, and it is important that i read this to tell you it's not just i am saying that relationship is all right and going well. it is going well, and procter

and gamble is just one of the examples. chinese people love to eat chicken the way we cook chicken is stewed with soy sauce. it is very delicious. but kentucky fried chicken beat the chinese soy sauce chicken and they have established 3600 branches in china. a huge business. we don't worry about whether it is american or chinese, so long as it tastes good. it's fine and i will give you another example. walmart cannot get into japan or germany very successfully. but they are in such a big way in walmart. we treat walmart as a chinese company in hong kong. for everything you read-, there are lots of things going on very well.

in every big relationship, just like husband and wife, sometimes you get into an argument. it's all right. we sort things out, but we should not overblow an extremely good relationship for potential and for the years to come, their relationship is going to blossom and china is moving ahead confidently in building a modern nation and in the process of doing that, china looks for what it to working with all of the countries around the world, particularly with betty and i did states of america because you are the largest, strongest and most vigorous country economically in the world. we are going to be fine. we need all of us to be working very hard to make sure we can achieve the full potential and everyone of you sitting here knows about this and should put

your weight behind it to help it come through. i'm going to stop here and come back and sit down and start the dialogue with you. thank you very much. [applause] cut >> is wonderful to start out with such an optimistic tone. i did not hear one optimistic word at the imf, there seem to be a tremendous amount of concern about the global economy and, as you point out, the united states and china are truly leaders in economics. tell us what would your prescription be for how we avoid the worst scenario the was discussed so deeply by those

visiting world wide this weekend from and other recession to a depression this would be -- what would be right with the partnership. hard -- thet's reason to worry -- of course in that progress the country is making, there will always be ups and downs and a key question is is this a down, do we know why it has happened? how can we bring it back up again? do we have a plan? does the plan work? if "it works, why don't we get on with it?

one of the difficulty sitting in asia where i sit, i see this in america, a country with enormous competitive advantages, the best of the brain's want to come and live and work in the united states. that's still the same. the best universities are here, the science and technology superiority is way ahead of any other country. the availability or abundance of natural resources for developed nations, you cannot compare with any other nation on earth, you are so far ahead. your demographics, other nations, most of them are aging, but the united states, the population is getting younger. all of the things that makes

america strong in the future, you have it in your own hands. yes, for the time being, there is a challenge about job creation or economic recovery, yes, there is a problem about reducing deficits. but these are the issues that will be resolved and need to be resolved and the key is we should have a plan on how to move ahead and the anxiety for everyone is it seems to have a political consensus about how to move ahead. >> the question is how to get on with it and make the decisions and get on with it and then confidence will be restored and we can move. europe is having huge

challenges, probably the solution is more challenging. it takes a similar critical response. what are the problems we have, how do we manage it? how can we overcome these problems and with our vision of the future? if i am an investor and i understand warrior is going and how we're going to get there, confidence will then come back to you. is going to be very difficult. i know all of the nation's, whatever decisions being made, it is not going to be easy, but there are no easy answers to these difficult challenges.

for america, a decision to resolve the problem, it is serious, sir in nothing insurmountable. it's a question of political courage. for europe, it is more difficult. it takes a lot of political will to get it done and as far as asia is concerned, our worry in asia, all the countries, we put aside japan because they are in a developed nation camp. if you look at these countries, there fiscal management has been rather conservative. the problems we had in a the later part of the last century, running surpluses, they are in

the real economy, making things, exporting things, and spending is slowly going up. the big worry is how inflation, the additional commodity costs worries china a great deal and worries other nations agreed deal in asia the chinese economy, i would be happy to talk separately about it because i can go on forever. but asia, even though asia is doing reasonably well, but asia all alone cannot take the world forward. it needs and the others to become healthy again.

there is reason to be worried, the united states is one challenge which i think it's just a question of political resolve. europe has a bigger challenge, but i hope we find some other way through it. >> i totally agree we live in a globalized world and it's impossible for any region to think they can decouple. the partnership becomes more important, rather than less. i would like to hear your views about the prospects for the g 20 scheduled in november. this will be its sixth meeting, and it's had a number of pronouncements about fixing the global economy, rebalancing, the imbalances, no more protection, finishing the doha round, and if they convene on france and continue to make statements without action, that it will

become an irrelevant institution we sorely need in the international arena. talking about the u.s.-china partnership, what's right, do you envision we could as a partnership pushed veggie 20 to make a difference? -- pushed the edgy 20 to make a difference? >> if we look back, the best example of g-20 successes, at that time, a very much pushed for by the united states and very much responded by china was what happened immediately after the 2008 crisis. it was through the key 20 that

actions or galvanize together about fiscal expansion to get the economy moving again and it was a huge thing. i thought it was very successful this was dealt with the way it was dealt with in debt united states and china's cooperation was particularly impressive. at this homecoming g-20, i don't know specifically, but i would imagine the focus would be on the crisis talk about europe, the united states, asia, how can we move the world economy again? i think that would be the priority. i think it would be very sad if we lose sight because it is the

global trade which drives the economy ford and creates new jobs. because of these existing crisis, which is more financially related, we tend to forget the importance of these issues. another year would have gone by and nothing would happen. i a hope all of us would be wise enough to make sure the agenda includes items which are relevant to the things we are trying to do today, not just put out the and immediate fires. >> let me go to the audience and ask you to give your name if you have a question.

do i see a hand? >> [inaudible] the fundamental factors causing concerns about the audit states and europe are very much our domestic policies. there are some obligations for wealthier companies that would not have been expected when it was that a lower development level. whether they are ready to join the higher level of policy commitments, i think currency policy is one of them.

yesterday, it was made clear that china is planning to stay the course in terms of the moderate level of appreciation currently taking place. there are great questions of whether they china would stop the 6% nominal appreciation against the dollar. do you agree there are new expectations about what china contributes to the international scene in terms of its domestic economic policies? >> >> can i first of all say this to you? in america, some of you would ring me and say, you guys are too smart. you are deliberately keeping your currency low so that you can get away with it and

accumulate a massive amount of u.s. dollars and so forth. the other thing, you have to know better, that's you are holding all of these u.s. dollar bonds and treasury notes and the americans are clever and you fell into a trap, but the truth of the matter is none of us are that clever. the other truth of the matter is we are not in the same boat trying to find solutions. all of the sting's happened because we were trying to the best for our country pant and you are getting into this situation now, says the first point that want to make. in china, we are not that smart to be able to create that sort

of conspiracy. i don't think in america you can do it either. my second point is on this currency issue, i want to make these points. first is if you look at this, since 2005, we started this currency appreciation, altogether up to now, 30% appreciation of currency already. is it a small amount? to china, it's not possible exceed two a quantum jump of the value, 20%, 30%, the orderly appreciation was promised. does this currency have actual

impact on trade? during the first six months of this year, china lost a huge market share. many of these commodities, to the likes of bangladesh, vietnam, indonesia, why? because of the chinese currency appreciation, is that the reason? yes, it makes chinese goods more expensive and wages have been going up very rapidly. does that actually make america, did america's current account deficit decrease? it did not. did american jobs created because china made less of these things? it was made by other countries. currency is not a reason for

america and to have this currency value to have this -- to have created the job situation, to have created these difficulties. it's just the way the world trade organization divided the workloads. the developing nations get the low end of the manufacturing jobs. that's the real issue. i don't think america wants to go back to making shoes and socks and toys again. the other point i want to say to you is chinese imports from america has grew astounding amount from 2001 at 19 billion to last year, the total import from the united states to china was at $90 billion.

in other words, 4.5 times increase. it is a huge increase in imports by any standard. china overtook japan as the third largest importing nation. for every one% it creates 8000 jobs. if you ever set out every year, china is importing 30% more goods every year. that translates to two rendered 80,000 jobs. it is a huge increase. china is importing such huge amounts from the united states. china does not have the intention to deliberately create surpluses. china wants to see a balanced

situation, about. china is encouraging domestic spending. china is encouraging imports from america. i also want to tell you that many of view go to this trade fair every autumn. and this trade fair was always done to encourage exports. but this year, the trade fear -- trade fair was done to encourage imports from that united states. a number of states have trade delegations invited to china to sell american goods into china. all of these things are happening to create american imports to china. china is doing its part to try to help with the balanced to work through it. china will continue its policy to read value the currency with a view that in time, china will

fully make the currency international. what if you revalue the currency? china would have to bear the consequences if there is difficulty with the market. but the thing is, if you take actions like this and something happened with the chinese market, would america be happy to see this? it would affect american exports and to china. so these are the real issues, through dialogue and conversation which tries to solve these problems. i am not making a propaganda, but i want to promise you china is doing its very best on this particular issue and i think it's just about the right balance. >> would you not agree it's less

a question of currency appreciation and more a liberalization of the banking system? my chinese friends tell me that the consumer depositor is getting below the inflation way -- below the inflation rate. you want to stimulate consumption, that's a problem. i know governor joe appreciates that fact, but what will time be for china to permit market forces more than controlling the banking system that would give consumers a break and put a lid on the inflation that is going? >> a very good question. i would say this -- when would china do it?

you have a trade account which is being very rapidly liberalized. you have personal accounts, people take the currency overseas and come to america. that's also very liberal. it is the capital account which is being very carefully watched and of the reason this is the case is that 95% of foreign exchanges that goes down every day in the marketplace, 95% is unrelated to transactions of trade. is basically -- you don't use the word speculative, it's at trade about predicting the market's going up and down and so on and so forth.

for a developing economy like china come what china cannot afford is a sudden surge of capital flow in and out of china. for that matter, and a course of the last six months of this year, many of the countries in asia were worried about an enormous amount of capital flow coming through from the united states of america into debt asian economy. not with a view to invest in real businesses, but to take advantage of the stock market and property market and so forth. these are some of the real issues that need to be addressed to address the concern of china and many other countries in the developing status to face similar problems because there is just too much speculative

money going back and forth which creates a distortion of value. that needs to be addressed. >> we have a question from the audience. >> currently, eurozone banking and the sovereign stress have caused market concern about the global economic recovery outlook. this has caused less external demand for countries like china. some say china and other countries can play a big role in stabilizing the eurozone crisis. in your perspective, how china can bend its attention to domestic economic growth, restructuring, and as global responsibility? thank you.

>> thank you for the question. a vigorous global economy is in the interest of china. a europe that is healthy is in the interest of china. china will want to see europe become healthy and vibrant what role can china play? what role can anybody play? alloys make the same point. you have to know what are the visions of europe? particularly in view of what has happened in the recent past. what are the problems that caused this enormous uncertainty. what are the plans of action to

correct this uncertainty. once we know these very basic points, it will be possible for china or any other country who wants to be of assistance to move forward. always consistent with its own ability because, as you said, china has its own domestic -- a very tall order. then we can move forward. >> yes, please. >> i would like to ask you to

talk about environmental issues and the rate of progress and awareness during this rapid time of growth, particularly in the power sector. i was in london last weekend people there who are very active in the climate area, china before america was going to adopt some kind of program for a low carbon strategy with a focus on production in greenhouse gases. that is one point of view. the other point of view we heard from some of the panelists who alluded to the fact at there had not been sufficient environmental protection. with those different views, perhaps you could comment a little bit about what the

prospects are in this area that will accompany dramatic growth. >> i'm sorry i do not have a answer for you. china is very conscious about the sustainability of development and and issues such as climate change and energy security, clean air, water, all of these are issues that has the full attention at the senior leadership level. they attach the same important

as this sustained development part of it. i want to assure you that i travel around different countries, i feel china puts this agenda on the top of the list as much as any other country would and also recognize many of these rely on science and technology to achieve breakthroughs and there for collaboration and research in science and technology is really important. one of my worries is we have been talking about working together between the united states and china i'm concerned

we are not finding the solution there and all and we need to make these breakthroughs. the other point i want to say is that if you have a chance, or you visit beijing, visit the university center. they are looking at all sorts of things, not just science and technology breakthroughs, but a way of life and what is needed to do different things to take this society ford. china is quite forward-looking in many of these aspects. but we still need a science and technology breakthrough, which we have to be patient, i know.

>> a short and friendly question. i'm with air china ltd.. the question is, you said in your opening remarks that you think the economic partnership between the u.s. and china is quite well. what can -- is it working well enough, or what can we do to make it better? other than an economic partnership, is there any other partnership the u.s. and china should forge together? >> >> that's not a short question. [laughter] i like to answer in this way. a partnership is about recognizing each other's strengths and weaknesses. i have defined to you what my view is about america's strengths and also to understand at this moment, america's top

priority is to get a job creation going and get the economy recovering again. that is america's first priority. china needs to move on with its five-year plan, a sophisticated and well-thought through plan. that is despite the difficult global challenges we face if you'd say how can we work together, for instance, last year, there were 820,000 tourists from china that visited america. i have seen some numbers which talks about if an extra 1 million tourists come to america, it would create 200,000 new jobs. then, you can argue what is at

200,000 or 100,000, but anyway it is a big number. yesterday, i was in new york. 50 million tourists. that's a lot. it's a very successful city. but what ever. we only have 800,000 tourists coming from mainland china. from mainland china. mainland china is a huge pocket where people want to go overseas. there are lots of obstacles to it. i could not believe this. how could there be a problem? this applies to people who want to come over, there is a visa problem. these are very simple issues for homeland security.

i am sympathetic. i tell you, my hong kong experience has really helps in 2003. there are lots of other areas where they can work together and it is not happening yet. is all right? ok. [laughter] >> you have lived up to your reputation, bringing hope and encouragement to the audience. they are very grateful for your time. i know that you all want to join me. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> i am very glad you did not

have a visa problem. it is an honor. thank you, carletta. not only is it always good to hear what you have to say, but i love your voice. it is fabulous. please come this way. it is lunchtime. i have been instructed to have everyone come this way to take a break from the discussion. we will hear from henry kissinger at lunch. at 2:00 we have an all-star panel of officials from china and the united states talking about the economy. you will not want to miss that one. >> on to the white house coverage tonight in prime time, starting at 8:00 eastern, with

the wife of rick perry. she is on the campaign trail. then, the wife of canada at mitt romney, in new hampshire, speaking to a republican luncheon in greenland. from earlier today, candidates michele bachmann, speaking at liberty university in lynchburg, va.. it all gets underway tonight. newt gingrich the have his 21st century contract with america from iowa tomorrow. live on friday night with rick perry, his first town hall meeting in new hampshire, fighting -- friday at 6:00 p.m. eastern. the justice department is joining calls by states and a business group for a review of the obama health care plan. the associated press writes that the justice department will file an appeal with a high court later today, asking for the

justices to uphold the constitutionality of the law, and throw out an appealing -- and appeal that struck down the key provision. they call it the first obama administration indication that they want an up or down when before the 2012 presidential election. >> start with the assumption that a politician or a ceo, when they're telling you something, they are not telling the truth. >> he directed and produced three of the top 10 grossing documentaries of all time, and is also a best-selling author. his latest memoir is "here comes trouble." this weekend, your chance to

call and tweet michael more, live on "booktv." >> he ran five times for president. the final time, from prison. he lost, but he changed political history. one of the 14 men featured in c- span weekly series, the contenders. get a preview and what some of our other videos as our special web site for the series, c- span.org/contenders. former federal reserve board chair, alan greenspan, and former cbo director, alice richmond, are among state panel with recommendations for the joint deficit reduction committee. the committee is tasked with finding $1.20 trillion by the

23rd of november, with automatic spending cuts triggered if they fail to pass the recommendations. this is one hour. hosted by the new america foundation. >> let me briefly go over who we have with us. thank you to all of us for -- thank you from all of us for being here. we happen alan greenspan -- we have alan greenspan, chairman of the federal overseer of -- former chairman of the federal reserve system. david stockman, and senator warner, the sitting senator and one of the gang of six, heavily involved in this issue. we are going to talk pretty much about anything that you want. this is one of those washington

policy forums where you get to answer any question. we want to have a rich discussion. what we want to focus on is where the politics and economics of this issue are right now and where they are headed. i have to observe, it has been pretty remarkable. i saw people disagree. they were allowed to. across the board, it has been a fairly tough argument in urging and forcing the super committee to come up with a fix is a necessary endeavor. >> first of all, let me start with chairman greenspan with the economic argument. you have had a lot of discussions about going big. and from an economic standpoint, what is the right number and how quickly do we have to get there?

>> it is not for dollar trillion. the reason, as everyone here is aware, there is a tendency in government to underestimate the size of the problem. indeed, if you look at the underlying economic decisions that have been made, forecasts that have been made, it is clear at this stage that we are under and will continue to do so. if you sit with that data and send it to the base, you end up with a significantly larger deficit. remember, when you are dealing with a deficit, which is a number that is very sensitive to changes, small changes give you very substantial changes in the deficit.

everything i can see works in the direction of essentially increasing the size of what we are dealing with. on top of that, we have a very serious problem in that we do not have a large deficit that can be collapsed very quickly by discretionary outlays. i remember, with the deficit at the end of world war ii, it collapsed. largely because the war was over, spending went down. what is driving this deficit is very substantially entitlements. when entitlements push the deficit, they are very difficult to bring down. once the country grants an entitlement, it is very difficult to rescind. i suspect that if i just looked at the raw figures, not cbo, but what i would expect, my judgment

is that we are dealing with an issue in which the actual growth of the gross domestic product with potential revenues, essentially they're running into a problem, which i do not think we have confronted before. mainly, a significant slowing, because we are taking the most productive people in the economy and retiring them. they will be around for quite a substantial period of time, receiving benefits. the people coming in to support them, these are the students who did so peru -- or early in 1995 -- who did so badly on those international exams in 1995.

if you look at the slowdown in the civilian labor force, putting in reasonably optimistic numbers that are adjusted for the fact that cohorts are changing within the labor force, it gives me a figure that is possibly as high as $6 trillion to close. this is a fairly substantial margin. >> as someone who has weighed in on this issue, the chairman just told us that $6 trillion should be the target for this deficit reduction. how do we get there? >> [inaudible] [laughter] >> [inaudible] problem that is being underestimated. i will love supply. [inaudible] ok -- i will not say why.

[inaudible] before i do that, thank you for recommend in my book. i was not feeling good, but when i was run out of town on a rail, i did my book. my publisher gave me 800 copies to distribute to my friends. i still have 795 copies left. a lot of books and very few friends. i think that this 10 year thing is really courting us to play a numbers game. to get lost in a me as much of numbers that results in losing track of how serious this problem is. go bigger? i agree. bigger and sooner. whether our -- whether you are doing $1.50 trillion all or $5 trillion, the baseline in the future is $200 billion.

we are asking if we should fund the deficit by 1% of the gdp, or should we cut it by 2%? we have been locked in over the last four years. the fact is that our gdp has been growing since the recession ended in june of 2009. we have been here one month. we have been borrowing $100 million each month. there is no way to an equation where we are borrowing at twice the rate that gdp is growing. if you look at a realistic view, going forward, that gdp has only grown 1.5% annually over the last 11 years, that the payroll number today is the same number that we had in january of 2000, that the manufacturing industrial index today and august is the same as it was in 2000, that the economy has not grown for 10 years or 11 years,

at a time when the fed still has money to print, which does not now, that when we had a housing market that was booming that is busted now, if you put all of those things together, the out but going forward is far worse than what is in the baseline. the underlying problem is 10 trillion -- $10 trillion to $15 trillion. one party says taxes, the other one says no taxes. both parties say to the military industrial complex that we need a defense budget that is 80% bigger than the one eisenhower left. i would say that alan is right, $5 billion, but it is really $10 billion. >> the political reality of trying to get anything done in

this reality. i know you have worked about trying to go big -- work ongoing big. the reality of getting there? >> a great panel. first of all. thank you for maya and all of her hard work. these numbers can become so overwhelming. we should at least all agree that what we did, and even the process that we set up, which has some good things in it in terms of a super-committee, let's not set the bar so high that if we do actually get the $4 trillion, that we once again say that it is not some level of success, number one. no. 2, ever-growing, 2600 of

them standing together publicly, the only voluntary group of bipartisan folks in town willing to say yes, tax reform generates revenues. entitlement reform will maintain the programs. the grateful -- the great work of the folks in this room, we are all in in terms of supporting the super-committee. as a relative new guy, i think that the process ability of the super committee forges a grand bargain, doing this not in a sequential basis, but in the mother of all votes, it is something that we would be really remiss if we did not give it our all over the next few months. and we do need, i can give my

own power point as far as what we have to do. but we know the problem. we will have to deal with entitlements. deal with the fence. we cannot cut or tax our way out of this. we can demonstrate that we can walk and chew gum, which means doing some short-term stimulative efforts in terms upper growing the economy. as both the chairman and [unintelligible] just mentioned, gdp is coming back up. the economic numbers are still so low. the short term work, medium and longer-term deficit reduction, one of the things that we build upon it was real enforcement mechanisms. no one seems to believe that when congress acts, that they will enforce what they say.

what i would argue is that we need everybody's wars in the water at this point. this will not happen unless the business community and political community, and the budget thinkers, all kind of agreed that we are going to go help this super-committee get to this big number. candidly at this point, the margin of 10% needed on either side, to my mind i feel very strongly. one of the things that was so self-inflicted in what we did to our economy at the end of july and august, both on the business side and the individual consumer side, people that were uncertain, we put in an extra dose of uncertainty about

political leadership that could not put a plan together. i will cut back on my business question in terms of spending. one of the best things we can do for job growth is get this real enforcement plan in place. if everyone says -- well, my way or the highway, we will not get there. i am much more optimistic today than i was in office. flex congresswoman, you are a few months removed from your time in congress. your arm's length view? who is optimistic here, senator warner? is it more skeptical? >> i want to be optimistic. i am impressed that market is optimistic, since he has been having his head -- hitting his head against the wall for the last few months. first of all, not an economist, just recovering politician.

i will start with a quick story. some of you will remember in the stern. -- andrew stern. at the end of the 1990's, i ran for governor. someone asked me -- how big are you? i said -- big enough to run for governor in california. the question is, how big is congress and the president's, in terms of this issue of going big? i would like to point out that congress and the president were big enough to do these things in the 1990's. i was there. i do not know how dave for john voted, but i voted for the clinton budget in 1993. a career threatening move. i came back by a not reach a margin of 800 votes.

most of the women elected me in 1992 to end -- to open seats that were lost. i also was one of a hardy band of 40. we propose to cut from the budget, it would be substantially larger in today's terms, but then it was $400 billion. we hit the wall of most of the moving parts of the clinton administration. i was also part of a large bipartisan group to balance the budget in 1997. that was only four years ago. look at what happened. are we big enough, are our elected leaders big enough to do this? they used to be bigger. something happened. at risk is not just on our

short-term future, but whether or not america remains a superpower or is in the top tier countries, the stakes are huge. i do know if i am as optimistic as market, but i did write a piece one month ago with jim webber. we said exactly the same thing. that between us, we had 15 terms of service in congress. and politics aside, we were going to join in the president could request congress to introduce, on a separate track from the budget committee, no offense, bowls and simpson, or something close enough, plus an infrastructure bank or some short-term jobs funding mechanism. and infrastructure bank has been a very popular idea with both parties. that could proceed using the regular order through the

committees of congress. hopefully putting pressure on the budget committee and involving more members. getting them to the right results. am i optimistic that it could happen? i am disappointed that it did not happen. by am disappointed that the president did not ask for this and it could not have been done by john boehner and the president in the summer. i would close with i hope that everyone has read the todd freeman peace. he says that we can either have a hard decade or a bad century. i would like to vote for the hard decade. >> governor, do have a unique perspective. the businesses that chanel represent, what are they ready

to go? >> i think they are. maya was kind enough to spend a fair amount of time just walking through the options in front of the congress and the nation. you had ceo's saying that this was not a short period of time. they had to act and they did not think it over for a few months or a couple of years. they had to make that decision tomorrow morning. you got at it. the other interesting point is that are around the country, governors, democrat or republican, with legislative bodies, split control, and in some cases their own bodies, they have all been making decisions to balance their own budget. the magnitude of the order that

does what governor warner says, but what i have waiting back for me from the old days, 1991 in michigan, they have had to step up. i think that they have captured it. is it 1% or 2%? over a period of time? a decade? it seems to me that this is also, going very big year, an opportunity for a great deal of creativity. that never happens in this world. in washington you could not get that the state legislature very easily. screaming for a package, it is

the popular vote at that point. there will be a lot of things that people will not like, -- , but the point behind asking is what carries giving you a annual budget for each of them next 10 years, but some baseline amount. at some agencies, i would say that that should decline each year we have time bella to get this 17th century shropshire into the 21st century by mean

there is so much opportunity here. but no one is in charge. the special committee has an opportunity. once the responsibility is fixed, the direction is set. i think you have your miles and some company and for research and the benefit of going baby and bringing other people into

it there is a space for regulatory reform. there is space for a lot of things that can trigger economic growth in the there was a news feature resented if you put in place a multi-year the a -- reduction plan. if you do it right in is putting in place a budget that people can count on for a number of years. i think that is the key to getting out of our current downturn. a fiscal space up front on how

of decadence of the nation is expected -- debt consolidation strategy succeeded. what is the most important pro- growth policy that you think should be part of the package. whoever wants to jump in? chairman greenspan. one thing that we know is that a number of endeavour's on the parts of the various countries to rein in deficits, almost everyone in every study i have seen indicates that the endeavors that are essentially permitted by sharp reductions in spending have been some of the

most successful at solving the problem without maximum problems with respect to the economy. a larger study indicated that, to be sure, both tax increases and expenditure cuts would tend to cut the level of economic activity, but the difference between them is very large. the interesting issue that we do not know the answer to, was this is where bowls simpson was very clever. what would a very large reduction in tax expenditures due to economic activity? if it behaves more like outlays, which i suspect, than the import is a little over that $1 trillion. potentially, it is a very important beginning for this

particular problem. i think that the governor is raising an important issue. there are more ways in which people can agree with it. in a single issue there are innumerable people against it. there is another softer aspects that we cannot disregard called the bond market. but i was originally asked, as chairman before the committee's report tomorrow, i was asked what i thought the possibilities of some symbols setting the framework were. i said something like the initiative will pass the congress.

the only question is, is it before or zero -- before or after the obama crisis? we can stand here, sit here, argue whether or not we are dealing with a large number or a small number, but we have to ask ourselves, what would we do if all of a sudden the markets began to erupt negatively? a feeling that the congress in this country is incapable of coming to grips with problems of size. i hesitate to think what the consequences and politics could be. >> in 2008, los angeles passed a ballot measure by a vote of at least two-thirds, to raise taxes. to raise sales taxes by half of a percent. to fund infrastructure build out in los angeles for mass transit,

light rail, and maybe, i think, that is essentially what it was. that measure has been generating revenues for the last three years. los angeles proposed that it be able to front load that billed out by borrowing money in an infrastructure bank, or by some other mechanism, building out in 10 years but that tax measure would fund in 30 years. by doing that, it would generate hundreds of thousands of jobs in the short term. i tell this story because people, including republicans, voted to tax themselves to deal with the transportation meltdown in los angeles in a way that could solve that unemployment problem. therefore, if there were some form of infrastructure bank, not

necessarily funded with new revenue, but with repatriated earnings, funded some help, it could help a city like los angeles get in the game of building transportation jobs fast and solving its problems. that would be a huge win. the other point of the story of just told us that the government, or someone, would be paid back. the sales tax is generating the revenue to pay the government back. this is not a handout. this is a way to accelerate something that voters in large, metropolitan cities, have decided that they need. >> and jane, i agree with the infrastructure. co-sponsors agree, and john has

supported it as well. often talking more about grants and loan guarantees. gary hutchinson. i think it will be true. we have used monetary policy and fiscal stimulus. what can we do a round the edges? i get concerned in these kinds of panels that we can spiral into a dark place pretty quickly. your comments earlier, what is the twist? is there going to be a rallying cry in america? the european union? >> that is generic. this is where i have to make -- john and i were governors and we struggled with our challenges. i agree with john completely.

by and the legislature, however, we raise revenues. we had the best state in the country for business. before we lay around this super committee, i would like to see as many additional things on it as possible. if they only get five of the 20 that we want, recognizing they have to be done in five or six do what is the $4 trillion number that everyone agrees is at least the minimum. if we take that step toward political leadership and the climate in this country that works together on something, the point that i would say, as a relatively new person up here, it will not get done unless the governors, state legislators,

business leaders, all willing to give it a little and say -- with at this super-committee, if you step out, we have got your back. >> the reason we are not going big -- and we all agree, $4 billion is enough. excuse me, $1 billion per hour. we have got to have that. the point is, there are too many people in this town that do not believe it is real, necessary, or urgent. it is evidenced in their behavior. part of the reason for that is they believe things that are not true. one of the things we have been saying for years as pat moynihan. everyone has the right to believe what they want, but they do not have the right to their own facts. a lot of people believe things

that are not facts. on the republican side, it is that we cannot raise taxes in a weak economy. sorry, we will have a weak economy for years and years. in 1982, it was 10.5%. there was not necessarily like at the end of the tunnel. that act was worth 1.1% of gdp increases over the next few years. $150 billion per year in this economy. the fact is that history shows that you have got to pay your bills. if you do not like it because of this week to week to set your -- suit your fancy, it does not give you the right to keep hitting the credit card until someone says it is ok. now we can start getting real about the deficit?

we are growing at 1%, if we are lucky. if we keep doing multiple stimulus, we are creating an eclipse. right now there is a tax reduction that will expire. the baseline says that the safety net will go from $400 billion to $300 billion in a year or two. we have 3.5% of gdp clipped. we will be stepping right into it, year after year, unless they get started on it now. they will not allow these programs to expire. once we get back into the heat of trying to put that stuff into a reasonable order, you will not get much deficit reduction done. that is the problem. this lift its huge.

$600 billion per year. if they do not do it now, we are going to be a fly on the windshield when we get to 213. >> u.s. about the growth agenda. maybe i will come back to that in a moment. mark touched on it. jane touched on it a little bit. both of my other colleagues sort of mentioned this. i clearly look at this from a different place. it is important to understand, growing up on a michigan farm, that that is the first place to start picking up stuff. the energy speech that is not given is that the top of my list. we used to shy away and get nervous about saving energy

independence. today it is within our grasp, when you think about the improvements in geology, shale discovery, resources being found offshore. and you want to be a part of this remake to have a true energy department that would be an energy exploration reduction apartment. you get serious about exploration. i am very happy that over the past week they have finalize drilling off the coast of alaska. i think that we will have to redo the nuclear base. those plants are going to start aging out. we need to get that sort of. -- sorted. a couple of things on the list, transmission lines today, losing 5% to 8% in transition.

there is a wonderful business plan in our lives where we need to go new. you need permits for that. for heaven's sake, you should be able to upgrade a lot of jobs. you cannot do those offshore, that is all work here. another thing that you can do, in every public building in america that is owned by federal, state, or local governments, since we will probably keep those in the public sector, you would complete all of that. it makes perfect sense, you have thousands of jobs there. if you were actually doing that exploration, they had never been scored. i would probably reservations some of that and do the entire mississippi basin. i would get that big pipeline built from alaska.

i would probably open up the billion dollars in federal land. upgrade our national parks. those people only to work. that is my energy speech. $30 billion, $40 billion, no public funds needed for the next generation air traffic control system. that is a quadruple wind. or more. is less earnings, less hassle, with export potential and high- tech, to boot. $60 billion in stuff that we can sell. the british, the german, and the japanese are selling it. that is just to get warmed up. all of these were introduced by the administration, but these ideas have gone nowhere in three years. nell is the time.

as i said, i did not get into education, health care, or regulatory reform. we are just getting into these millions of jobs here. [unintelligible] >> i want to make sure that we get into these treasury's four two. it is a lot of what john is talking about. taking home a conservation fees on public buildings, next time you can finance that retrofitting. you can train that and use the revenue stream in the youth category. there are a series of things that we can do. but we also have to acknowledge that when every bill becomes an all or nothing for one side or the other, and every operation

of government in terms of continuing becomes a potential shutdown nightmare, we do an enormous disservice to this country. of course, many of them, i have reform that i work on where we copy what has been done. one in, one out. until we deal with this, until we can show that the political leadership in the country can actually get something done, we have to restore a level of confidence. we can go darker, talking about the old days, or we can take the next three months, 2.5 months, and we will be all in, helping the super-committee. the first thing is we got this opportunity.

that's not have another one of these sessions in january where we talk about what we did not do, when we have this opportunity to add that one major vote. at the end of the day, you are eager for the country moving forward. it cannot be one democrat versus republican. the only way we would get there is if everyone gets their oars in the water. more than they did in the last election. thank you for your time. let you guys all the rest of the problems. [applause] >> market is right. but if the campaign of 2012 has started, than what comes with it that is that you get more bang for your buck if you blame the other guy for not solving the problem that if you work the other guy to solve the problem. both parties do this.

they played the blame game. what is wrong with that picture is that we do not solve problems. congress has shrunk in their ability to solve problems. in the 1990's, we solve this problem. it is the incredible shrinking congress. how did that turn around? with a few people who had the guts to say -- doing this right, going big is more important than getting reelected. i think that if one person would do that -- and i certainly applaud mark for his courage and his message. if a few people would do this -- fix them from each party, maybe that could start turning around this terribly broken and destructive paradigm. i wanted to put my thoughts out there. not in terms of static vs. dynamic, but in terms of the dynamic nature of the economy.

if we had a growth agenda, it might meet a little bit of a jump start here. at the same time, we are trying to do a responsible deficit reduction plan. then we get a faster deficit reduction with more confidence, retaining our leadership. i just wanted to add a couple of things to johns list that are important. as a democrat, i am not against resource exploration. clean energy is a very underused idea here. not just clean energy in the united states. there are a lot of ways that we could develop clean energy. but it will not fill the energy picture. i am not saying that nuclear is the only answer, but clean energy exports are something that we could really be doing. why are we letting china do this in sitting on our hands?

we know a lot about this. we could take our largest consumers in federal purchases of automobiles and make those fleets cleaner. we would drive the market in developing and mass producing cars and other things cheaper that could generate strong exports. the second one that we have not mentioned is immigration reform. it makes no sense to have a genius graduates in science and engineering leave because of our immigration laws will not let them stay in this country. 50% of those graduates have to leave the country upon getting the best graduate -- best degree of the planet. and we do have to pass those agreements. it makes no sense to deny access to other markets. it is also a good national security agenda to have a trade

rather than war. >> picking up on the economic sphere, if the super-committee comes to you and best for your advice on the ultimate plan that must be considered, what is the appropriate mixture and guideline for what the target should be? what would your advice be? >> i think, probably, mark warner is views are going to occur. that is not where i would start if i had my choices. i know my view of what should be done. we would get may be one vote, which is one less vote that i would use on myself. i do think that the president has indirectly acknowledged that he made a mistake in not addressing bowls of simpson when

it came out. it was an ideal time. in my judgment, where we ought to go is basically take bowls simpson, which is a very cleverly constructed bipartisan approach to coming to grips with this problem, and is simple, extraordinarily clever. for reasons i do not understand, it is the tax expenditure part of this issue. i would basically do what they do. start off with the assumption that all tax expenditures are gone. and then you have to negotiate a few items that could come into place. unless you do this it will not

get anywhere near to a solution. first of all, there is no way to solve this problem without significant economic and political pain. if you are going to try to do this on the cheap, without pain, it will fail. or it will be a whole series of entertainments that we have seen over the years. at this stage i would say that the quickest way to come to grips with this problem is to take bold simpson -- you have a very detailed document their period of very impressed with what they did over a short period of time. you could take that with a of the work -- i do not think that they did a complete line item. but they are close to it. there is a budget out there,

which as the governor says, you can vote up or down. bowles simpson does not have the votes and i despair and where this country is going. because what is at stake here is the status of the united states in the world. there are a few little things going on. studies which take a look at the military, for example, find that our whole infrastructure is deteriorating. the average indication what that a very significant part of our military infrastructure is very open. i still cannot believe it. the average age of the

equipment in the american military is 50 years. there are b-52 bombers still in operation. so, the question then gets into budget terms. what does it require for the moment? to restore the existing military? the military was built during the cold war to fight the soviet union, but that is not what we would need going forward. to build up where we were would require hundreds of billions of dollars to bring the technology up to something which, in my judgment, represents where this country should be and is. i am looking at the negotiations going on with respect to the

middle east today. but i have never seen the united states in a lower position, diplomatically. there is no way to differentiate in the budget the status of the united states as a world power in years ahead. >> dave, i was hoping to get you to weigh in on this. moving up from tax expenditures? talking about those sacred cows, how do they pick that up? >> a sacred cattle form is what it is. it is a way of getting revenues into the coffers. it will not be a good idea for economic policy in the long run, but what we need in the middle term, with the second thing i

want to say being economic growth being a wonderful thing. but it has little to do with budget discipline and hard choices, or the sacrifices needed to be discreet. there is not much washington can do about it. what they have been trying to do about it is presenting a $200 billion payroll tax holiday so that people can buy more happy meals that they do not have and bags that they do not need. please, give me a break. more money for clean energy, like the one we just saw go down the tubes? this is how we got into the mess we are in. we have got to swear off stimulus or growth management because there is no agreement on

how to get it. take the facts about by the economy, take the real numbers out there. that is what the job is. other was as a result we will have a huge bond market upset one of these days, when they finally wake up and see that our government system has fallen. how much time? >> market-based reaction. >> this bond market is totally artificial. it is medicated and manipulated. half of the $10 trillion is in central banks. they are roach motels. the problems go in, they never come out. the only way that they have gotten away with it so far, they are not buying any more bombs.

america is out of business. as a result, one of these days we will have a test of the real bond market and free market investors and how savvy they can be to purchase a three year bond for a 30 basis points when he acknowledged inflation rate is that 2% and we are going with a five year bond. there is going to be hell to pay. i think that it is coming -- i do not know when, but when it comes, this town but have to be ready to deal with it. >> christmas card, governor? [laughter] >> over a decade, it should not be as painful, but it really is, to put it in perspective. it can be done.

i do think that it has to do with growth in the sense of whether or not i can go forward to do something or not. if i can get them out of that role, if the permit is in their hands, i have to get them. i do not think that we need that public capital. looking at washington capital, money is almost free today to put to work. let's get that going. i think that the chairman's idea is interesting. it would be of great interest to me to see that a forward. i think that on tax expenditures, marty feldstein and john taylor, the senate finance subcommittees, some symbols was clever in that they got not just business rates, but that ty