if you want to find out what the health and human services department has done, the plan they have put in place, you can go to phe.gov, which stands for public health emergency. dr. coleman and the national cancer -- from hhs and the national cancer institute, thank you for talking to these -- about these issues with us. book tv starts at 8:00 a.m. saturday morning on c-span2, live coverage of the texas book festival from austin, texas. we are live both days, saturday and sunday and you can find a full schedule on booktv.org. the latest durian muammar gaddafi, he died of wounds suffered on thursday as 50 -- fighters battling his rule ran his home town sirte.

this is a reuters story. it confine this on line -- you confine this online. we will go live to a senate banking committee hearing. it is just getting under way and this is about a 30-year fixed mortgage and whether it should remain the standard. it is starting in just a minute. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> a call is hearing to order -- i call this hearing to order. i would like to think the witnesses better with us today. -- i like to thank the bonuses here today. i released my agenda for the committee which includes several priorities. maintaining the widely available 30-year fixed mortgage markets was one of the priorities. i believe we to reform our housing system but i am

concerned about the unintended consequences for our housing market and the economy that could result. a new system that eliminates the most popular and stable mortgage product in the country would be a step backward rather than an improvement to our housing market. let me be clear. i am not advocating that the 30- year fixed mortgage be the only product available. shorter-term stick straight loans -- short-term fixed rate terms like the 15-year term, an adjustable rate mortgages can also be appropriate for a borrowers who can afford them. any new housing financial system must ensure that the 30-year fixed mortgage continues to be widely available to qualified

borrowers across the country. repairable long-term fixed-rate mortgage allows households to budget their finances better and establishes a stable housing cost which is not always available by renting. home ownership is not the right choice for everyone, but for those who choose to own a home, the 30-year fixed mortgage is the most predictable option for financing the home. witness' testimony during the last hearing stated that under some proposed systems the 30- year fixed mortgage would likely require substantial down payments and higher interest rates -- to a small number compared to today. this is the last thing our

housing recovery needs. our witnesses have extensive experience and knowledge about the impact the 30-year fixed mortgage has had on homeowners. the mortgage market and the economy. i look forward to hearing their testimony as well as the options for congress, if we're to continue what is believed in necessary product. without a turn to senator shelby -- with that, i turn to senator shelby. >> we're basically talking about the 30-year fixed mortgage. the government established the subsidies for the 30-year fixed mortgages. for many americans, the 30-year fixed mortgage has made a home ownership possible.

the failure of fannie and freddie and the bailout demonstrates that the federal government support for the 30- year fixed mortgage comes with a cost. if this committee under taste housing reform, it would need to determine whether the benefits for the 30-year fixed mortgage outweigh the cost. if it decides to continue to subsidize the 30-year fixed mortgage, the committee will need to find a way to protect taxpayers from having to pay for bailouts in the future. today's hearing should provide some insight into how the government supports for the 30- year fixed mortgage impacts consumers and taxpayers. in the 30-year fixed mortgage -- is the 30-year fixed mortgage always the best option for consumers?

is the prepayment option included an truly free -- is the prepayment option included truly free? consumer choice is very important. consumers should be able to purchase a 30-year fixed mortgage at the corporate market rate if it is determined that product is best for them. we must not create incentives that push people towards a 30- year fixed mortgage even when it may be harmful to them. i hope to learn the 30-year fixed mortgage impacts our financial system. is the claim that the financial crisis could have been averted if more people possessed the 30- year fixed mortgage a fact or fiction? what unintended consequences have been created by subsidizing

the 30-year fixed mortgage? these questions and there are many more that need to be answered. it is assumed that the 30-year fixed mortgage has been written and there's no need to investigate the facts. as we proceed, i think we must seek a full understanding of the fact. we need to take a hard look at this product and determine if the pricing resulting from these subsidies truly creates a public good. only by doing a thorough analysis can we develop sensible, profound housing policy. >> thank you. are there any other members that was to make a brief opening statement? thank you, all.

the record will be open for the next seven days for any other materials you would like to submit. i like to welcome the witnesses. our first witness is miss janis bowdler, the deputy director of wealth building policy project. john fenton is the president of affinity federal credit union on behalf of the national association of federal credit unions. dr. anthony sanders is a professor of finance from the george mason university school of management. dr. paul willen is a senior

economist from the federal reserve bank of boston. and dr. susan woodward, a president with the sand hill econometrics. welcome all today. miss bowdler, you may proceed with your testimony. >> thank you and good morning. my name is janis bowdler. my project promotes fair markets were latino families can build wealth they can share with their children. i hope today's hearing sheds light on the importance of the 30-year fixed mortgage. without this tool, home ownership would be a luxury reserved for the affluent. home ownership has been the long -- i will provide a brief

overview of the 30-year fixed mortgage and share ideas. let me start with the benefits of the 30-year fixed mortgage. the long term makes the asset more affordable. modest downpayments open the door with those who lack family wealth. the bar can predict the final payment -- the borrower can predict the final payment. there are two key reasons why supporting the 30-year fixed mortgage is good public policy. it makes homeownership possible for families who did not inherit wealth and provide stability to families who left the budget carefully. these teachers have helped create a stronger middle class. this is true for hispanic and

black homeowners. the benefits of home ownership have not been equalled available. the unfair steering of borrowers of caller to toxic mortgages. the subprime loans are expensive and more likely to end up in defaults. wealth held in white households exceeds that of latinos by 18 to 1. this gap is issued to the loss of homes through foreclosure. critics order of famines would be better off in adjustable mortgages. most people did not play the market and they do not hedge interest rates risks. the predictability and security

of tha 30-year fixed mortgage helps them meet their goals. we need a robust market for whom -- now is not the time to abandon our commitment -- several decades of affordable lending have taught us how to reduce the risk of lending to new buyers. in a recent comparison, the only difference was the kind of loan they received, the 30-year fixed mortgage outperformed the subprime loan. home ownership counselors have felt more than 25,000 moderate income families purchase a home with a prime mortgage.

when families receive the right loan, they can be successful home owners and build wealth, even with modest incomes. tight credit standards and overlays on fha are limiting loans in the market today. the threat to the future of affordable lending has as most concerned. the idea of a wealth standard. critics of fannie and freddie are pushing for a complete dismantling of our current secondary market system, even though lenders say they would not be able to offer fully amortizing loans in a completely private system. we should work together to preserve those aspects of our system that work well.

i have attached to my statement something signed by 16 other civil-rights organizations. i offer three specific recommendations today. maintain this the secondary market liquidity for affordable loans and made available to all qualified families. support pre purchased housing council. reduce barriers to purchasing a home by reducing -- thank you and i would be happy to answer any questions. >> thank you. mr. fenton, you can proceed. >> good morning. my name is john fenton. we appreciate the opportunity to share our views on housing finance reforms and the value of

the 30-year fixed mortgage. credit unions were not because of the recent economic crisis. the credit union mortgage lending has outperformed banked mortgage lending. these are solid products that they could afford. there is no evidence that the collapse of the housing market was due to 30-year fixed mortgage. congress began offering 30-year fixed mortgage back in 1977. this is straightforward and easy to understand and provides a predictable monthly payment schedule. the lending institution assumes the risk associated with interest rate risk increases. having too many mortgages in the portfolio can be cause for

examiner concern. we mitigate risk of our portfolio by hedging with interest rate swaps, caps, and matched borrowing. the securitization activities of fannie and freddie help lower the relative cost. may30-year fixed mortgagema still exist. long-term fixed-rate mortgages will become riskier propositions for credit unions. consumers may face additional costs to mitigate risk. we believe that it would further limit the availability of long term fixed rate products and

increased the cost of mortgages to consumers. fannie and freddie are a valuable partners to credit unions who seek to hedge. fannie and freddie will buy loans on the secondary market. the liquidity created allows them to reinvest those funds into their membership or institutions by making new loans. without these new relationships, credit unions -- we like to stress the importance of maintaining this system. as you consider legislative proposals, we believe that there is a core set of principles that must be considered to make sure credit unions are treated fairly.

there should be at least two entities to insure competition. the government should issue guarantees on payment of principal and interest for mortgage-backed securities. credit unions must have on interrupted practice into the secondary market. credit unions is could support a model that is consistent with a cooperative entities model. a board of advisers should be formed. a central is a vital, the gsc should be self funded. it should reflect the quality difference. fannie and freddie should continue to function until such

time as they begin to repay the government debts. take into account the consequences of the federal home loan banks. the 30-year fixed mortgage remains the most popular product to credit unions today. it to remain a readily available products -- it should remain a readily available product. with ever to reform the housing finance system, it is important to consider the impact this behalf on credit unions and make sure they maintain access to a viable second market. i welcome any questions you have. >> thank you. >> mr. chairman, my name is dr. anthony sanders, i'm is

professor of finance at the george mason university. the fixed rate mortgage occupies a central in the u.s. housing system. more than 90% of mortgage originations. the frm is a consumer-friendly instruments. it offers payment stability. if rates rise, the bard benefits -- these consumer benefits have costs. the prepayment option creates significant costs. if rates rise -- to compensate for this risk,

lenders in corporate a premium that all borrowers pay regardless about whether they benefit from might refinance or not -- from a refinance or not. the adjustable-rate mortgage also has consumer friendly benefits. banks will originate and hold 30-year fixed mortgages even without the government guarantee, is like they have done in previous years. this baby a short-term effect because freddie mac, fannie mae fha have cornered the mortgage market. the only country in the world was subject high concentrate -- most countries have shorter maturity --

the u.s. home ownership rate is comparable to that of other countries with higher arm. there is nothing natural about the 30-year fixed mortgage and home ownership. arm rates are typically less expensive than fixed-rate mortgages. mortgage payfixed for the prepay option even if they do not use it. 30-year fixed mortgage is risky for consumers since the principal pays down so slowly. small house price declines put the bars in a stressful negative equity position.

sure it would be promoting -- should we be promoting 10- or 15-year mortgages instead? is that our objective, to put people in the biggest houses they can afford? arms are consumer friendly. boris will be more careful on taking on -- borrowers will be more careful on taking on more debt. arms have lower default rates than fixed rate mortgages. homeowners lost $7.25 during the peak of the housing bubble.

these are catastrophic to those households if the markets tanks again. i aniston how some people like the comfort of the payments -- i understand how some people like the comfort of the predictable payments. thank you for the opportunity to testify. >> thank you. dr. willen, you may proceed. >> i thank you for youthe chanco testify today. i will take on today in my spoke

remarks a conventional wisdom about the fixed-rate mortgage. it starts with the invention of the fixed-rate mortgage, which is widely attributed to fha. prior to thes, depression, most american families had short-term rate mortgages. these mortgages expose them to fall co-payments and caused massive disruptions during the depression. so the fha invented a new type of mortgage which was the long term fixed rate mortgage. the payment never changed until the loan was paid off. was neverwarower vulnerable to payment shock. it was like the safety elevator came along.

before that, the passengers plunged to their death. there replaces was something that was inherently safe. lenders forgot the lessons of the 1930's and started issuing complex mortgages. borrowers were hit with these payment shocks. i will take on this conventional wisdom and argued these basic premises do not fit the facts. wereong term fixed rate s invented by building and loan societies. they were the single largest source of funding for the typical family when they got a mortgage. there were widely used in the year before the depression.

40% of the mortgages originated were originated by building and loan societies. 95% of those originations were long-term, fixed-rate, fully amortized mortgages. you can see this in table two of my testimony. devastated by foreclosures. but what about the most recent crisis? in table one, i show some data that we put together. but those who've looked at the data, the proper level data has come to the same conclusion. our sample is of the foreclosures who have lost their homes. 80% of them suffered no payment shock prior to defaulting on

their mortgage. the mortgage payment the made at the end of the loan was the same as their initial payment on the mortgage. 59% had a fixed rate mortgages1. .. 1.6 million mortgages. it is a safe product. when owning a home, a family financed by a mortgage faces many risk. there is jobless, ellis, business i a, divorce, and there is falling house prices. research has shown that compared to those risks, the funds rate mortgage payment presents a small problem. the benefits in terms of foreclosure prevention of ensuring the availability of a mortgage with a payment that can never go up, in my opinion is very small.

i hope you find these fine insight to work and i would be happy to address any questions. >> thank you. dr. woodward, you may proceed. >> thank you so much for inviting me. i'm here representing myself. i'm an independent economists now but the lived for 10 years in washington and i spent a quarter years as the chief economist at the securities and exchange commission. the critics of the 30-year fixed mortgage claim it is unfair for homeowners to benefit from the rest avoid it while taxpayers benefit from the rest from it. taxpayers are homeowners, too. there is nothing unfair about this trade-off.

i think it is an important piece of social policy. let me offer a few facts. home ownership is around 70%. the fraction of households to become homeowners is more like 85%. household incomes rise over time and peak ant around age 55. the people who benefit from the availability of the 30-year fixed mortgage are also the same people who pay taxes if and when problems arise. the benefits come when families are young. this is a fair trade-off. my guess is that they will say they want the 30-year fixed mortgage to be available.

we should not forget the rest of adjustable-rate loans. i think there is some considerable risks. the arm design is basically flawed. these are numbers to are relevant to today. suppose the rate of inflation went to 4%. the likely change in the home owner's income is the current inflation rate of about 4%. payment borrower's would rise about 25%. it was mostly affluent homes prior to its financial crisis that have the adjustable-rate loans. arms threaten the economy, too.

there would have been more mortgage defaults if all borrowers have had arm loans then. there is some risk and potential cost to taxpayers. there's nothing unfair about this trade-off. do we need government support for the 30-year fix? the tube's most important innovations in financial markets were undertaken by the federal government. the first was the support for long-term amortizing fixed-rate loans. we have discussed this before the hearing. it made the amortization more precise is scheduled and not tied to ownership of shares in building and loan societies. it pooled the default risk.

so borrowers were better off and things were better off because more comfortableoruch making these loans. the second big innovation was ginnie mae. astounding success. when ginnie was introduced, there was a long time real mortgage rate of about fo4%. this was all entirely already insured fha loans. this improved packaging of them. so at the end of the day,

we're not going to rock institutions like fannie and freddie without some government push, especially now when the large banks have such better access to the capital markets than the smaller lenders tdo. there are many reasons that we should give smaller banks -- thank you. >> thank you. >> what elements in the market must be preserved to ensure the availability of the 30-year fixed mortgage where borrowers in rural areas like those in south dakota? >> entity like ginnie mae, i don't think there's any threat with the removal of ginnie mae. something like fannie and freddie and their successors for

the conventional market. that is a substantial piece. to turn loans into liquid securities through an entity like them. have seen the, we of se credit markets dry up an increasing percentage of 30-year fixed rate products. how with the availability of credit to average americans change in times of economic turmoil? >> their two separate questions. -- i think we need to make sure no separate out what it is -- the 30-year fixed mortgage is it.fixed-reporate part of

what happened over the past quarter years is that -- in the past four years, every part collapse, including fannie and freddie. if fannie and freddie have been doing -- if the government was going to intervene to back up the market, they could have intervened to back up the adjustable-rate market. the portion of the market we intervened to help was the fixed-rate part of the market. that is why that is the part of the market that survived. the federal reserve indecent large-scale asset purchases. >> miss bowdler, i have a question for you.

how would the absence of a government guarantee affect the availability of the 30-year fixed mortgage? how would this affect the average american borrower? >> our understanding after talking to a lot of lenders is that without that guarantee, they would not offer 30-year fixed mortgages and they would not offer a long-term financing at rates that the average person can afford. yes, some financing can continue to exist without the next generation of fannie and freddie, but it would only be for families that have large amounts of inherited wealth that they can put towards down payments or to provide out in a shock. what. woodward,

skills to boris need to have to develop what their risks of adjustable-rate mortgages are honest and how their interest rates which adjusts? >> they need at least an mba. it cannot be even 1% of households that understand the interest rates that are behind arms. the london interbank borrowing rate -- i had a friend's panicked daughter come to me because she cannot refinance her arm. i got her loan documents. i know exactly where to look up this number. inn index.ly benigh once i told what it would look like, she calmed down.

but almost no household understand the interest rates to which their arms are linked. finance is hard. >> mr. fenton, what are the characteristics of the borrowers that come to your institution and request 30-year fixed mortgages? why is that products so popular? >> the characteristics are very diverse. we have all different segments of the committee, and to borrow. the product itself is important at different times. you have to offer members a choice and they have all different levels of credit backgrounds and understanding of the product that are out there. the key to what is to understand that it in a time of low interest rates, you need to be able to support a product like

the 30-year fixed mortgage and in times of rising aegis rates, you might look at a different type of product. we evaluate each member based on their needs and what is the best product for them. >> senator shelby. >> dr. sanders, a central argument made by some advocates is that without this guarantee, the 30-year fixed mortgage would not be available to consumers. for the moment, if we could set aside the question of whether the 30-year fixed mortgage is always the best products for consumers and go to this. if a consumer desires this product, it would be available even if there is not a federal guarantee? i can go back to myself many years back. i bought a house.

it was a conventional 30-year fixed mortgage from an insurance company. the federal government was not involved. we have to come up with a pretty healthy down payment, but that is what we wanted to do. elaborate. >> i have had home loans, arms fixed-rate mortgages and there were never touched by freddie and fannie. they will start making loans again. fannie and freddie and fha have such a dominant presence in the security markets. we have spelled out the 30-year fixed -- we have bailed out the 30-year fixed and not the arms.

everyone is mentioning the fact that there is interest rates risks but they're more the well we should be forcing consumers to bear part of the risk as opposed to someone in iowa hit with a higher tax bill. but it will come back. >> the prepayment option. you discuss how borrowers who of a fixed rate mortgage with a so- called free prepayment option are in fact paying fat option whether or not they realize it. explain what you mean. >> in other countries they have non-repairable mortgages -- non-

prepayable mortgages. there is a substantial difference in interest rates. it can be anywhere from 30 to 70 basis points. we can help consumers out. it would cut their expenses. arms are cheaper. 15-fixed are cheaper. >> i do agree with the econom ist. lot of consumers don't understand the adjustable-rate mortgage. what can we do to make them understand? can would be more explicit in the terms one day by house? "you are paying x today but my co-op or might go down, rather

than just sign here, there." a lot of them did not understand. >> two issues. it was simple to have a simple cover sheet like we do in securities or have a risk page saying that here is your current rate and it will be fixed for this amount of time and then it goes up to whatever level and some spread. i know susan will kick me after this is over. if a consumer sees something as something as libor in the contract, why would a sign that -- why would they sign it? is much more benign than we're

making it sound. we can make it more clear. >> i want to direct this to you. dr. is easier to understand been any adjustable-rate mortgage. the average household will not understand what risk is undertaking with an arm. approach rd's is to success that people are not capable of making educated choices. i would think they could make their choices. have you seen any evidence that suggest consumers are not sophisticated enough to handle an adjustable-rate mortgage?

i asked paul. other instances where the 30- year fixed mortgage could be more harmful to a borrower then an adjustable-rate mortgage? >> there are many things we deal with in life the way -- or we don't have as much understanding as we need. most people don't understand why transmission is but that doesn't stop them from driving cars. the risk in adjustable rate mortgages -- compared to implement risk, compared to the risk they face in their jobs is tiny. and no one understands employment rest. to understand the distribution of your labor income next year -- nobody understands that.

but people live with income rest all the time. and that is most people and they deal with it. the mortgage payment is a third of your payment and it goes up 10%, that is 3% of your income. people do with 25% income loss in a year and the do not end up in foreclosure and the do not end up bankrupt. -- in thisfits crisis, we have seen exactly how much damage the fixed-rate mortgage can do, so ever by a focus on the fact that adjustable rate mortgages can got a would dismiss the fact that they can go down. they go down when interest rates go down. interest rates go down usually in recessions.

libor has gone down by 500 basis points. we have looked at the data. most of them are paying 5.5 % or more on those interest rates. the people who went adjustable- rate mortgages, their rates are under 4.5% and a third of them are paying less than 3.5% on their mortgages. they do that without any assistance from anyone. the only people with fixed rate mortgages were paying low interest rates are people who left fought bitterly with your server to get a modification. the just a desperate mortgage has it built-in stabilizer prop. which the fixed-rate mortgage is not. prepayment is not free. you have to get an entirely new mortgage. >> built into the price.

>> the option is not free. why are we having this problem? people cannot refinance the mortgages. between the closing costs and paying the transaction's cost to the lender, it costs twyou points. there is no free payment. that is why so few people are refinancing right now. >> with the adjustable rate mortgage, you have to tell the consumer it can go down. could go up, too. they do not realize that. they should. >> in massachusetts, there is a adjustable-rate

mortgage. it says this is will happen if the rate goes up. >> you pointed out your testimony that adjustable-rate mortgages are defaulting more than fixed-rate mortgages. why are people with alternative mortgage rates to fall to more -- defaulting more? >> there is a relatively small difference. going from 1% or 2% of borrowers to 5%, that is because of falling house prices. they do default more.

what i said was that people who take out adjustable-rate mortgages are different from those who take up fixed-rate mortgages. if they took got fixed-rate mortgage company would also be more likely to default. there are a lot of unobserved factors in the data. people are more likely -- people speculating on prop.. erty. there's no evidence that the product -- the justle-rate mortgage defaults have been much lower -- the adjustable-rate mortgage defaults have been much lower. the notorious optional arms, because interest rates have

fallen, those loans have been performing much better than we have expected back in 2007. i think -- i keep coming back to the reason people default on their mortgages, negative equity and something else -- job loss, illness. that is why the default on the mortgage. that does not depend on a fixed or an adjustable-rate mortgage. we have talked about how we can stimulate consumption by getting people into lower interest rate products. the adjustable-rate mortgage product does that automatically. presumably those with adjustable-rate mortgages have more free cash. that's the goal that we have. >> what is your view of the differential about the defaults?

>> the households that side up forarm arms are different than those who sign up for fixed. we've had an episode of rising interest rates from 1970 to 1980. there were arm loans outstanding then. from 1980 until now, interest rates have come mostly down. we have not seen the full force of what happens when arms reset up for. today we look at the structure of interest rates. it is pretty flat. they could go up. it is much are likely they could go up a lot then go down a lot because they're so close to zero.

if the arms reset two points, payments will rise 25% and a household increase will not be that big. you want household that are good at managing their finances taking that risk. what we can see in the orman data is that the -- in the arm data is that the default risk is higher. they're taking some risks somewhere else the we cannot observe. >> we had an experience where there was a significant increase in the insurance rates. >> i am old enough to remember, too. >> my father told me about it. [laughter] in canada, they had much less --

there was turbulence in the housing markets. the mib the example which has influence on the people to get into 30-year fixes. having a fixed rate looked really good than. we might be captives of history. >> they did have a lot defaults. the rate to state reset was managed by the government. it is not a completely objective rate like libor or treasuries. but they still led big defaults. >> thank you. >> thank you, mr. chairman. as look at the low guarantee rate that has been charged and the fact that credit was

available all the way through, it seems that it had to affect -- when you have a low interest rate, it dries up the prices of housing. people are looking at what their mortgage payments are. i go back to dr. woodward. that's generally what people are looking at when they go to buy a home, what is your payment going to bae? we have had a situation where our government guarantees which artificially kept prices lower than they should have been. it should have done the opposite thing for consumers but would like to see happen. it has driven up home prices. it has. there is no question. i'm not asking a question. then you have a situation where you don't have any price signals. we continue to have a this

bubble, we had nothing in the market that was slowing that down. without this government guarantee, i think the private sector, which we do have a 30- year fixed mortgage without government guarantees and is not as robust as it was because we have had this housing crisis. but much of what could have happened could of been avoided. i wonder if you might respond to that, dr. sanders or dr. willen. >> yes. implied orwhether explicit did help the under price of insurance. therefore they could charge lower rates to consumers. couple that with the easing of credit standards over time, we got a nice crediblt bubble.

this is making housing affordable. fannie and freddie no longer have that as a slogan. we create a bubble and burst. $7.25 chilean of home equity has been lost -- $7.25 trillion of home equity has been lost. >> it is interesting to be in washington in various sectors. there is an infrastructure built around making money and what the government has put in place. we all want to move away from that. everybody wants to see us move away from where we are today. i think that is universal.

let's move back to where the gsc's are at this moment. why has it been in the psychology of what we have done here a one-way street? i own commercial buildings or have in the past when you pay the loan off you have to pay a penalty, i'm sorry. if it's not -- if rates are lower than when you financed, you have to pay a penalty. why have we not had that? it seems like it would solve a big part of the problem we had today? >> i was going to put that into my testimony on the commercial side we have arms galore and they have either lockouts, prepayment penalties, yield maintenance, or something saying if you're going to refinance you pay a hefty price. one of the reasons we don't in the residential market is we have had built kind of a huge empire of mortgage backed securities that our agency, fannie, freddie, and ginnie mae and to facilitate trading you want to have liquid prepayments.

meaning the option to prepay is what everyone likes to speculate on and how it's going to do. they really avoid the having prepayment penalties or prepayable mortgages because there's been a lot of action in them so to speak on the market. that shouldn't be driving public policy the fact that mortgage backed security traders like the prepayment option. >> any other comments in that -- regarding the prepayment only? >> yes. >> it's my understanding that the absence of prepayment penalties is mostly a matter of state law. essentially all 50 states have limits on the prepayment penalties that can be created. and as far as the mortgage backed security market goes, what the mortgage backed market wants is not necessarily the absence of prepayment penalties. what they want is securities for the prepayment penalties are all the same so they can trade as liquid instrumentses. -- instruments. >> the penalty is zero.

>> it doesn't matter whether it's zero or it's 1 $100 or $1,000, what they want is for all mortgages to have same prepayment penalties so that they can trade identify k4r -- trade identify dentically. >> my --identically. >> i agree. if you look at the prepayment mortgage with huge prepayment penalties or something, you'll find the number close to zero, freddie, fannie, and f.h.a. they are nonexistence. -- nonexistent. >> what do you think would happen if fannie and freddie all of a sudden said we'll continue doing what we are doing and we all know they are jacking up their fees and all that. what if they also said, but we'll have yield maintenance on these things. candidly if you want to refinance in seven years which is -- that's the average. if you want to refinance in seven years but have the

opportunity for a 30-year low fixed rate mortgage, you are going to pay yield maintenance on that, what would happen in the marketplace? >> what would happen is mortgage rates would actually decline. because since the -- you're sharing some of the risk with consumers. again the risk -- i agree with paul is little. once again prepayment option raises mortgage rates which is the whole -- one of my arguments in hand. why weren't we refinancing households into arms? why did we pick 30-year fixed? it's prevalent across the system. if we are interested in homeowners, we should lower the rates that we believe that theory. we should have done five-one arms and three-one arms but we didn't. >> thank you. yes, sir. >> i'd like to disagree with that to some extent. i believe it's an affordability issue. if you add on prepayment

penalties to the consumer, you're shifting that cost out to the consumer and in the long term effect it's going to have a negative effect on the real estate markets as we go forward. i think you have to have a choice. there are members in every life segment and lifestyle. so depending on where you are in those, there are options for you. prepayment may be one of those. adjustable rates may be one of those. we can't just have one product, but there is a different timing of it all. you got to have an effect. the consumer shouldn't bear all of the cost on this nor should any one segment. risk should be spread balanced over all of the segments. >> it seems to me that the person who is taking the loan out should bear the cost of that loan. i mean i understand what you're saying about -- that's a really weird statement to me. if i'm borrowing money and i decide that -- and there's a cost to society of me taking

certain actions, it seems i should bear that cost. that's a strange statement it scenes you just made. >> it's how you view cost. cost is an investment. it depends which angle you are looking at it from. from a public policy perspective i think the cost is an investment that returns in a more vibrant economy eventually. so there is return for us making that investment. it shouldn't be borne by the consumer because the consumer a doesn't understand it fully enough, and at some time it will affect their ability to go into it. rather than go into it they'll rent a home as opposed to buying it. i think that has a negative impact on the economy. you need to look at it from all different angles. from the policy statements as well as what the effect is on the consumer. >> thank you. >> dr. sanders, the tax rate mortgage has been criticized as problematic for homeowners on

interest rates don't always fall because homeowners can't take advantage of lower interest rates without refinancing. do all arms allow for a drop in interest rates? >> yeah. virtually all arms allow refinance. but -- yes, they do. again those people refinance at the reset dates. >> mr. johnson, can i get -- finish my answer? one of my common friends is a famous person locally in the market. he uses arms. why? he did a study showing arm rates continually with a couple of episodes have always been lower than fixed rates, so he just said i'll roll them over if the rates stay low, if they are not i'll just -- the reset has always been very trivial in comparison. so other than one shot we have not seen a problem with them.

>> senator menendez. >> thank you, mr. chairman. i appreciate the witnesses being here. i certainly appreciate mr. fenton from new jersey who is well-known as an expert in the financial industry and our home state as well as miss bowdler who has worked for la raza has been extraordinary. i am concerned that there is a universe of borrowers who, in fact, can be responsible borrowers. but at the end of the day without the guarantee of a 30-year fixed mortgage ends up eliminating the opportunity for them to be a responsible borrower. basically gets them out of the market.

i noticed that, you know, even though there are those who argue that in the private sector alone will do this that we haven't really seen much securitization at all of jumbo mortgages in this marketplace. so the private sector has them come in as of now. to provide the opportunity to do that. so if we do not have an evidentiary set of circumstances under the most probably propitious opportunity for the private sector to come in and they have failed to come in to accomplish it, then how is it we expect individuals who can't even be responsible borrowers under a long-term fixed rate to be part of the marketplace? any of you have a comment on that? >> senator, i do agree with you that the securitization and jumbos is a great example of where privatization has not entered the marketplace. you cannot rely solely on

privatization to come in and bring capital in without some offset to the risks that they are going to take. risk is offset by price. and in this case i think the price would negatively affect the different segment which is the consumer segment. we need to be able to balance that. that's where the government has some role in coming in and trying to encourage the private sector to bring their capital to the table. >> i would also point out that while we have this issue on the jumbo side, we have the same problem on the lower end of the market. right now what fannie and freddie are financing is essentially middle market, affluence, sort of the best of the best. they are taking cream of the crop right now. and borrowers who are qualified but maybe live in a neighborhood that they have deemed not desirable or lack the family wealth to make sizable down payments are getting left out of

the market. those are borrowers we know, the research shows, right product with the right support, those can be qualified families who perform very well. we don't see the private market stepping in to help those families, either. and fannie and freddie is not serving them. >> dr. sanders? welcome back. >> thank you very much. >> you are a regular at our hearings. >> that's right. let me just take a little different spin on it although i don't disagree with what anyone is saying. what i'm saying is that the guarantee in the 30-year fixed and low down payment mortgages, when you combine that into a ball, what we have done is we have encouraged households to take on more risk than they ordinarily would have. we give them the illusion that everything would be fine with a 30-year fix fixed. and lo and behold, i said this about five times, from the peak of the housing bubble to now, 7.25 trillion, that's a

mind-boggling number, if you want to figure out a reason why our economy isn't jumping starting, we lost that much wealth in the housing market. and that's terrible. so -- if we could figure out a way to pear back some of this. we are not encouraging people to take this risk that turned out to be a bad pony. housing was great for a while during the run-up. it had catastrophic collapse. what middle income and lower income households really get creamed in it. >> let me interrupt you there for a moment. a bubble regardless of when that bubble is is problematic whether you are in a fixed mortgage or whether you are in in an adjustable rate mortgage. as a matter of fact it seems to me part of our challenge that created this bubble was that we had all of these instruments, including no doc loans and teaser rates and a whole host of other set of circumstances that brought people into a market

that probably shouldn't have been, certainly not under those circumstances, and that's part of creating the bubble. i don't know that a bubble itself is the reason not to look at a 30-year fixed rate mortgage on the contrary, it seems to me that there is long-term stability there for the individual to know what their responsibility is. and not necessarily with engaging in the fluctuations of the marketplace, including the mortgage side which some of the adjustables and no down payment and interest rates ended up being. so i appreciate your comment about the bubble and i understand that. i don't necessarily subscribe to a 0-year mortgage. the final point i would like to make is i am increasingly concerned because my dear friend and colleague, senator isakson, who has a long term experience, he's actually someone who's been a realtor for i think 0-some odd years and knows this pretty well, he -- 30-some odd years

and knows this pretty well, he made a comment on the floor yesterday it's not just the size of the loan but the lending criteria. he commented that the lending criteria has been almost so pristine now and so difficult that the risk is dramatically downsized. i get concerned in addition to the 30-year issue and having some government role, but i think the least we can do in a very difficult to say the least housing market is to do no further harm. at least in the short term. is this whole issue of what is the down? because saying that -- to a qualified residential mortgage is now 20%, well, that's going to eliminate a whole universe of people who can, again, be responsible borrowers. i look at it, a medium single family home costs approximately

$170,000 in 2009, medium household income is approximately $50,000. i just think about how long it will take for a family earning twice the medium to save, $17,000 much less -- that's about 10%, much less 20%. so it seems to me lending criteria is important to determine who will be a responsible borrower and not permit the bubble to take place, but that lending criteria is in and of itself you have to have 20% down. you could have 20% down and still not have the other criteria to be a responsible borrower. is that a fair statement? >> senator, if i can, i would go further with that. lending criteria is one of the keys that actually was a major influence in the crisis that we are just coming out of. there was a lot of lax credit standards. we ignored some of the rules that we had actually established for ourself. and that is what had more of an effect on interest rates whether it's adjustable rates or 30-year fixed rates on this whole situation. so what stops us from those?

the g.s.e.'s had established those standards. and allowed them to become more lax. there were certainly different components in an unregulated environment that were selling products that were not good for the consumers. credit unions have always stood by and looked at the consumer and said, let's figure out what's best for you. if it's a 30 or 40-year fix it may not be the best thing for them. we try to look beyond that. i'm suggesting that that was not done at all -- in all parts of the economy. >> my time is over maybe mr. -- ms. bowdler you can make a comment. >> with my written statement i went through some things that we know can make borrowers very successful and i think that's the better place to focus this conversation. not about taking options away but what makes borrowers at any income range succeed in their mortgage. what makes them responsible. certainly that's underwriting criteria. there are other things we can do as well. like housing counseling which we are a big proponent of. we invested a lot of money in

helping families figure out how to eat their veggies, get your budget right, get your credit right, and step into this when is your right time. i'm concerned a dichotomy here that somehow everybody who got arms were savvy and people who are 30-year fix are the chumps that don't understand interest rate markets. in fact, i think people are making these choices because shall, at least in part, it works for them. i completely agree there should be choices and that there's certainly not a single product for everybody. but a good housing counselor or other visor like a credit union can help families evaluate those options and make the choices that really fit for their family and their long-term financial plan. >> thank you, mr. chairman. >> i'd like to thank all of our witnesses for being here with us today. this hearing has been very useful to the committee as we continue to explore the future of the housing finance system

and the financial products for that system. this hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> more senate coverage later today. senate hearing coverage later today on the c-span networks. we want to let you know also that the news out of libya is that muammar gaddafi is dead. the man who ruled libya as a dictator for 42 years has been killed today in his hometown of sirte in libya. we hope to have more details on that when the white house briefing gets under way at 12:30 eastern. we will cover that live for you here on c-span. coming up at 2:00, we will -- at 12:30 we'll bring you to the white house briefing, but ahead of that comments from senator charles grassley this morning on the deficit debate on capitol hill.

host: what were some of the main points of finance committee recommendations? guest: first of all, could i differentiate between the finance committee and how we made recommendations as opposed to how the agriculture committee that i sat on made recommendations. the biggest difference is that the agriculture committee recommended specific dollars in savings, like $23 billion of savings on farm programs and other programs. whereas in the finance committee we didn't say you ought to cut x bill dollars out of this program and that program. we started with a theme that the supercommittee has that we ought to do those things that promote growth, competitiveness, overall

the whole project here is to build confidence in the future. and to preserve responsible programs. so we looked at social security, for instance, and said that you need to look and make sure it doesn't affect anybody, any changes made, anybody that's older than 55. i suppose you could say older than 50, but we chose older than 55 because you got to give people an opportunity to adjust. anything that you do with medicare, the same thing. and we didn't suggest like the house did in their budget block granting medicaid, we suggested that you ought to have maybe more state authority so that they could try different things to save money and eligibility and things like that. so we didn't come up with you ought to save $100 billion or $200 billion. but very basic principles like

increasing the age. almost like everything's on the table. but increasing age would be an example. but you wouldn't do it for people that are over 55. and maybe even more basic. i should have started with this. we've got to preserve medicare and social security. because it's part of the social fabric of america. so when seniors get nervous about us talking about social security or medicare, they get the opinion, maybe you are going to do away with it. no. just the opposite. it's been for 70 years for social security. or 40 or 50 years for medicare. it's part of the social fabric of america. it's got to be preserved. but also at the same time and if i'm talking too long say so, but at the same time if anybody says just leave my social security alone, or just leave my medicare alone, maybe they don't realize it but they are saying, after 2021 there won't be any medicare

unless we do something to preserve it. and social security after 2036 the young people today will only get 70% of benefits where people today are getting 100% of benefits. so those are the basic premises of what we suggested. one more thing if i could say this, it seems like we couldn't -- unlike the agriculture committee where we are trying to get a bipartisan agreement of what to do about these various programs, in the finance committee the senate republicans suggested things for the supercommittee and i presume, but i don't know for sure, that the senate democrats on the finance committee are going to propose specific things. >> according to the senate finance committee, the g.o.p. recommendations include these. income tax rate for individuals and corporations no higher than 25%. repeal obama health care law and its tax increases. full repeal of the alternative

minimum tax is another proposal that the republicans on the finance committee have made. when it comes to medicare, address the eligibility age. evaluate impact of supplemental coverage. strengthen efforts against fraud, waste, and abuse, and with medicaid give states defined budgets and flexibility to modernize eligibility, implement provider reimbursement systems. when it comes to medicare, we had a caller earlier who wanted to ask you the question why don't you open it up for younger, healthier people to be able to buy into medicare in order to help support it? >> -- guest: it would probably be better if you want to help people with a government program to allow them to buy into the federal health insurance program so that those people that say, why can't we have a program just like federal employees have? it would probably be a more viable program for them to buy in there than to buy into

medicare. because i think it adjusts regularly annually much more than you can adjust medicare. see, if they bought into medicare today, it would be just like -- let me start over again. it would be just like 1965. why is medicare in trouble today? because people in 1965 when they wrote medicare, the average age was about 74 years old that people were living. now it's 79 or 80. nobody anticipated the longevity that you have now. you couldn't expect them to do that in 1965, but today we have to make up for the fact that in 1975 they didn't really realize people were going to live longer -- 1965 they didn't really people were going to live longer, or medical help was going to keep people alive longer or have these sustaining things of life in the last year like we do now. and so we have to compensate for those things now. but the important thing is that medicare's got to be preserved

because it's part of the social fabric of america. host: senator, before we go to calls, we have the numbers up there so we can get right to those, i want to ask you two separate questions. we talked earlier this morning on the "washington journal" about rick perry's flat tax proposal. what are your thoughts about that? guest: my thoughts on that is it's the second best proposal that congress could consider if they want to throw out the existing tax code. and 70% of the people and even congress knows this, but most congressmen don't talk about this like the people do. but we all realize it. it's become very -- makes or economy very uncompetitive. it stifles individual initiative. it needs to be thrown out. i would prefer a flat rate income tax. but if you don't have a flat rate income tax, i would support a national sales tax. but the point is don't have a sales tax on top of the income tax. it's got to be one or the other. host: have you endorsed in the g.o.p. primary yet?

>> no. i did announce yesterday that i'm not going to endorse anybody . host: before january 3? guest: if your question is will i support the nominee of our party, i sure hope i can, and i intend to. but the reason i announced that is i believe we have so many good candidates and quite frankly it's difficult for me to choose among them. secondly, i think that we have a system in iowa where we make presidents. president obama would not be president of the united states if he hadn't beat hillary clinton in iowa. president carter would not have been president of the united states if he hadn't come to live in iowa a couple years before he was nominated. we make presidents. and maybe you can say that about gorge bush as well -- george bush as well because he did well in iowa. since we have a system where the cream tends to come to the top, i think i'm going to rely on that system. host: is there any chance that

the january 3 date could move now that nevada's looking at pushing back their caucus to february? guest: in that case i don't believe so because what you have to do is, we set ours -- we had to do it because of florida. let's bring florida first. we had to move ours from february to january 3. then the question is, can new hampshire come in 10 days or so after us? and then still time for nevada. if nevada's going to move later in january, then i think we are pretty firm at january 3 in iowa. host: finally, muammar gaddafi, it's reported that he has been captured. what are your thoughts on that? guest: wonderful. i hope that it doesn't take long to bring him before a court of justice like it does a lot of people like him. it seems like it's 10 or 15 years before they ever get convicted of anything. host: we veered off into a

couple other topics. we invited senator grassley here to talk about the debt reduction committee. the finance committee's proposal for deficit reduction, and his own personal proposals for deficit reduction. we'll start our calls with john in milford, pennsylvania. you are on with senator grassley. caller: good morning, gentlemen. senator, i would like to ask you if you still get government subsidy on your family farm? guest: that's right. i am. and i do that because i don't -- i feel like if i'm going to be a farmer from iowa representing them and the united states senate, i should participate in the farm program. not be an absentee landowner. i crop share and so naturally when you crop share you pay for half the expenses of fertilizer, taxes. everything that goes into the production of farm. i get half the crop. so obviously i get half of the government payment.

but because corn is $7 the only government payment for the last three years has been the direct payment, and by the way, i said to peter, we have very firm recommendations in the farm program for saving $23 billion that we are making recommendations to the debt reduction committee. and one of those would be to do away with the $15 billion of direct payments. so if that goes into effect, then chuck grassley as a farmer would not get a direct payment. host: next call for senator grassley comes from silver spring, maryland, peggy. caller: good morning. thanks for taking my call. i'm a first time caller. thank you. i'm a bit nervous. i'm an independent but i lean more towards the republican party because i'm very conservative. i have a few comments and few

questions. one is regarding the tax rightoff. do you get a rightoff for your cell phone, for mortgage, for gas in your car, investments? farm subsidies? these are the problems. it's the write-offs. it's not we are not being taxed enough. it's the write-offs. number two, the problem is not with social security and medicare. the people who created social security and the medicare system are very smart. the problem is the congress men and senators who have been there forever who become corrupted and not particularly smart. all they do is spend, spend, spend. host: we got your two points there, peggy. senator? guest: well, i don't know whether -- can you tell me was she suggesting we do away with the mortgage deduction? host: she was saying the deductions and the loopholes are the problem in the tax system i think was her point. guest: she's right. and that's what makes the tax

code so complicated. and that's why i said to you earlier that with the flat tax you would do away with all those. and end up with just a flat tax. there is some suggestion, even with a flat tax, you would have to have a little higher rate. but to preserve the mortgage deduction and to preserve the charitable deduction. the second thing is, if her word of corruption is violating laws, i hope she knows that i know that if you violate those laws you're going to go to jail whether you are a congressman or not. host: a few more of the proposals from the senate finance committee republican members, this is when it comes to social security. this is what the senate finance republicans have proposed. benefit changes should apply to younger workers. no change in benefits for current right-side tire changees or those close to retirement. any proposed benefit changes should ensure protection against

poverty for workers with lowlife time earnings and disabilities. and maintain the fundamental value that there is a relationship between what workers put into the system and what they get out. senator, two conflicting newspaper reports this morning, "the washington post" saying that the debt committee was going nowhere. politico saying it's making progress. what have you observed in talking to your colleagues who are on the committee? guest: you understand even talking to us they have taken a blood oath that they are not going to say too much what goes on in there because they don't want to be negotiating in the press, and they don't want all the lobbyists in town coming down on them when some rumor gets out that this program might be affected or that program. so even in our republican caucuses i don't know how it is in the democratic caucuses, but even in our republican caucuses and steering committees, it's

difficult to get our three members that are on the committee to say exactly what's going on. but they do talk very positively about getting a result, and they also talk very positively from the standpoint -- they encourage us to not be -- how would you say it, not too pushy on accomplishing a whole lot more than the $1.5 trillion that is their assignment for right now. even though we all know that -- take the $900 billion that was passed in august 2 for saving, and $1.5 trillion this time, that's still only about 60% of what everybody knows needs to be done. so it puts some off into next year. but we better -- if you want to build confidence, and i said confidence in the future is one of the goals of the

supercommittee, then, you know, you want to do enough to build confidence, but you can't -- if you try to do it all at once and don't get it done, then you could do more harm than good. host: ronald tweets into you, senator grassley, is social security a ponzi scheme, and what is wrong with eliminating the cap, social security cap on wages? guest: what's wrong with the latter one is easier to answer. and that is, the reason you wouldn't take that, we would have the highest tax rate of any country in the world if we were to do that. and what does it accomplish if you're going to have billionaires pay in on every penny they have and they draw out accordinglyly. then what do you accomplish? on a ponzi scheme in the sense, this is why it's legitimate to call it a ponzi scheme, but i

don't use that word, but i'm not going to complain with anybody that does use that word is because it's just like now. i draw 100% of benefits out of social security today. but my grandchildren under the law of 1936 will only draw 70% of benefits. but yet -- and the reason for that is once the i.o.u.'s are used up, and they are used up by 2036, the law says you can only pay out what cash flow is. so consequently it's a ponzi scheme when people that are paying in today are not going to get out according to what i get out, compared to what i paid in in my lifetime. host: next call for senator chuck grassley, republican of iowa, member of the senate finance committee, the judiciary committee, the agriculture -- agricultural committee, comes

from jewels, a republican from vista, california. you're on c-span. caller: hi there. mr. grassley, i'm from iowa. i'm from fairfield. guest: when did you leave iowa? caller: 1956. guest: you need to go back to fairfield because it's a very prosperous community today. caller: i did go back there about eight years ago. i stayed there for about a year. it didn't look that prosperous to me. all the factories are closed down. all the things that i knew when i was a youngster there, pretty much gone. guest: you would be surprised the number of small entrepreneurs and very wealthy entrepreneurs -- caller: i have to argue with you about that because i tell you what. you remember parson's college? guest: yes, i do remember it. caller: well, you know what it is now? guest: yeah.

and that's where -- caller: you know what it is? it looks like a compound. it doesn't look like a college anymore. guest: what's your question? caller: here's my question. social security, social security is -- depends on how many people you got paying into it, right? guest: yeah. caller: people don't have any families like they used to have, like i had -- i come from a family of seven. i had a family of seven. and i assume that, you know, hopefully, i hope they are going to all pay into social security, but you only have one or two children, how do you expect to collect? guest: he's bringing up a very key point i should have made, you know. i said we are only going to draw 70% of the benefits.

that's because today, that would be after 2036, but today there's about three workers paying in for everyone drawing out. and probably in 30 years it will be two people paying in for everyone drawing out. and it would be a lot worse in the united states if we didn't have the legal immigrants come to this country. and i suppose you could say if we didn't have some illegal immigrants come to the country, but i don't like illegal immigrant but i like legal immigrant. and we are not as bad off as europe. our birth rate's 1.8. europe's is about 1.3 per family. and i think japan's even less. 1.1 per family. and with their one child per family in china, in about 20 years they are going to have a tremendous problem. so we are at least somewhat fortunate in this country because we have people that want to come here and work and be productive and pay taxes. so it's not quite as bad.

but it's still going to get a lot worse. he brings up a very important point. host: sue from whiting, new jersey, emails into you, senator, how can proposed fixes to social security and medicare programs not include at least in some small part those over 55 years of age? it seems that would be the most likely area to implement, sensible cost saving measure. guest: it's a very simple matter. that is that when people work for 40 years, to pay into the system, and they are 55 and over, you start affecting them, they don't have time to adjust to it. that's why we suggest 55 or maybe even 50 for people that are younger, that any changes are made would start affecting them at that age or younger. because it's just beyond fair. just like, for instance, if you were 66 today and tomorrow we would change the retirement age to 67, maybe you quit your job

and what are you going to do? you can't get social security for one more year and you were planning on getting it tomorrow. host: next call comes from kalamazoo, michigan, ralph, democrat. good morning. caller: i wonder if the senator has any predictions on -- economic predictions. i'm hearing the financial budget office is predicting the unemployment rate will remain 9% for another two years at least. and economic growth will be around an anemic 1%. maybe 2%. and of course poverty is continuing to go up. is the senator concerned about any of this? or does he have any ideas about it? guest: first of all, i'm not an economist and i would suggest that congressional budget office is not right all the time, but they have more institutional predictibility on that than i do. there's some private economists

would say that we'll have unemployment getting below 8% in 2013. but it's still going to be relatively high. and presumably you have to hire at least -- you have to create at least 150,000 jobs every month just so it doesn't get worse. and from that standpoint. and he says, his question to me, am i concerned about it? yes. that's why i concentrated at the beginning of this program, maybe he didn't hear it, that what the supercommittee has to do and what we that aren't on the supercommittee have to help them do, because it's the only game in town, we've got to promote economic growth and have tax policies and regulatory policies and fiscal policies and trade policies that promote economic growth because if this economy doesn't grow, you aren't going to create these jobs. the caller calls in and a lot of

people that call in and think, well, just put people on the government payroll. hire more teachers. hire more everything. but you got to remember, government consumes wealth. government doesn't create wealth. so you're not going to get the economic growth by putting more people on the government payrolls. you've got to create private sector jobs because that's where the growth comes. and that's where -- how you're going to get the unemployment rate down. you've got to have competitiveness to do that. that's the tax policies and the spending policies that the debt commission's going through. and all of this builds confidence in the future for the caller from kalamazoo, michigan, i would say to him that one quantitative measure of the fact that government's got to create a better competitive environment is the fact that there's $2 trillion in corporate treasuries, and they aren't making any money on that. it's just sitting there. they aren't making any money.

they want to hire people. they want to build a plant. they want to get equipment. and they aren't spending it because they don't know what government's going to do to them. we have the highest tax increase in the history of the country coming at the end of next year. we got -- let me put it in pages. we got 66,000 pages of new regulations out of the administration just this year. and we got this big budget deficit that congress is responsible for that we got to do something about. and all of this undue regulation, and all of this consequences of the tax policy coming down the road and the big health care reform bill and the costs connected with it. corporations aren't hiring because they don't want congress -- know what congress is going to do to them or president is going to do to them next.

we got to build confidence. so we need a moratorium on new regulations. we got to say that will taxes can't go up when you have a recession. the president said that before he was sworn in. and we got to get this fiscal control under. and we are doing something in trade. we are expanding our trade now through the free trade agreements we passed last week. host: senator, to interrupt our conversation here, gaddafi dies of wounds according to the national transition council in libya. this is a reuters story. n.t.c. official told reuters earlier that gaddafi was captured and wounded in both legs at dawn on thursday. as he tried to flea in a convoy which -- flee in a convoy which nato airplanes attacked. if we could get an immediate reaction. there is no -- guest: it's better than arrest and trial. because he's got loyalists in his country that would still have that loyalty to him that i

think is going to keep libya from unifying. and i believe that this is going to bring about a stronger libya, hopefully a more democratic libya, because they won't have him as a ruler for 42 years whether he's behind bars or whether he's in some foreign country as some hope, maybe we can go back to the pro-gaddafi years. that's what a lot of people close to him and in the power structure would be hoping for. host: if it's confirmed that he was shot by nato airplanes, any thoughts on that? guest: nato's legally into it based upon the u.n. resolutions. so if there's any question about whether that is right or wrong, we were involved there under international law legally. not the united states so much but france and england, etc. italy. host: again, senator grassley is learning this as we are learning this.

those are preliminary remarks from him. we don't want to force him to keep his remarks in case he has different ones later on. dover, ohio, mike, independent line, you are on the air, please go ahead. caller: good morning. i have three points. number one, on social security president obama this year has cut the fica tax for the employee by 50%. the jobs bill next year cuts the fica tax by 50%. if you're on a table bleeding out four pints of blood a minute and you are only using two pints a blood a minute, how long do you think you have to survive? he's personally killing off the social security program. number two, as far as job creation -- host: seriously. how is senator grassley personally killing off the social security? caller: he's not. president obama is. host: i apologize. i misunderstood that.

caller: the deficit commission, the only way you're going to create jobs is if you created demand for the products. you can spend all this money and give them tax breaks and everything else you want, but until this company has a product to sell, they aren't going to need to hire anybody else. host: senator grassley, what do you think about his remark that president obama is personally responsible for killing off social security? is that a fair remark? guest: i disagree with that. what the caller doesn't know that he would not say it if he knew this, first of all on the second point, on demand, he's absolutely right on that point. on social security he's right in the sense except he doesn't know that president obama's plan and congress, if we go along with it, we did go along with it last year, we extend it for a year, that's still up in the air, the amount of money that the 2% reduction in the payroll tax for

one year is going to be taken out of the general fund and put into the social security fund. so the total amount of money is going to remain the same whether it came from the payroll tax or comes from the income tax. host: next call for senator grassley. we have about 10 minutes left. elizabeth, new jersey, frank on the republican line. you are on the "washington journal." caller: good morning, senator grassley. pleasure to speak with you. guest: thank you. caller: my question is this, there are -- it seems to me incentives for large corporations to move jobs to foreign countries. now, the reasons for that may be varied, but i think that there should be a penalty of some sort for a corporation that is doing well here is being -- has built a reputation and has made a lot of money in the united states should be your job, my job to

peru, canada, whatever. secondly, social security my feeling is this. social security when it was set up under the new deal was never meant to be a primary retirement system. it was meant to be a base, a basic system where you at least have a little something when you right-side tire change. would you agree, and then i'm going to hang up and eagerly await your answer. would you agree that maybe as families and as americans we are just not planning properly? we are depending maybe too much on what was meant to be a social safety net, we are depending on it to guide us through the later years of our lives. guest: on the last point he's absolutely right. that people aren't saving enough and social security was meant to be just one part of a three-part retirement plan. social security, administered by the government, paid in by the individuals drawing out.

number two, it was meant to dovetail in with the second leg of a three-legged stool for pensions. and the third one would be personal savings. so the, tent to which people aren't involved in a retirement -- extent to which people aren't involved in a retirement plan with a 401-k or where they don't have personal saving, he's right. they are not saving enough. there is a little more savings now the last two years than there has been the three years before that when we had a negative savings rate. but it's still probably not enough to supplement it. there's about a third of the people are in retirement that get 100% of their retirement just from social security. and that -- so they obviously didn't save beyond that. on the first point it's very difficult for me to tell frank in elizabeth, new jersey, that if catter pillar is moving -- caterpillar is moving a plant overseas because labor is

cheaper and they want to be able to manufacture a better product, that john deere couldn't do that. if john deere didn't do it they would be uncompetitive and go out of business. we don't have laws in this country, frank, or peter, that say that if peter, you wanted to find a lower tax country to move there, we aren't going to pass a law that says you can't move to some other country. that isn't the way we operate in america. we believe in personal freedom, economic freedom, political freedom. and that is applicable to corporations as well. the point is that we could keep more of these corporations in this country if we would take care of some problems that we have in this country of why people move overseas. number one, we have the highest corporate tax rate in the world. at 35%. even socialist countries of

europe are reducing their tax rate for corporations. that would make us more competitive. we have a lawsuit regime in this country that most other countries don't have and manufacturers have to build that cost into their product. so if we would have tort reform it would help. the cost of the health insurance programs are very expensive. if we could do something about that. all the government regulation that we have, that other countries don't have, makes it very difficult for our manufacturers sometimes to be competitive. so there's a heck of a lot we can do in this country to make our manufacturing and our -- more competitive. i think you see that in agriculture. we've become very competitive in agriculture. that's why our products are -- we export about 1/3 of our agricultural products and do it on a fairly competitive basis. host: as a reminder, the deficit reduction committee is looking for $1.2 trillion in spending

cuts or tax revenues. the committee must vote on a plan by november 23 which is the wednesday before thanksgiving. congress must vote on it by december 23, two days before christmas. and if no agreement is reached, 1.2 trillion in automatic cuts split between defense and domestic spending start to take effect. there are schools of thought, senator, that perhaps it would be the easier, softer way to allow the automatic cuts to take place. guest: it would devastate our defense operation. it would make the united states very -- what we do through military and the protection it gives to the american people would be really hurt if that happened. and that's one of the big reasons the committee's going to come to a recommendation, i believe. host: senator grassley, joseph

tweets into you. will you recommend an increase in the income tax of the rich if it saves medicare and social security? guest: no. again here we are looking for a competitive environment. and small business creates 70% of the new jobs in america. so much of the people that make more than the $250,000 that the president proposes get this big tax increase at the end of next year are small businesspeople. small business people create 25% of the jobs in america. so why, if you want to get unemployment down, would you want to tax employment? that's what you would be doing in the case of small business. it's very necessary to follow the rule if you tax something you get less of it. you don't want to tax employment if you want to get more employment. and particularly it's small business operates on cash flow.

so you increase taxes on small business and it takes money out of cash flow, obviously they are going to have less money to hire people. whereas corporations, you know, can borrow or float more stock. small businesses don't have that leeway. host: ted is a democrat in hammond, oregon, good morning. caller: good morning, peter. this is mr. sweet spot. mr. plumber, we have talked before. good morning there, chuck. guest: hi. caller: anyway, getting back i guess what i want to ask the senator this morning is, number one, let's say congratulations to the nato air strike. i'm an old air force veteran. i remember the day in 1986 when the f-111's took out of r.a.f. in england to fly to libya to drop bombs on muammar's tent. anyway, on to my next question, i guess where i guess what i'm

going to ask you here, chuck, is i understand that senator kyl and senator kay bailey hutchison, senator coburn, they are all due to right-side tire change. and i guess my question is, when i was in the air force i would have to go 20 years for a retirement. correct me if i'm wrong here, chuck, but i guess the base wage of a senator is $175,000 and change a year, and here we've got senators on both sides of the house, don't get me wrong, democrats and republicans, that are going to due to right-side tire change -- host: what's your question? caller: my question is, do you think a senator is worth $139,000 on a pension? that's my question. guest: they would have serve more than 30 years. so kyl and kay bailey hutchison would not qualify for the maximum. and also let me throw in at this particular time that coburn was just re-elected. he's not going to right-side

tire change. but kyl and kay bailey are. but they haven't served the 30 years to get the maximum retirement. i didn't know the maximum retirement was $139,000. i'll take your word for it. but, let me say this. i don't know whether you have but some people have written to me they get some crazy information off the internet that says, well, if you served in the congress six years, one term as a senator, regardless of what your age is, and you're going to -- you can right-side tire change at full pay. that's absolutely wrong. now, the question is, might be more legitimate, with these financial problems we are having, should retirement of congressmen and every federal employee be changed to some degree? and the answer is, everything ought to be on the table when it comes to deficit reduction. host: last call for senator grassley comes from albany, new york. lynn on our independent line. you're on the "washington journal." caller: hi. good morning. i know we don't have much time

so i just kind of want to ask two questions. one is about the flat tax. my concern is that businesses actually take deductions for salaried employees. the c.e.o.'s making $13 million a year. annually. annually. that's actually just a business expense that's written off. so in the flat tax concept is that adjusted? or are businesses going to be continue -- continue to be allowed to deduct salaries that are outrageous? guest: the flat tax is on personal sales. at the retail level. so whatever the national sales tax is, that's a flat -- she's talking about the income tax, isn't she. i'm sorry.

i got it mixed up with the fair tax. the flat tax would be -- there wouldn't be any deductions except for personal -- like for a familiar of four there might be the first $35,000 deductible. but the flat tax applies to just personal income. it would not affect the corporate tax. you could have a corporate tax rate that would be a flat tax, but that isn't what we are talking about, individual tax. so the tax would not be affected if we had a flat tax individual. let me say this where you're wrong about the $13,000 if a c.e.o. gets paid $13,000, the 1993 tax law allows only 1 1/2 million dollars of that $13 million to be deducted as corporate expense. now, that was put in in 1993 with the idea that we would limit corporations from paying

their c.e.o.'s like $13 million as you suggested there, but it did not stop it because they found other ways of getting around it. so we can only deduct $1.5 million from our corporate tax. well, we'll pay them more if even if we can't deduct 2 or we'll give them deferred income or we'll give them the ability to buy stock at a lower rate. . it is impossible sometimes through congress, through the tax laws, to do what you want to. in 1993, we thought we accomplished no ceo getting paid more than $1 million. but this guy is worth more than $1.5 million. if enough pay more, he will go somewhere else. we have to have him to protect the work force that we have and to protect the stockholders. host: senator grassley was

elected in 2010 with 65% of the iowa vote. he is a member of the finance and agriculture committee. guest: i had to move to the next committee that i was senior in. i am the first lawyer to be a ranking member of the judiciary committee. host: if you'd like to see his proposals, you can go to his website. grassley.senate.gov. guest: there are also more recommendations that i have made personally to the debt reduction committee that i made to the finance committee or even the agriculture committee. there are a lot of ways that we can say specific amounts of money. >> former libyan leader muammar

gaddafi was killed today when revolutionary forces overwhelm his hometown of sirte. a senior western military official in washington said libya's interim government has sent nato commanders still pictures and video imagery that "leave no doubt as to his death. we will have more information from the white house coming live for you here on c-span. meanwhile, ban ki-moon said that muammar gaddafi's to death marks a change. >> good morning. before we begin, let me say a few words about this morning's news headlines.

we have reports of the death of muammar gaddafi and the end of fighting in sirte and other cities. clearly, this day marks a historic transition for libya. in the coming days, there will be scenes of celebration as well as brief for those who lost so much. yet let us recognize immediately that this is only the end of the beginning -- the road ahead for libya and its people will be difficult and full of challenges. now is a time for all libyans to come together. libyans can only realize the promise of the future through national unity and reconciliation. combatants on all sides must lay down their arms in peace. this is a time for healing and

rebuilding, for a generous -- for generosity of spirit, not for revenge. as libya's conditional authorities have paved the way and taken other steps toward building their own nation, including altruism must be the watchword. all libyans was the will to recognize for themselves the nation's government and leadership. the high hopes sustained through the long is a revolution and conflict must translate into opportunities and justice for all. i have just spoken with my special representative for libya in tripoli. the new united nations mission for libya and is on the ground and ready to assist libya and

its people along the path toward health. >> again, muammar gaddafi killed today by revolutionary forces in his hometown of sirte. mitt romney is on the road in iowa at a town hall meeting today. he was asked by reporters for his reaction. >> can we get your reaction to the muammar gaddafi killing? >> he was a terrible tyrant who killed his own people and murdered americans and others. the world is a better place with gaddafi gone. they do so much. >> all of that event with mitt romney in our video library at c-span.org and later in our program scheduled good in 25

minutes, we will take you live to the white house. we will hear more about the gaddafi story. jay carney will bring us more. melete barnes will be leaving the white house at the end of the year. while the houses out this week, don edwards joined us this morning -- donna edwards joined us this morning. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

guest: it is a new day for libyans. host: that is donna edwards giving us her reaction to libya. you have sent letters to the debt reduction committee -- or the debt committee, talking about what you would like to see done. one of those included no changes to medicare. is that a fair assessment? guest: i think that is a fair assessment. would you can strengthen medicare is to reforms, but not to cut benefits are asking seniors and those in disabilities to reach more deeply into their own pockets, which are not so deep these days, to pay additional amounts for medicare. i think we can do that and still meet their obligations.

the reality is that, on the revenue side, if we actually got rid of the tax cuts for the wealthiest 1% and 2%, it would free up an awful lot of money where we do not have to ask seniors and those of this ability to meet costs that they just cannot. host: there is a school of thought about whether or not the automatic cuts should come into play if the committee cannot agree and congress cannot agree as well. what do you think? guest: it basically results in the cold cuts for defense and non defense discretionary spending. i do not want to show the american public that we continue to be a dysfunctional congress that cannot figure out how it is that we should manager budget and spend our resources. i think would rather and a lot of my colleagues would rather make the appropriate cuts, but make sure that we have a balance

of revenues so we can fully meet our obligations. host: congress's approval rating is at 13%. guest: this is a deep disappointment. i started reading a biography of jefferson and thinking about the vision that our founders had for our country. i think we need to get that back. we do not want to go back to hundred some odd years, but we want to go back to where people had confidence and people had confidence in us as leaders and we owe it to the american public to do that. then we can see the number below. host: we will put the numbers up on the screen could be to like to call and talk with donna edwards.

you can also contact us through twitter and facebook. you the chair of the red-to-blue program. what is that? where are your strengths? where the democrats' strength when it comes to taking that congress or increasing representation? guest: our strengths are in that we're talking to the american people about our values and focusing on jobs and what is good for americans and not just what is good for politics. i feel really confident. i have been participating in our congressional campaign committee. we have dozens of candidates across this country running in competitive districts. i am confident we will be able to regain the gavel.

then we can put it into the hands of somebody who understands what is right for the american people. in 2012, there will be a lot of activity in all the states. it will not just be about the presidential campaign. host: unique to pick up 25 seats to get the majority again. -- you need to pick up 25 seats to get the majority again. guest: we have really strong candidates. our governor just finish redistricting in maryland. i believe we will pick up a seat in there as well. it will be incredibly competitive. who knows? there may be primary race there. but we will come out with a very strong candidate. in other parts of the country, some of our members who were defeated in 2010 are actually

coming back. people like and kilpatrick in arizona and dns titus in nevada -- anne compactokilpatrick in aa and dina titus in nevada. host: there is a controversial plan in maryland that the state senate supported. if you could talk about how this affects you personally, your district is no. 4, which is just south of washington, d.c. how has your district changed? it looks like it snakes through a little bit -- the green. there is green year and there is being here as well. guest: i describe it as a pair of ear muffs.

you have one side in prince george's county, maryland. they go along a boarroadway that borders montgomery. i cannot explain it. it is a district that sets a path and was signed into law. i look forward to learning more about my district in the same way that i learned when i ran in the coming county. host: how much does this change your current district? guest: as far as the democratic performance, it does not change very much. it does pick up a significant swath of and around the county -- of ann arundel county. i was concerned about the map and the representation of montgomery county.

as democrats, we should do -- we should value the diversity that is there. it is one of the wealthiest counties in the country. unfortunate, with this map, it does not have the potential for minority representation. i think we will get some democrats in that district. host: go-ahead to with your question or comment. caller: is a treat to talk with you. i am a pro-life democrat. i wanted you to know that first off. i absolutely think that we need to tax the rich in this case. the reason why is that that is where the money has gone. that cut back on profit sharing. they have cut that people's hours. that cutback people's benefits. and poor people do not have what to give. i know that you know this. but a lot of people do not know

that you have to understand where you have come from to know where you're going. i am an african-american. a lot of people do not realize that the things that were done in the past in the new deal times, which is what former secretary rice is proposing, all people could not participate in the new deal policies. the could i get the middle class values and the middle class education. they could not participate in the economy of the day, much less in the economy of the future. i hope that congress will look in ways in which everyone can participate. as african-americans, we know that that was our dream and vision, that everyone would participate. host: we will leave it there. guest: i think that was a thoughtful statement. many of us understand that while

you can go backwards, you can move forward from your past. that is why i am in favor of a robust investment in our infrastructure, rebuilding it. unlike in times of the past, it is time that we rebuild our infrastructure and make sure that there are jobs of the opportunities for all sectors. making an investment in repairing the infrastructure would create 35,000 new jobs. that is why i support the president's jobs act. it works for all of us. most americans understand that it is not fair to ask all of the 98% to 99 percent of us to bear the burden when so few have shared the wealth. host: the c-span 2012 campaign bus is in texas today. it is visiting stony point high

school, 20 miles north of austin, texas. we have a group of students on the bus would like to ask you questions as well. these are honor students and international baccalaureate. we will start with a question from alex beret who is on the c- span campaign bus right now. alex, good morning. caller: good morning. representative edwards, recently occupy wall street has gotten worldwide attention. what do you think of this movement? guest: sometimes we get more thoughtful questions from our young people. a biography of thomas jefferson

points out that thomas jefferson and patrick henry and some others decided that they would engage in fasting in support of their compatriots in massachusetts who were protesting the tea tax. this idea that we have this mass movement from wall street all across the country and all across the world is a deep part of our history. i think it is calling attention to the gaps in poverty and income and opportunity that have been created by a set of people who made an awful lot of money, whether it is on wall street and this economy, but it has been at the expense of working people and young people who do not have the ability to see their dreams because they have been snatched away from them. host: michael in atlanta, georgia, good morning. your on c-span.

caller: coming from generations of performers, i have always felt that simple solutions work best. my two-part question is this. number one, do you feel that 10% waste can be found in any government program? no. 2, if everyone was working, most of our problems would be eliminated. if america built superior products, and everyone globally would want made in america. your thoughts, please. guest: thank you to our farmers. we have an agribusiness that is being supported and our family farmers as we have known them. it is also true that you can find ways to just about anything. i worked in the private sector. i have worked for nonprofits. where i found ways, i -- it out.

-- i rooted it out. we have to look for that. but there are things that government can and should do that will benefit people. i will give you one idea and it has to do with your idea about making things in america. if we invested more heavily, for example, in research and development -- we used to have the has research and development credit in the world. now we're down to no. 17. what if we were to make those investments in research and development and mary that with manufacturing? if you innovate something in the united states and manufactured it here, then you get the benefit from that. that is value to the american people. i think we began to -- i think that, if we began to put people to work, they could contribute to medicare and rotifer structures and we would be more

competitive in the world economy. -- to medicare and infrastructure and we would be more competitive to the world economy. host: we will go back to round rock, texas. puja hamas and sahara. caller: what is your opinion about a green economy? guest: one of the things that we really set this on is how can the united states government actually make deeper investments into scientific research that will actually improve our ability to compete in the green economy? most of the technology that led to the development of the solar panel and shrieking from the

united states. we do not make -- solar panel industry came from the united states. we don't make that many battles here. investments in our sciences and earth sciences would contribute to what it means to be green. i liked this idea of a green infrastructure. we need our natural environment to make sure that we can treat their water and create safe for supply. all of these technologies will make us more competitive and to great things for our environment. host: what do you think about the investigations of solendra? guest: i do not think there are many of us who would not agree that that was really a bad loan. another company installed 8000 solar panels.

they were a beneficiary of one of those loans. they are a good company. they are a strong company. they are creating jobs. they are installing solar panels. just because you have one bad apple, that does not mean you throw out a good program. when we spend taxpayer money, we should do it in a good way and not based on politics. do not use that to throw the baby out with the bathwater. host: frank on our independent line. congresswoman donna edwards is our guest. caller: good morning. i want to say that the gerrymandering is strangely indicative of the kind of politics we have going on today. i have not been a republican since 1992. but i have to say that i am an independent and a really believe that you have to really play

dirty because the people on the other side are coming out of the sewer. you have to get down to the gutter with these people and really fight. i think the democratic leadership needs to be stronger. we need people who are strong in there. guest: what a great point. i have to tell you that i do not like gerrymandering, whether it is republican or democrat. at the same time, i think there really is a difference between republicans and democrats, a difference in the direction we want to take this country. i think we need to be forceful and emphatic about what these differences are. when we point the differences to the american people, we allow them to make better choices when it comes to the polls. i know that i have the values that i share with my fellow democrats of the protecting medicare/medicaid and social security and making sure that we

can create jobs, not just for those at the top, but for all of us along the income sectors. i think these are important arguments to make to the american people. i do not think anybody calls me a patsy for the fight. 10t: we're pleased to have students with us on the c-span campaign bus. amber mercado is the next student with a question for the commerce woman. caller: good morning. 0.3% of the nation's wealth is concentrated in the top 1% of the people. what is used to combat this economic destruction? guest: i have to tell you that i do not know we're doing the right thing at to make sure that we can cure the income inequality that you describe.

we have 46 million people in this country who live below the poverty line. 22 million of them are children we have the lowest median income that we have seen in a couple of decades. i just think that the gap between those at the top and all the rest of us is growing wider and wider. when you go to our tax policy and look at the tax structure, you look at creating wealth instead of job creation. we have to change that. caller: 84 years' service. i think more people need -- fate you for your service. i think more people need to do that -- thank yo ufu for your service. you mentioned the biography of thomas jefferson that you have been reading.

could you comment on the founding fathers, in particular, thomas jefferson's view of a role of the size of government? guest: thank you very much for the question. i think that what the founding fathers intended -- one, they knew they were not treated perfection. that is one of the reasons that they created a constitution that could be amended. that there is ad difference between a federal government and state government. they tried to incorporate that into the constitution. there are things like our social security system where we recognize from a policy perspective that it was important for all of us to contribute to a system that had a baseline for american retirement security. it does not mean that all of our

americans need retirement security, but this is a balance that are founding fathers were striking. this is a debate on our history and we will continue to have a debate about the relative role or not of the federal government. it is important for our structure. sometimes we get it right and sometimes we do not. host: rachel is the student's adviser down in texas. we thank you and time warner for setting this up. good morning to you. you're on with congresswoman edwards. caller: the 2010 election was the first time since 1979 that women did not make substantial gains in congress. why do you think that is? guest: that is disturbing to me. when i decided to run for congress, it was when my son was grown and ready to go to college. women make decisions in

different ways. i have been in the recruitment committee for the democratic congressional campaign committee. women may not be in politics, but they may be in business or academia or in other areas. we need to draw them into the political process. the money raising is a real challenge. i do not come from money. i did not have money to contribute to my own campaign. when it takes a couple of million dollars to run a congressional campaigns, you need a lot of really good people to help. if we could fix the campaign finance system, we would have a lot more diversity. host: what did your campaign in 2010 cost? guest: i did not have that much competition. but the campaign that i read to defeat a longtime incumbent cost a couple million dollars. i started out having to make phone calls. even now, so many of us are calling on the phone and asking for money. it really takes away from the

business of government. this is the hand we are dealt. we have to play it. it is a system that really undermines what we could be doing for the american people and it needs to be changed. host: according to the recent fec filings, democratic committee congressional committee, and the republican committee have raised sabbatical amounts of money this year. guest: they have. again, it is the system we have. all of us play in it. i do what i can to help the democratic congressional campaign committee because i want to win. but i do not think that it is a system that serves the american people. i would like to see a system of really clean elections where candidates can go out and get signatures and get a baseline of money to run for congress. but a system where you have people on the phone hours and hours and hours every single week, every single month, calling people and asking them for money is not a way to run the government. host: c-span junkie tweets in to

you. many work for government the report came out yesterday about d.c. having the highest wages in the country. guest: washington, d.c. also has the third highest poverty rate in the country. you can even see here that there are significant gaps between people who are really struggling and those who are doing really well. even in metropolitan washington. in the suburbs, you can see the income gap is really huge. i think that is true all across the country. we may be faring slightly better in terms of employment. host: you are on the line with congresswoman donna edwards. caller: i would like to rescue to questions. please do not cut me off.

the first one is -- do you think that the liberal democrats have destroyed the black african families? i do not like to use african- americans because we are all americans. the second one is -- abraham lincoln was a republican who released the slaves. -- released the slaves that the southern democrats created. guest: that is an interesting point. but most americans get up in the morning and they do not think of themselves as a democrat or republican. they think of themselves as an american. they get up in the morning and they want to help themselves and their families. i think we need more people in the congress and in the body politic who is thinking like most americans do. i am proud to be an african- american. i am also proud to be an american.

i and understand your from hampton, caller. host: have been, michigan. guest: -- host: hampton, michigan. guest: oh. host: keith is from long island, new york. caller: the congresswoman said that she was on the sunset technology council. i have a quick question about how that works and how that information is passed to congress in general. i am enough petition. -- i am a mathematician. it disturbs me how politicians have a lot of leeway to change the facts or reinterpret them so it seems like there is consensus on issues like this.

can you explain how you render some kind of determination to say that this is the state of things? host: thank you. guest: i serve on the science and technology committee of congress. it also happens that i live in the county that is home to the space center where most of the important research is being done in the country on earth sciences and the human factors to climate change. i believe the body of scientists who believe -- we have a problem with climate change. we need to figure out ways to conserve energy, producer more efficient products, and not use so many fossil fuse that create the destruction of the country. we have to believe the science.

host: the next tweet. guest: when i will say is that i have long been concerned in at we have given up without fail many of our rights to the defense forces without a lot of examination. i think it is time for us to reexamine what it means to have national security and what it means to act in the security of the united states and balance that with our obligations as citizens and with their constitutional rights. i think this is the right time for examination. even though this is a bad guy,

an american citizen, there is something very distinct about that compared to other bad actors in the world. host: allison is our next student. caller: good morning, representative edwards. i saw that you voted against massive expansion. i wanted to know why? to what extent could nasa's expansion help our economy like the space race of the 1960's? guest: i do not recall that i have been a real strong supporter of nasa -- and do not recall that. i have been a real strong supporter of nasa. i was an engineer were cared working for lockheed on the space program -- i was an engineer worker working for lockheed on the space program.

i think they are on the cutting edge of astrophysics. we need to make those investments in technology that resound to other kinds of technology and innovation in the larger economy. host: sometimes their campaign commercials such as so-so voted against this and so and so voted against that. where could it possibly have been no that allison found this information? guest: i do not know. it could have been in an overall budget package where there were other budget issues. if you look at my record, everytime there have been proposals to cut various sorts of nasa funding and programs, usually, that takes place in an amendment process. but probably voted against that, even though i had to in another package. i know my staff is the same

right now and they will look at the same thing. i have been a strong proponent of the space program. host: thank you allison for the question. sam mcdonald is another student at stony point. go ahead with your question for congressman edwards. caller: what specifically does the democratic party plan to accomplish when it describes that big business and the worker will be the one for economic recovery? guest: i think you always have to strike a balance between the things we have to invest as government and ways in which the private sector will then jump on we are in nearly tough economy. it calls for government to invest in our infrastructure. it is the roads and bridges and the water and sewer systems,

broadband and those sort of things that begin to spur the private sector economy. we also have to call on business to release their capital. i want financial institutions to make loans to small businesses. but in my congressional district, businesses who want to hire people cannot because it connected the capital. host: boston, massachusetts. don edwards is our guest. caller: i would like to talk about how we got to where we are. right after world war ii, with americans producing the marshall plan which rebuilt europe, is to rebuild europe -- it allowed them the luxury of not having to pay for a standing army because we protect them.

an unintended consequence is that america subsidized europe's ability to produce socialized medicine, free tuition in college, and four weeks to six weeks of vacation in certain industries and a lot of other handouts. consequently, -- host: we got the background. could you give us your question please? caller: i will finish in about 20 seconds. host: we need the question or we need to move on. i apologize. caller: although we have no more money to spend and we cannot finance anything anymore, in the mid-1960's, which produced the great society and elevated the debt limit 70 times to pay for

it. host: we got the point. guest: part of what he and others raise is what is our responsibility with the europeans and then meeting more that responsibility is and the question of what is our responsibility to places like afghanistan. we have been there for 10 years. andave been doinbuilding roads infrastructure. but we need to build our own. not that we cannot play a moderating role in the rest of the world, but it is time for us to focus on rebuilding this country, making us competitive, getting people back to work, making things in the united states. and then we have much more to take care of our citizens and to do the kinds of things we need as a premier leader in the world. host: rachel johnson is one of those international baccalaureate honor students

joining us from round rock, texas. caller: good morning, representative edwards. do you think that technology in the classroom will help the education become more effective and less expensive? guest: 0, my goodness, of course it will. i have been a huge proponent to make sure that we have the latest technology in every classroom. what disturbs me is that there are a couple of schools in my congressional district that do not have broadband taxes. this is true across all the country, in urban areas and rural areas. that limits the ability of our students to use the 21st century technology they will need to compete in this world economy. i think we have to upgrade our classrooms so that they have the best available technology in the classroom, making sure that our teachers are really trained in the field and that they can get the training of two students. i think then we will prepare young people to be competitive

in this country. host: let's get your reaction to this. applications are slowly edging down. guest: i think this is good news for the administration, for the president, and for america. now the question is whether the united states congress will have the courage to come forward with programs and things that will really stimulate the economy. that is really good news.

i know that americans would actually see those numbers more robust as we move forward. host: we have three students that we have not had a chance to talk to. i will try to get one more in year. this is civa manda good morning. caller: many companies nowadays are moving to foreign countries to increase profit margins and they're keeping their profits in foreign banks and not bringing them into the u.s. because of the 35% tax they have to pay. they want a lower tax to pay to bring the money back into the country. do you think the government should lower the tax rate for them to bring the money back into the u.s.? guest: it depends. it depends on how that money will come back and whether it will be invested into our economy. i do not have a problem with figuring out a way to repay trade that money.

but also to make sure -- to repatriate that money. but also to make sure that it provides investment. host: a couple of front page political stories in the local newspapers here are about how senate democrats are steering away from the president in the next campaign. a front-page story about your fellow progressive and cbc member, maxine waters, is creating problems for the white house. what you think about that? guest: how the president does will be important for how we do as we regain the senate. it is important to make the case, as the president does, on

how to make jobs. when we make that case, while the president's approval is down now, i think these numbers coming out from the department and the more we've focused on building the economy, the more it will be better politically and stronger we will be economically. i am looking forward to running with president obama at the top of the ticket. i know all the candidates across the country will do the same. host: donna edwards is in her third term in the house of representatives. thank you for being on "washington journal." >> we had planned to cover the daily briefing. that was changed. the president will be speaking to the press and commenting on the killing of muammar gaddafi today. u.s. officials have yet to say anything publicly about gaddafi possible death. gaddafi's death.

up next, more from this morning's "washington journal. dr. norman cole menaced us.h thi he is a senior medical advisor. first of all, what is it that you do at hhs? guest: i am in a planning group. i am a senior medical advisor, which means i am a scientist. i work at two jobs in the government could my primary job is that the cancer institute. my expertise in radiation biology -- i am a cancer physician. i would get to the health and human services when they went

down to put together a -- i have to judge putting together the response. host: what are the building blocks? because of the cold war had ended, there has been little threat of nuclear attack. we put together a plan has the most basic science of radiation to what people should do if an incident happens to have to orchestrate a response to how to develop responders who can actually do what they needed to do to where we could actually get individual care than to any

person from a radiation event who needed it. it is a very complex system that we have been building in the last seven years to eight years. host: would this be in response to a leak, such as what happened in japan after the tsunami, or an attack? guest: that is a great question. if we can take care the most difficult problems, you can or less assumed the lesser problems appeare. you can use these skills elsewhere. the experience we have in the united states in developing our nuclear plants was very helpful when the incident in japan give up. host: if you took a nagasaki type of bomb and exploded that

within 20 miles to 30 miles of washington, what would happen? guest: we have had a lot of modeling. a lot of the nagasaki bombing for mission and nuclear bomb information from the cold war was at the nevada test site. we're now actually have models for what a 10 kiloton device would create if it went off in an urban setting. we have very good models on which to build a response plan. if something happened -- there are disasters, obviously. right in the center, we have the severe to moderate damage done with infrastructure damage. would people do not realize --

what people do not realize is that many would not have radiation at all because of the facts of the visit because of the effects of the blast -- because of the effects of the blast. a lot of things may go out with the blast. the shock waves would go farther than that coul. the fallout would go in a certain direction. there would be a certain number of casualties to have injury with no radiation and a fair number of people who would be potentially exposed to fallout but have no casualties at all. people would have multiple injuries is true for some, but a lot of people who could potentially be affected. host: if that bomb were to hit washington, how many people would die? how many people do you predict would die later of radiation exposure? guest: it depends on the size of

the device and where it goes. but it would be 60,000 to 100,000 emitted cal solti's -- immediate casualties. the plume could potentially have high enough radiation. people further down wind would have the letter effects of radiation. in terms of the immediate effect -- a lot of planning has been how to setup the response so that the responders know what to do, so that the medical profession knows -- medical professionals know what to do? those who have combined injuries, those who have traditionally, those who have trauma lee? you have a very -- who have trouble only, those who have

radiation only? you have a very complex system. host: we will take your calls now. dr. coleman, you were recently in japan after the tsunami. what did we learn from that nuclear accident? guest: this is the first time a major nuclear accident happened that was monitored in real time in a very sophisticated country. the japanese did a spectacular job. out a number of dead and that injured a -- there were 15,000 people killed in the a quick and tsunami and another 5000 lost. the real disaster was the earthquake and the tsunami. some of the most important things we learned is that

people do not really understand radiation. it is hard enough for us to express to understand it. -- for us experts to understand it. to answer questions of legitimate concern, it was very informative in that regard. another thing that we learned is that, whatever the catastrophe is, these are health and medical events primarily. when bad things happen, people worry about their health. when we do decision making in medical care, it was different in the way it is done in other sectors. in medical care, you have a situation -- you have to analyze and make some decisions and move forward. i think we learned a lot of our incident management and communication from this. host: dr. coleman got his m.d.

from yale university in 1970. he received his undergrad in mathematics. he spent time as a professor of oncology at stanford university in the late 1970's and 1980's. how has the study of oncology changed from when you started until today? guest: it is really different. i am trade in medical and radiation oncology. in those days, it was very empiric. some of the cancer biology then, you did the best you can. there was a combination of drugs that were just being developed. what we do now is really understanding the blueprint of what cancer is could we understand at the molecular level what the regions are and what is driving them. -- what the lesions are and what

is driving them. you take it out and study the genes into profile it. personalized madison in -- personalized medicine in oncology is that, if you can understand a person's disease in the clinical level, where it is, and the chemical level, you can create treatment specific for that patient. it has become a spectacular and interesting and created spectacular advances. host: in japan, how many people got radiation sickness and how many people died from radiation? guest: probably easier for both, interestingly. a nuclear power plant gives you

warning. it does not all explode at once. it takes time for the court to meltdown or for the reactor to spill over a little bit. so you do have warnings. the japanese, as we do in the united states, evacuated the area nearby. beyond that, you have the addiction zone where you can stay there, but denied drink the water or eat the food until we check out the radiation. they did a superb job. they evacuated people nearby. then the people at risk for the workers at the nuclear power plant. they had maybe three or four people who had high doses. the have not been a symbol that

for a single person needed to be treated for acute radiation syndrome. -- they have not had a single person yet needed to be treated for acute radiation syndrome. host: dr. norman coleman is our guest. health and human services' office of prepared as where he serves as senior medical adviser. vernon, conn., peter is on our line. caller: good morning, dr. coleman. i am old enough to remember the world war ii the effects. chernobyl, three mile island, and the japanese fallout from the plant, that information will now be available for 20 years as was the result for

chernobyl and world war ii and three mile island. those making predictions say on what will make -- those making predictions on what will happen 20 years from now and patting each other on the back for what a great job japan did the summit cents. guest: -- does not make sense. guest: first, you have the acute exposure where there have not been any cases. next, you have studies being done to follow that. in fukushima, where they are in fukushima, where they are making