at 8:30 a.m. eastern. in a few moments, reaction to the death of former libyan leader muammar gaddafi from president obama, united nations secretary general ban ki-moon, and the un special representative for libya. in a half an hour, the town hall meeting with mid-romney in iowa. after that, a hearing on the g- 20 and the world economy. >> because i am a businessman and was formally connected with a large company, the opposition has attempted to picture me as an opponent of liberalism. but i was liberal before many of those men had heard of the word. and i fought for values before

another roosevelt adopted and distorted the word liberal. >> wendell willkie sought and won the republican nomination for president. although he lost the election, he left his mark on political history, speaking out for civil rights and becoming a foreign ambassador for his former opponent, franklin roosevelt. he is featured on our series "the contenders," friday at 8:00 p.m. eastern. >> deposed libyan leader muammar gaddafi was killed today near his home town. president obama spoke about that for nearly 10 minutes at the white house. >> good afternoon, everybody. today, the government of libya

announced the death of muammar gaddafi. this marks the end of a long and painful chapter for the people of libya, who now have the opportunity to determine their own destiny in a new and democratic libya. for four decades, the gaddafi regime ruled the libyan people with an iron fist. basic human rights were denied. innocent civilians were detained, beaten and killed. and libya's wealth was squandered. the enormous potential of the libyan people was held back, and terror was used as a political weapon. today, we can definitively say that the gaddafi regime has come to an end. the last major regime strongholds have fallen. the new government is consolidating the control over the country. and one of the world's longest- serving dictators is no more. one year ago, the notion of a free libya seemed impossible.

but then the libyan people rose up and demanded their rights. and when gaddafi and his forces started going city to city, town by town, to brutalize men, women and children, the world refused to stand idly by. faced with the potential of mass atrocities -- and a call for help from the libyan people -- the united states and our friends and allies stopped gaddafi's forces in their tracks. a coalition that included the united states, nato and arab nations persevered through the summer to protect libyan civilians. and meanwhile, the courageous libyan people fought for their own future and broke the back of the regime. so this is a momentous day in the history of libya. the dark shadow of tyranny has been lifted. and with this enormous promise, the libyan people now have a

great responsibility -- to build an inclusive and tolerant and democratic libya that stands as the ultimate rebuke to gaddafi's dictatorship. we look forward to the announcement of the country's liberation, the quick formation of an interim government, and a stable transition to libya's first free and fair elections. and we call on our libyan friends to continue to work with the international community to secure dangerous materials, and to respect the human rights of all libyans -- including those who have been detained. we're under no illusions -- libya will travel a long and winding road to full democracy. there will be difficult days ahead. but the united states, together with the international community, is committed to the libyan people. you have won your revolution. and now, we will be a partner as you forge a future that provides dignity, freedom and

opportunity. for the region, today's events prove once more that the rule of an iron fist inevitably comes to an end. across the arab world, citizens have stood up to claim their rights. youth are delivering a powerful rebuke to dictatorship. and those leaders who try to deny their human dignity will not succeed. for us here in the united states, we are reminded today of all those americans that we lost at the hands of gaddafi's terror. their families and friends are in our thoughts and in our prayers. we recall their bright smiles, their extraordinary lives, and their tragic deaths. we know that nothing can close the wound of their loss, but we stand together as one nation by their side. for nearly eight months, many americans have provided extraordinary service in support of our efforts to protect the libyan people, and to provide them with a chance to

determine their own destiny. our skilled diplomats have helped to lead an unprecedented global response. our brave pilots have flown in libya's skies, our sailors have provided support off libya's shores, and our leadership at nato has helped guide our coalition. without putting a single u.s. service member on the ground, we achieved our objectives, and our nato mission will soon come to an end. this comes at a time when we see the strength of american leadership across the world. we've taken out al qaeda leaders, and we've put them on the path to defeat. we're winding down the war in iraq and have begun a transition in afghanistan. and now, working in libya with friends and allies, we've demonstrated what collective action can achieve in the 21st century.

of course, above all, today belongs to the people of libya. this is a moment for them to remember all those who suffered and were lost under gaddafi, and look forward to the promise of a new day. and i know the american people wish the people of libya the very best in what will be a challenging but hopeful days, weeks, months and years ahead. thank you, very much. >> united nations secretary general ban ki-moon says the death of muammar gaddafi marks an historic change in libya. we will hear his short comments

next, followed by the u.n. special representative to libya, who is in tripoli. this is a little more than 20 minutes. >> excellencies, distinguished delegates, ladies and gentlemen, good morning. before we begin, let me say a few words about this morning's news headlines. we have all heard reports of the death of muammar gaddafi and the end of fighting in other cities. clearly, this day marks and historic transition for libya. in the coming days, we will be seeing scenes of celebration, as well as grief for those who lost so much. yet, let us recognize 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 the time for all libyans to come together. libyans can only realize the promise of the future through unity and reconciliation. combatants on all sides must lay down their arms in peace. this is the time for healing and rebuilding, for generosity of spirit, not for revenge. as a libyas transitional authorities prepare the way for elections and take the many other steps toward building their own nation, or a new nation, inclusion must be the watchword. all libyans must be able to recognize themselves as the nation's government and

leadership. the high hopes sustained through the long days of revolution must translate to opportunities for all. i have just spoken to my special representative for libya in tripoli. the united nations mission for libya -- >> with the history that libya is coming out of, and nobody should be surprised when this turns out to be a difficult challenge for its new leaders. what i really can convey from libya to new york and elsewhere is that this is a country now that has a very strong sense of the values of human rights, democracy, accountability and transparency, precisely because this is the opposite of what it experienced for so long.

it is these values, united nations values, that we will do our best to assist them in realizing. thank you. >> thank you very much indeed. i think we will go to questions now. mr. martin may not be familiar with all of you. please continue to introduce yourselves and say who you are working for. first of all,, the u.n. correspondents association. >> thank you very much. it said that the death of gaddafi gives the sense of security. had the think the efforts are proceeding ahead. have they been satisfactory or is there much to be achieved?

>> idec not say there was a sense of security. -- i did not say there was a sense of security. i said if gaddafi remained at large, there would be a sense of insecurity. much remains to be done to bring a sense of security to all parts of the country. as you may know, i am one who appealed that the fighters should try to bring the conflict to an end in a way that does not pose further challenges to national reconciliation. there have been significant abuses. i believe the commitment of the leadership to address that is real, but we have seen one place where they clearly were genuinely supports think colonel gaddafi until the end of the conflict.

they will need to embrace all segments of the community in the future. >> are you satisfied by the efforts of the leaders in libya? >> at the moment, we're still awaiting the formation of an interim government. there are many issues that have not yet been adequately addressed. there are those in detention without a justice system functioning to review their cases. detention facility responsibility is just now being transferred over to the proper state authorities. there are considerable issues that have to be addressed, particularly by the interim government, that they are now committed to form immediately following the declaration. >> coming toward the back here.

>> of a question regarding the , given gaddafi's sons their capability of financing mercenaries. is there any news about the sons of gaddafi? >> there are various reports out there at the moment but i hesitate to give any of them currency because i am not privy to any definite or privileged information. what has been made clear about the fate of one son, who was fairly well in one city, but as for the others, the reports are less clear.

>> would you encourage mercy on the former supporters of gaddafi? what about the regiments that fled to tunisia and niger? >> first, the united nations has very clear positions and excludes from consideration amnesty for those who have committed war crimes, crimes against humanity, or more serious human rights violations, and that is a position that is reflected in the approach that the current minister of justice announced. i believe that the libyans to want to see justice done so far as the worst of the traders of what they have experienced are

concerned. there is of course a very serious issue of men going out across the borders of libya, and serious concern in neighboring countries about the implications of that and addressing that challenge, and bringing about disarmament of all the fighters, and the reintegration. that is going to be a big challenge not only within libya, but with libya's neighbors as well. >> there is a lot of concern about gaddafi's arms getting spread around the region. have you seen that in other countries, particularly sudan, darfur? >> i have seen a few reports, but we're inside libya, so we're seeing the other end of it. we're doing our best to

facilitate the securing of chemical weapons, stocks of nuclear material and other ammunition. although the chemical weapons and nuclear material appear to be secure, there is very serious concern that other weaponry has gone missing and may indeed already have crossed borders. we're trying to address that within libya, but i do not have any particular reformation as to what already got across another -- information as to what already got across to other countries. >> what the know about the moments before and after mr. gaddafi's -- what do you know about the moments before and after mr. gaddafi's death? >> i can tell you anything.

i have no privileged information as to the precise circumstances concerning mr. gaddafi's death. there are reports in the public domain that i am reading as you are. we look forward to the ntc clarifying. >> just to follow up, you're certain that he is dead. >> the has been stated in both tripoli, and benghazi and there are photographs that appear to confirm that to happen. >> i know your mission is a political one primarily, but what can you tell us in terms of the humanitarian situation in libya rain now. what are the immediate needs? what is the situation with --

right now. what is the situation with water, electricity and basic needs? >> our mission is alongside many of the united nations humanitarian agencies which came back into tripoli as soon as possible and are dealing with some of the requirements you mentioned, particularly the restoration of the water supply. at the moment, certainly in tripoli and cities other than those where there has been recent fighting, as supplies of water, electricity, fuel, a reasonably satisfactory. now of course, the concern is the situation in the cities with the most recent fighting. the agencies have been carrying out humanitarian missions in order to be ready to assist now at this moment. what they have found is very considerable coping mechanisms

on the part of libyans themselves. we do not believe that the need for international assistance will be a major or prolonged one. >> will you be actually sending un personnel to cities to see the situation first hand? >> the missions that we already carried out are alongside the humanitarian agencies. we will be accompanying them now. >> i wanted to ask you, i have heard in terms of your mission and reconciliation that there is some discussion of working with the libyans in terms of who can vote. people who came into libya

under gaddafi were given citizenship. is there some movement afoot that you're aware of to deny them the right to vote, and what would be your position on that? also, you wrote in your memo that the mandate of the u.n. does not end with the fall of the gaddafi government. do you believe that your mandate has ended? >> i go back to the statements nato themselves have made. so far as eligibility to take part in the elections is concerned, indeed, there is a discussion in some quarters about the eligibility or whether people granted citizenship as some people see it improperly by gaddafi should be eligible, but it has not

gotten to the stage either of being considered by those drafting legislation, so it is not something we are addressing yet. it may indeed prove to be an issue. >> does the and have a position more generally on the possibility of stripping citizenship? do you have any guidance as to what would happen to these people if that were to take place? >> a degree of to understand what the issue really is. you are describing -- i think we have to understand what the issue really is. you're describing what has gone on in the past and what view was taken of that. a cannot bring out an opinion at this stage. >> i want to ask, are you

concerned about the tribes in libya and what is your take that gaddafi's death was announced first by the regional council and then later the press? >> i think the reason why early statements came from the misrata is because it was the misrata brigades being attacked. that is the reason why they were evidently the ones who encountered colonel gaddafi and his convoy. i do not think there is more to be read into it than that. as to the future role that inbal affiliations playin social and political life in libya, that remains to be seen, but the overwhelming view of libyans i talked to is that

while they remain socially significant, they're not expected to be politically divisive. but we will see. >> gaddafi was wanted by the international tribunal. there are reports that he tried to surrender, that he said don't shoot. can you say exactly what happened during his capture. could he have been captured alive? did he tried to surrender? what the know about reports --

do you know about reports that certain resistance in libya was not about gaddafi but about people being scared of being limited or raped -- looted or raped? >> it was said that people were resisting as individuals because they were scared, and now it is clear that they were resisting because they were the remaining core of fighters around colonel gaddafi and members of his family. it is clearly important that in any remaining fighting or in addressing the consequences of the fighting, ntc and ensures that all those who acted on its human fully respect bthe rights of those who may indeed have been gaddafi loyalists or

also may have been in the fighting element. that is the responsibility, i believe, of the leadership and they know that is their responsibility. a lot of people who were gaddafi's supporters were allowed through the revolutionary lines when leaving .ertificatio >> there are reports that he tried to surrender. are you going to investigate the way he died? >> if there are responsibilities in any area, they rest with the icc and the commission of inquiry mandated by the human rights council. they're not issues for my mission.

>> there as been taught by some officials in the area of instituting sharia law. is it too early to tell or is that a real possibility? >> there has been a debate within the ntc about what they would say in their constitutional draft that might draw on sharia principles. that is a debate that will take place primarily when the constitution comes to be drafted. that will not be for least another eight months, which is the timetable for the election of a national council that will have that responsibility. no doubt there will be a debate around that as there is in egypt and elsewhere. >> with the change of the military situation, is it your

understanding that there will be a need for a new resolution of the security council to revoke 1973? >> i do not know. there clearly are issues that still have to be addressed by the security council at some point. also, in relation to the sanctions situation. but that is a matter for the council, not for me, as to when they address those. >> any final questions? >> does the ntc plan to brief the diplomatic community in libya about their plans? there are countries that have not yet recognized that

government. do they plan to seek formal recognition? >> i do not know when the ntc will plan to brief the diplomatic community. in my discussion with the minister of foreign affairs, we had expected a briefing in the near future. as for recognition, i think from the perspective of the ntc, they feel they received overwhelming recognition and look forward to any remaining countries and joining the great majority throughout the world you have recognize them. >> thank you very much indeed for this updates from tripoli. i think it has been extremely useful. it thank you very much. >> in a few moments, a gop

presidential candidate mitt romney pose a town hall meeting in iowa. in about an hour, -- mitt romney's town hall meeting in iowa. >> every weekend on american history tv, the people and events that document the american story. only once has a sitting u.s. senator been killed in action. this weekend is the 150th anniversary of the battle that killed senator and colonel edward dickinson baker. little tokyo near los angeles has been the center of japanese culture since the early 1900's. we will be shown around. on lectures and history, the history of opiates in america. for our schedule in your in box,

click the c-span alert button. this weekend, six republican presidential candidates traveled to iowa for the faith and freedom candidates' forum. watch our live coverage of herman cain, rick santorum, ron paul and michele bachmann starting is 7:00 p.m. eastern on saturday. >> gop presidential candidate mitt romney says the republican party needs to better define its message to voters. he was speaking today at a town hall style meeting in sioux city, iowa. this is just under one hour.

>> i went to take this opportunity to introduce candidate for president of the united states, governor mitt romney. >> thank you. thank you so much. i was just on the radio with sam this morning. he asked some good questions on the air there. thank you for joining me this morning. a number of students from morningside as well. how many of you are morningside students? great. good turnout. i have to be honest with you guys. i do not know how any young person in this country could vote for a democrat. i just mean to say to you that

my party is focused on making sure that america is strong and prosperous for you, not just how well we can do for ourselves and how many benefits we can accrue for my generation, but instead, how can we make sure we can care for our own folks at the same time we care for the next generation and leaves america stronger and more prosperous than we found it. years old. i enjoyed the results and the contribution made by the greatest generation. not those folks. these two here. they made a real contribution in holding off tyranny in the world and building the strongest omy in the world and leaving a nation that had an economic base that was second to none. right now the question is what are we going to leave?

will we leave a stronger america? is this going to be an american century or the century of some other part of the world? i want this to be an american century. i want us to have the strongest values, the strongest economy and the strongest military in the world. i am committed to keeping america strong. i foreign-policy can be boiled down to keeping america strong -- my foreign-policy can be boiled down to keeping america strong and doing what ever it takes. our economy is in trouble, and you know that. this president points out that he did not cause the recession, and he is right, but he made the downturn worse and made the recovery last longer than it should have. i do not think he is a bad guy, i just do not think he understands how the economy works. i think he is over his head.

the evidence of that is that you have 25 million people today, three years after he was inaugurated, 25 million people out of work, or stop looking for work, or are in part-time work looking for full-time. when you get your certificate for morningside and you go out to look for work, you'll find it is not as easy as you might have expected. home values continue to go down in this country. the median income of americans over the last three years has dropped 10%. this is just an president and -- just unprecedented. what i want to do is get this economy going again and let people know that the economy will be brighter for them and brighter for their kids than it has been in the past. right now, we of the president campaigning. he is in north carolina today.

he is campaigning for his stimulus. someone needs to tell him that the stimulus is dead, gone. the emperor has no clothes. what he needs to do is stop campaigning, stop blaming, and go back to washington and sit down with democrats and republicans and work on legislation that will get america working again. [applause] leadership is hard. reaching across the aisle with people who disagree with you on issues and finding common ground, that is tough. he has not been able to do those things. he likes campaigning, so that is what he is doing. but we did not elect him to

campaign. we elected him to leave. we need leadership. i have laid out a series of things i think you need to do to make sure it the foundation of our economy is so strong we start creating jobs again. i described them as in four major categories even though it is a much longer list than not, but just to remind you of those seven things you have to do. one comely have to make sure that the tax rates for our employers are compounded -- one, you have to make sure that the tax rates for our employers are competitive with other nations. right now, hours are the highest in the world. businesses will go places where the tax rates are more competitive. number two, you have to have regulations. as republicans come up we cannot pretend we just want to get rid of all -- republicans, we cannot pretend we just want to get rid of all regulation.

but the regulations need to be streamlined and the regulators need to be encouraging the private sector, not killing it. right now, our regulatory burden is killing jobs in america. this president has added regulation by a factor of four times more than the prior president on an annual basis. number three, you have a tough trade policies that open markets for american goods. when people cheat, you have to hold their feet to the fire. this is an exporting state, as you know. iowa exports goods around the world. i want to open more markets for iowa goods, american goods, goods for all of our states. now, we of a president who has been in office for three -- have a president who has been in office for three years and stalled on trade agreements. he is negotiated no new deals to open up markets for america,

while the chinese have put together some 40 deals. that means they're going to have trade relationships, distribution, brand awareness and so forth that will make it harder for us. we need a president that wants to open the markets. number four, we have to have energy policies that get us on a track to becoming energy secure an energy independent. that means you do not say no to all of the sources of energy in the country. you develop coal, oil, natural gas, renewable resources, ethanol, wind, solar. and you encourage the efficient use of energy. number five, you have to have the rule of law. in order for america to have confidence to invest in the future, you have to believe that the law will be followed. when the presidents? the national labor relations board with labor stooges -- when the president stacks the

national labor relations board with labor stooges and tells boeing they cannot do what they need to do, you violate the rule of law. number six, you have to have capital. what do i mean by that? we're in a capitalist system, as you know. sometimes people do not like that word. i like capitalism and free enterprise. capitalism and free enterprise are the only antidote to pottery the world has ever seen. even china -- to poverty the world has ever seen. even china has started to copy it. but you cannot just have capital for physical goods and assets. you have to have human capital. we have to have institutions that build human capital in an exceptional way. let's think about what they are, schools, k-12. unfortunately, our kids are

treated to schools that are performing at the bottom quartile of the world. you also have to have great institutions of higher learning. we have those, but they're more expensive than they ought to be. then you also have immigration policies that open the doors to the best and the prices -- best and the brightest, welcome legal immigration and stop illegal immigration. illegal immigration is the enemy of legal immigration. i mentioned there were seven things, and i will tell you the last one. if he were thinking about investing your life savings in america, or if you had some big companies were asked to run and you were wondering where to put your money, he would not put it in a place where the dollar was not going to be worth anything in the future.

if you're of a government the consistently spends more than it takes in, you are going to worry about the future of the country. we cannot continue to spend more than we take in. we have to cut our spending. we have to capture much the federal government will take out of our economy -- cap how much the federal government will take out of our economy, and we have to balance our budget. i know that this is a town meeting format. this is not officially a town meeting, the kind of a town hall, so you are going to get a chance to ask questions. i know there are friends in the audience. i see some romney stickers, although i have learned that sometimes those are just camouflage. there are some romney stickers in here. there are some obama stickers in year. there are some folks that are voting for other people. that is what is fun about this nation. we can disagree as long as we do

it respectfully. i will try to be respectful too. >> you were on governor hawk of uckabee's show a few weeks ago and talked about how you would support a life begins at conception amendment. that would essentially banned most forms of birth control. 98% of american women, including me, use birth control. could you tell me understand why you oppose the use of birth control? >> i do not. i am sorry. life begins at conception. birth control prevents conception. my view is this, and let me clarify it so that you understand it. what i believe is the right course in regards to abortion and life is that i would like to see the supreme court returns this right to the states and let states create their own legislation with regards to

live. that is my view. states will make different decisions, which is their right to do so. my view is that i am not out campaigning for an amendment of some kind. i'm campaigning how to see justice's -- i am campaigning to see justices appointed to the supreme court that will ultimately returned this decision to the state. >> i do not know if you want to have your staff look into this, but hormonal forms of birth control work differently. they prevent implementation -- prevent implantation, not conception. as someone that uses birth control, this is a terrifying prospect to me, so that i hope you can look into that.

>> what do you think about the fact that our democratic run senate has not passed a budget since this president has been inaugurated? to me, and that has caused most of the financial problems because we are running on resolution after resolution, which they created a crisis over, waste a lot of our time, and nothing is getting done. would u.s. president do if the senate is still in the hands of democrat -- what would you as president do if the senate is still in the hands of democrats to get an actual budget done? >> i would lead. one of the qualities of leadership is that you not only work with your own party, but you reach across the aisle to get things done. had he been spending the last 1000 days inviting people to the white house, working with people, back and forth, trying

new ideas, i would say well, he has tried, and they can i get the other side to live. but he has not been doing that. he is in north dakota campaign. the job we elected him to do happens to be right now in washington. he is not their leading. when he came into office, one of the things i found most surprising was his decision to delegate the stimulus to nancy pelosi and harry reid. my guess is they had probably about as much experience in the private sector as he had, and none. so they crafted and $800 billion stimulus plan the projected government jobs and did not get the economy going -- and $800 billion stimulus plan that protected government jobs and did not get the economy going.

i agree with you. the idea of a budget process is to make the tough decisions we need to make as opposed to just kicking the can down the field. look, washington is broken. i said that four years ago. it is more true today than it was four years ago. washington is broken. it is not doing its job. that is not because of real estate. it is not because of the 535 members of the senate and the house. it is because right now it does not have a leader. america needs leadership. i like the president. i think he is a nice guy. but he has never led before. he did not lead in the legislature in illinois. he did not lead in the united states senate. he has not had that experience. i do not know the answers to all things by any means. there are a lot of things i can be educated about and learn from, but i have learned how to lead three different experiences doing that. i have five boys. i could come down and complain

that the dinner table is not respectful, that there is too much joking going on, that these boys should get there on time, but it would not be their fault, it would be my fault if those things were going on. you have to be leader of the family. i learned leadership that my dad and mom see. i learned throughout my career. if i'm president of the united states, i will do everything in my power to get the congress to work together for the good of the american people, and i will give that all my energy. thank you. >> there is a huge appetite today for getting rid of the irs because it is a book of special favors and opt out for friends of legislatures. also, there is about $800 billion in subsidies we could get rid of in order to balance our budget.

i wonder how you stand on those issues? >> there is a lot we could do to try to reform our tax code to make it work better. i would like to see a tax code that has lower tax rates that are flatter tax rates were a lot of the special deals are taken out of the tax code. but let me tell you what i think we need to do right away, because that process of going through a complete restructuring of our tax code is going to take a long time. i have some ideas of ways to do that. i will not go through the right now, but let me tell you what i want to do immediately. i want to help the people that have been hurt the most by the obama economy, and that is the middle class. when i am looking to do is provide an immediate tax relief package for the middle class. i think i can get past pretty quickly if i'm lucky enough to

become president, perhaps in the first 100 days or so. for anyone who is making $200,000 a year or less, we would eliminate the tax on your savings. that means no tax on your interest, dividends or capital gains. you could save your money for college, retirement, home or whatever you want without having to pay taxes on it. that lowers the burden on the middle class in america. that is a relatively simple change, and therefore could be carried out pretty quickly. i would also like to have employers have their tax rates brought down from 35%-25%, which is competitive with nations around the world. to do that without losing revenue, we will get rid of the special breaks that have been put in by lobbyists and interest groups over the years. what other tax ideas i work? one would be to go to something called the fair tax. that is to replace the income

tax with the sales tax, a national sales tax, a consumption tax, if you will. there are a lot of positive features to that, and we could look and see if we could make that work and what the pros and cons would be. the current their tax has a problem that in my view, it keeps me from endorsing and the fear tax proposal as it currently stands, and that is this. it raises the taxes on middle- income families. therefore, it lowers them on the other two since, the poor and the wealthy. i do not like the idea of raising taxes on middle-income americans. i think we ought to be lowering taxes on middle-income americans. for me, that is a non-starter, although the concept of a consumption tax makes sense. the flat tax that steve forbes championed in 2000 has positive features. then again, you have to look and

make sure that it does not raise taxes on middle-income americans. for me, one of the key criteria in looking at tax policy is to make sure that we help the people that need the help most. in our country, half the people that need the help most -- in our country, the people that need help most are not the poor, which have the safety net, or the ridge, up who are doing just fine, but the middle class -- the rich, who are doing just fine, but the middle class. the best way to balance our budget in addition to cutting spending is to encourage growth. those are my principles. pardon? subsidies are deductions. there are corporate subsidies that if you had to take some of those out you get the tax rate for corporations from 35-25. then there are deductions for individuals. for instance, we get to deduct the interest on our home

mortgage. some are saying get rid of that. well, if you get rid of that, people who bought homes to be aired deducting the interest on their mortgage in their taxes will -- who are deducting the interest on their mortgage on their taxes will find the that is costing them money. right now, that is an industry we probably do not want to hurt. people say get rid of the charitable contribution deduction, the home mortgage deduction. those things would be pretty dramatic in the changes they would cause. before i propose that, i would have a careful evaluation of what impact that would have on middle-income america. there is a question. yes, sir? >> first of all, governor, i want to thank you for being here. the first time i ever saw you was when you were governor of massachusetts. i got to hear you speak. i was impressed about how you spoke about reaching across the

aisle. when you spoke in your introductory in remarks come the city do not think obama is a bad guy, -- when he spoke in your introductory remarks, you said you do not think obama is a bad guy, you just think he is in over his head. there are a lot of us here who feel that way. but so far, you have not campaigned much in iowa. we have had candidates here who are spewing vitriol. one say the nation is plagued with aladdin being shown in the classroom. we have a candidate selling a 9.99 pizza deal, i mean tax plan. we have another whose only claim to fame is that he shot a coyote. is your campaign an alternative

to that? >> yes, to answer your question. look, i want to get the support of iowa. this is not my first trip to iowa, as you know. i will be here yet again, campaigning here. i want to get the support of the good people of iowa. i would love to in -- win in iowa, as any of us would. i want to become the president of the united states. i did not imagine that that was going to be part of my life's experience, that i would campaign for president. had i known that i was going to get involved in politics, i am not sure i would have chosen massachusetts as the place to do so as a republican. a little tough there as a republican. and yet i find myself now in a position where having spent my life in the private sector, 25 years working in small business and big business, having started a business, having run other

enterprises, i have, in my view, the kinds of skills that america needs right now to get our economy going again. and so i am running for president and now will take me around the country and you guys have a big said. iowa comes first. you have an enormous say in who the next president is going to be. i think the american people are increasingly aware that president obama can i get elected to a second term, should not get elected to a second term. president obama was on the today show a few weeks after his inauguration. he said look, if i cannot get this economy turned around in three years, i will be looking at a one-term proposition. i am here to collect. he has not gotten the job done. and here he is today, inexplicably, campaigning, talking about a new stimulus.

it is like mr. president, we let you have your way with the nation for three years. he ignores the fact that his first two years he had a democrat house and democratic senate. he put in place a $787 billion stimulus bill. he ignores that fact. he ignores the fact that he pushed through obama care, another piece of legislation that the american people try to stop in every way they could, even elected a republican senator in massachusetts. and yet he went ahead with those things and he is trying to find someone to blame. we have gone from hope and change to divide and blame. the american people have seen enough of it. they want to see someone who will lead. i can tell you, i am not going to agree with the democrats on all of their issues. i'm not going to agree with liberals. i am not going to compromise my

principles, but i am going to look for common ground because i happen to believe that there are democrats that love america just like there are republicans that love america. the old ronald reagan . he said it is not that liberals are ignorant, it is just that what they know is wrong. he seeks to educate the opposing side and you see to find agreement right now. given the state of our budget deficit and the massive, massive total debt that america has, and the fact we're take -- facing challenges around the world of an extraordinary nature, i think they're good democrats, like tip o'neill who sat down with ronald reagan, there are good democrats who will sit down with me and say where can we find agreement? i proposed this change. i predict it will do this. if it does not, i will give you

something you want. that can happen. i have seen it happen in my state. i have seen it happen in other states. i have seen it happen in this country under leaders. i intend to be one of those leaders. [applause] >> i have two questions. one is easy. one is a little more difficult. the easy one is, what are you going to do about zars? are you going to get rid of him or keep him? the other question is, how are you going to stop the influx of illegals? to me, you have to shut the spigot off and put the fence up. >> zars. i thought you were talking about

sars. remember that infectious disease? have to do that. there will certainly be on voice. -- envous. ing it, it are manag does not make sense. the structure of this is strange. i was in the business world as i have mentioned a bubble of times. -- a couple of times. they reorganize. they find a way to do things better. they say you have it organized wrong. people are reporting in wrong order.

businesses do that. we have the same structure. there are programs that could be eliminated. i do not expect to appoint the czars. i can tell you that. i am from a strong american out there -- america now. i want strong values. i want a strong economy. everything i do will be focused on making america stronger paren. we are a shining city on a hill.

i will do everything in my power to keep the strong. and you have another question. what would you do about illegal immigration? >> i mention that. the interesting thing is that it is not that difficult to solve intellectually. it is the politics. how did they do this? this is hard. how do we deal with all the various nations tanations? that is a tough one. illegal immigration is a tough one. i was there was some border patrol agents.

we have a big festa there. they said people still get across the fence. they build ladder's side of free barebar. they grab the ladder and go to the next. what do we have to do? agree with. do you have to have a fence. to have to have enough agents to patrol that fence. you have to turn off the magnets. i do not know what he meant. >> he said when you have the employers that knowingly hire people that are in this country illegally and they're getting 10 times as much as they get paid in their home, and they will find a way in. you have to crack down on employers. you have to have a system that identifies who is here illegally.

you look at that card. you slide it. if they are legal, you can hire them. if you hire someone illegal, you can get sanctioned for not paying your taxes. once you do that, you close that magnet. >> they passed the dream act. texas was the first. they should give tuition breaks to illegals living in our country. taxpayers should funds illegals college education. i vetoed that. people that have a different course. you have to turn off the magnets. build a fence. patrol its. turn off the magnets. we will stop illegal

immigration. we want legal immigration. a lot to file a legal process will be bringing people that speak english and has skills that we need. thank you. >> a good leader knows the weaknesses. they're willing to bring them out to make them stronger. what is something that you struggle with. that your party my struggle with that you want to see bettered? >> one of the things my party needs to do is this spirit make

sure we communicate clearly. we do not do a good job of that. when i jokingly said that if anyone here is going to college should not ever vote for democrat, i meant that jokingly but also seriously. almost colleges do not vote for us. we have not been good at creating a message. ours is the party of trying to protect opportunity and making the economy so strong that you get jobs when come out of school. theirs is the party of benefits and handouts. that does not treat the opportunity you want. i want to give benefits to people in my generation. we are passing of the burden.

i am going to be dead and gone before that $14 trillion is paid off. the interest on that, year after year, will be paid by your generation. my part is trying to find a way to stop that from happening. not because we do not care about the things we spend money on. the all like to buy lots of stuff for everybody. giving away free stuff will kill the general action -- will kill the next generation. i am not in this race for me. i am almost 65 years old i am in this race for my kids. if we do a better job communicating, we will be able to get the support of young people. we can communicate the kinds of

choices we have. i think we do in an effective job too often in communicating with young people, with hispanic voters. that is another weakness of hours. we're not doing well with hispanic voters and other minorities. this is a very large portion of our national voting public. ours is the party that wants to preserve the american opportunity. this is what we are about. the number one weakness? do a better job communicating. i hope of i get the chance to debate barack obama, i will be able to post that i am in favor of making sure our military is second to none.

not for me but for the coming generations of america. i believe this is an exception on nation. i think our president is among them. there are some that think america is another nation with a flag. it sectionalism is like greek exceptional listen. i disagree. we responded on a radical principal that our creator endowed us with and alienable rights. it is life, liberty, and the pursuit of happiness. that swept the world. nation after nation adopted those principles. this is an exceptional nation with an exceptional mission. i want to do a better job of communicating that. thank you. my staff says one more question.

>> how do you speak of the cuts that the process means that what type? >> there are a number of things we could do right away that it is on the treachery of balancing the budget. one is to take our discretionary spending back to 2008 levels. number two is to stop obamacare. turn back the responsibility to the states. take medicaid and send that back to the state and say you care for your pour. we will give you the money you got last year. we slowed down that.

we cut better implement by 10%. maybe more. we can do that through attrition. we have baby boomers are retiring now. police said federal compensation to equal that in the private sector. do not quote me. with these cameras, it is not possible. i saw a report the said the average compensation of a federal employee is $125,000. that strikes me is higher than the private sector. looking response ability to irresponsibility, we should link compensation with that that exists. if you do those five things -- [applause] you balance the budget. we have to be honest to young

people coming along. we're talking about college kids. these are the promises we make. i want these programs to stay in place. i want them to be there as a safety net. i want to make sure we're not laying upon them a massive burden that they cannot carry out and live in a country that has opportunity. i propose ws make is sustainable. you do all of those things and thank heaven you're able to do it. you have a balanced budget amendment. i did that. not quite at the federal level. i did it at the state level. the numbers or smaller. our budget gap was $3 million. we made the tough decisions.

we put agencies that used to have different offices together. we got rid of press secretaries and lawyers. we said you can use the same press secretary. i action eliminated some budgets. we found a way to balance it. this is what i will bring to washington. the idea consistently borrowing hundreds of billions of dollars, actually it will provide dollars trillion borrowing that, knowing we cannot pay back and asking the next generation to get stuck with the interest. i do not understand how this can go on. i think it is immoral. it is wrong. we have to stop that. i will make sure that happens.

[applause] thank you for spending time with me. those that have come in from the community, thank you for spending some time. i appreciate the chance to be with you. this is an important election. you know that. we're walking on an economic tight rope. on one side, we could slip into a double-dip recession. with all the borrowing that has been done, it would be real tough time to go into a double dip. the other side is a long sidelight japan has experienced.

it to be essential for us to restructure our economy. they get the energy policies on track to allow american to compete globally. i want to make sure we get america's economy strong as we can protect ourselves with a strong military and promised a next-generation that they will have a good job with rising incomes and the future will be brighter than the past. that is why i am running. i hope i made that clear. i love america. we are an exception on nation. i love this country. i love the principles upon which it was founded. i believe that in america. i believe in free enterprise. i believe an opportunity. -- in opportunity.

we have a role to pass a generation that is strong and free. i will not die without and everything in my power to the phil -- to fill -- fulfill that. i do not want to go down in history as being part of the worst generation or a mediocre generation. we can be a great generation. i want to be one of those. the only people to say thank heavens that people like my mom and dad went back to cut back on the excesses of government. this is a great country with a great role and responsibility. it is our responsibility to get to the eviction ration in

america. i appreciate your willingness to be here. thank you. it is great to be with you. >> good to see. thank you. >> can i get a picture? >> absolutely. thank you for being here today. it is good to see you. thank you. it is good to see you. and when to follow up with the

exact same question. -- i am going to follow up with the exact same question. you want your name on it? this is exactly right. his shirt is lighter. >> thank you. >> thank you. thank you for answer my question. -- for answering my question. >> you are welcome. thank you. i think you have it backwards. where are you?

any make this thing where? turnaround. there we go. a really appreciated. we need your help again. thank you for coming by again. thank you. the blood. -- good luck. we have a couple of business guys in there.

how're you? i will do that. touchstone energy. thank you for being here today. it is nice to meet you. how're you? ?his is your daughter share just your student? are you a faculty member here? it is nice to me. what do you steading? >> premed. i want to get my doctorate and ph.d. and do research. hopefully i am not broke. >> that is what my son wanted to do. then he found himself being attracted to radiology. >> thank you so much for coming.

>> thank you for being here. what you think will happen after we appeal obamacare? there are a lot of things i do. they like what we did in massachusetts. one thing i do is i think the discrimination that exists ought to be eliminated. the corporation they get a tax advantage. they do not get this. individuals have the same tax treatment as companies.

they did not lose their insurance. >> what process do you think you'll used to come up with these ideas? >> there in the process of gathering information for people across the country. you come in. >> how about the experts? >> have everyone so that the table and express their views. i think people are pretty convinced of it. you let individuals purchase it. they can continue to get it through their company. it is at a relatively fair price.

continue the story about the shining city. >> thank you. it is good to see you. thank you so much. is this for me? i will sign that.

i will do that. july sign it? thank you. take care. that is your camera. the eu wants to get in the picture? -- don't you want to get in to the picture?

all right. we will be back. how're you? thank you. appreciate your being here. you have to shake hands and say thank you.

>> congressman ron paul is in iowa. he is speaking at the university of iowa in iowa city. our live coverage is tomorrow night at 9:00 p.m. eastern. watch more of video of the candidates. see what political reporters are saying in check the latest contribution with the c-span's website. it is easy to use an crumpton advocate -- and helps you navigate the political scene. this is all that c-span.org/ campaign2012. >> and a few moments, a hearing on the g-20 and world economy. in less than two hours, president obama's reaction to the death of muammar al-gaddafi.

dimon will go to med romney was a town hall meeting in iowa. >> it is very obvious that they're all were the. of every decision they made, every time should be broken in favor of growth. he implemented spending cuts that produce $1 and billiard -- $1 billion. >> next, a hearing on the g-20 and the global economy. this was established in 1999 to bring together advanced and

emerging economies. the next meeting is early next month hearin. this meeting is just under two hours. >> no. like to call to order this hearing. the subject is more timely than we initially planned it. we're fortunate to have the secretary for international affairs. since we moved this hearing back, i will be very brief to make sure we take advantage of

this. the timing of today is important. finance ministers met this past weekend. they issued a new communique. the g-20 will hold a full summon -- summit. the single most obvious challenge at this moment is the european economic and financial crisis. it is not the sole responsibility of the g-20 to fix euro's problems, and obviously this is not the only item on the g-20 agenda it in november. if the g-20 is to prove itself useful in the long run, and demonstrate its ability to react and at times get in front of the next economic or financial crisis, then these next few weeks are going to be extraordinarily important.

the world economy now faces a variety of crises. we still have an american economy that while technically in recovery, a huge number of americans have not felt that yet. are further shock to the system coming about -- of further shock to the system coming about from a non structured default by greece or any other country or even a contagion spreading across europe that could freeze financial markets will have a dramatic effect on our economy, and effect -- an effect that if not properly monitored and dealt wit, could even rivaled the challenges of 2008. the challenge right now is we don't have all of the same tools available to us that we had in 2008, both in terms of monetary policy and stick rejects -- fiscal stimulus, and a growing

level of concern and skepticism among the american public that some of the actions in 2008 disproportionately help financial institutions or many of our fellow citizens. so we are very pleased to have secretary lael brainard year. she has an enormous challenge. i would like to now turn it over to my good friend and colleague, the ranking member. >> let me just say to my colleague, senator warner, thanks for your willingness to do this. this cannot be more timely and cannot be more important.

secretary brainer, i think he said it very well and very directly, i was reading through your testimony and right here you say europe's financial crisis poses the most serious risk today to the global recovery. that is what this hearing is about. we want to hear about that and what you see on the horizon. if i might just offer a couple of thoughts about what i see, because i would like your reaction to that at some point. on one hand, i think there is consensus about the need for action, obviously. you have countries like greece and portugal that are really struggling, and trying to figure out how they better position themselves. on the other hand, you have political realities, too. how far can other leaders moved to deal with the crisis they are facing?

every day is a day of concern. every week is a week of concern. as we continue to move down this pathway, if there is not some hint of resolution or some pathway, then it appears to me that what ever since of security the financial markets have in the potential for resolution, the underpinning for that really gets hit. they began to be more and more concerned and then it gets tougher and tougher to fashion a solution. so again today, this cannot be more timely. we apologize for putting everybody off, but that is the way of the senate. my life is more dictated today by what mitch mcconnell and harry reid are doing and what my wife is doing, and that is a terrible thing to admit in an open hearing, but it is true.

some of this is just unavoidable, so we appreciate your patience. with that, i am very anxious to hear from you, secretary, your thoughts on this. this is informal enough for i think we can actually engage in a dialogue about what we see and what we need to be thinking about in the weeks and months ahead. thank you. >> with both of us being relatively new year, it is particularly painful for us as former governors, we used to make the agenda. >> as you said, this hearing is very timely. today americans are focused on securing good jobs, providing for their families, build and opportunities for their children. that is why it is so important for us to strengthen america's recovery, which still remains to vulnerable to destruction

beyond our shores. europe's financial crisis poses the most serious risk today to the global recovery, while the direct exposure of our financial exposure is moderate, we have substantial trade and investment ties with europe and european stability matters greatly for consumer and investor confidence. last week at the g-20 meetings in paris and on an ongoing basis, the europeans are discussing their methods to deliver a comprehensive plan to address the crisis by early november. the plan must have four parts. first, your needs a powerful firewall to ensure -- europe needs a powerful firewall to ensure they can borrow while they bring down debt and strengthen corporate european authorities are taking steps to ensure their banks have sufficient liquidity and a stronger capital to maintain the full confidence of

depositors and creditors and a capital backstop. third, europe is working to craft a sustainable path forward for greece as it implements very tough fiscal and structural reforms. finally, european leaders need to tackle the government's challenge to get at the root causes ensure that every member support growth and stability. for our part in the u.s., pro- growth policies in the near term and meaningful deficit reduction in the medium term provide the best insurance policy to protect the u.s. recovery from further risks from beyond our shores, to promote near-term growth and job creation, the president has put forth a series of proposals that would put veterans, teachers, and construction workers back on the job and more money in the pockets of every american worker. president obama has also proposed a framework to put our medium-term public finances on a stronger and more sustainable

flooding, placing the nation rejuvenation debt to gdp ratio of a declining path by the middle of the decade. with overall demand in the advanced economies likely to remain weak, it is essential for emerging economic powers in the g-20 such as china to move more rapidly to a pro-growth strategy that is led by zero domestic consumption, by allowing their change -- their exchange rates -- to move towards a market oriented exchange rates. we made this our top priority would china and we have seen progress with appreciation of over 10% real term bilaterally since june, with exports to china growing process fast as other markets. the exchange rate remained substantially undervalued and many to see appreciate faster. there are two other birdies i will touch on briefly in the g- 20 and the financial stability board. first, we have been working very hard to level the playing field across major and immediate -- and emerging greenwich centers. in the wake of the most globally synchronized financial crisis world has seen, we are working to implement the most globally convergent and enjoy protections world has attempted. we are trying to do so in lockstep as we implement reforms here under dodd-frank.

the g-20 endorsed a new global capital standards in november 2010. it will endorse a new international standard for resolution redeem at this summit so that large cross border firms can be resolved without taxpayer exposure to losses. it is very important that we move forward in sync with our g- 20 partners on the reforms to derivatives markets that were enacted under the dodd-frank act and that are extremely important for ensuring that there is much greater transparency, that with the risks in the system, and efforts to mitigate them. finally, sustained and strong american leadership through the international financial institution is vital to achieving our role in the g-20 and at home.

where were instrumental in 2009 in strengthening the imf, which helped strengthen the global economy and our continued leadership as vital in the imf to provide us with outside influence at the -- as the imf response to challenges such as the european crisis, which matters greatly to american jobs and growth -- whiteford to working -- we look forward to working closely on this continuing challenges. >> rather than putting time on the board, have a couple of questions. we can go back and forth in a more informal way. the first question is, and here we are a year after dodd-frank, three years after the 2008 crisis. one of the things we saw in 2008, i am not sure we would have predicted that not only lehman but then the exposure with aig, because we did not

have actor, real-time ability to figure out counterparty exposure overall. this is not directly your area, but with the financial stability oversight council in place, we have seen a lot of published reports about u.s. bank exposure to greece. what level of confidence to you have at the regulator level that we have enough knowledge, not only depository exposure, but we have talked about money market exposure, counterparty exposure, obviously direct and indirect exposure.

do we have enough current, real- time knowledge in terms of our financial institutions exposure to greece and some of the other countries that are talk about -- talking about being in the path of contagion? >> some of the reforms under dodd-frank and some of the confirming reports in the international system will help over time, although these are in the process of being implemented as we speak. fsoc has spent time on the risks from europe and it does provide a forum for sharing of information among the supervisors and regulators so that they have, assessments of risk. as you said, there is the direct exposures, particularly to the most vulnerable periphery countries are relatively modest at this juncture. there is also -- >> not just depository institutions. >> direct exposure from depository institutions. in terms of the intermission have on some of the other entities in the system, there is much greater information, much more detailed information available now.

money-market funds and that immigration is publicly available and that is a critical development. i think we are going to see that moving along at a rapid pace as well. of course the reforms that are just in the early stages on derivatives will provide extremely important transparency into what was previously a very opaque set of markets between central clearing, between the information being reported on a real-time basis, trade depositories, those reforms will make a material difference in terms of our regulators and supervisors visibility into the system. >> again, i hope we recognize

that we are doing as much as possible at this moment and time in terms of the counterpart exposure of some of our institutions. we had chairman bernanke in around lunch to do a small breathing around some of these issues as well. one of the things i think europe is wrestling with, we focused on greece, and we are looking at what the europeans directly have done in terms of the european stabilization fund and potential ways to lever that up. mr. bernanke made the point that if we were to see contagion if recent defaults, it would be challenging but if this were to spread to italy -- if recent defaults. -- if greece defaults. 500 billion euros in debt over the next year to roll over. when you look at the size of the european stabilization fund, even if you layer on top of that the imf dollars, our reserves, those reserves are not enough to take on the kind of challenges, and the far wall dimension to, it did that have enough -- the firewall you mentioned. the the have and a framework to provide that are wall?

>> it is very important as you say to emphasize that in order for europe's financial stability to return, what they categorically need to do is take the risk of cascading defaults and bank runs off the table. order to do that, they need a fire wall of sufficient -- in order to do that, they need of our wall of sufficient force and size to overcome the markets. that is something we saw in our own financial crisis was critically important in helping to restore orderly functioning to our financial markets and it is something that european leaders are talking about as

they are moving forward on this comprehensive plan. they have quite substantial resources in the european financial stability fund, but they will need -- they have 440 billion euro under the structure that was just approved by the national parliaments in the euro area. that funding is going to be critically important for doing those things that we talked about earlier, which is to ensure that large sovereigns with sound policy such as spain and italy can fund at affordable rates so that they can implement those critical reforms that will allow them to grow and bring their debt down. they also need to have adequate bank capital backstops, so as they move forward with their

plan to set strong capital buffers in the banking system, that were needed, they have public capital backstops. in order to do that, the esff will have to lever up. these goals are achievable with the capital that have, but that of course is one of the key issues that will be part of their comprehensive plan. >> you did say you think within that european stabilization fund, it is adequate? >> the funding that is available in european financial stability fund can be leveraged up to adequately address the needs that we were talking about, to ensure that italy and spain and other large performing sovereigns have adequate funding, to backstop the banking system, and of course to continue to fund the program countries as they perform.

again, it is vital important that they leverage up the efs. what is on the table is precisely what is the form of that leverage. that leverage needs to be credible in the markets and it needs to give them that overwhelming force that takes the threat of default and bank runs off the table. >> there is so much to talk about and ask about. let me start with some of the thoughts expressed on dodd- frank. i think the dilemma that we are heading toward, we have put in place with dodd-frank and enormously complex piece of legislation. i did not support it.

now, the rules are coming out and it is just a massive amount of injection of new systems, new rules, new requirements for the financial system. at a banking hearing some months ago, a concern was expressed by senator johnson and others, actually, and the whole issue was how it is this going to be harmonized

internationally? deputy secretary wall and said we are working closely with our g-20 partners to make sure we get our regimen networks worldwide so we don't have new opportunities for arbitrage. we are concerned about you end up with his u.s. system and then our capital flees because why deal with this if you can find less resistance in singapore or a g-20 country? soon after that, i am reading an article and i probably will butcher his last name but michael grenier of the european union said this. we don't support the same approach. he said that is not what we are going to do. he really kind of put down what we had done in the united states. so what assurance can you give

me that the g-20, with all of these other problems that and have -- there are economy threatening problems for that part of the world that in the midst of that, they are sitting there trying to figure out how to put the volcker rule in place and how to put this rule in place, etc., and following the leadership of the united states. >> senator, let me just a first of all, i could not share more fully your concerns and your determination to make sure that as we move to put in place the mechanisms to ensure the vibrancy and resilience of our system, that we move in lock step to ensure that other financial centers around the world, those established financial centers and those coming on line, move in sync with us so that we don't inadvertently undermine the safety and soundness of our system by providing regulatory arbitrage opportunities or create a competitive disadvantage for our financial institutions.

i believe we have done more on that than has ever been true in the past, and we are having quite a lot of forward momentum among the other members of the financial stability board and in the g-20. the commissioner who is -- who has responsibility for these issues in the commission meets regularly with secretary geithner or and they both have repeatedly stated their commitment to ensure that as we move to put in place new capital acquitted deleveraged standards, the europeans do the same. as a move to put in place requirements for standards based on a central clearing trade repository on derivatives, they move to do the same.

i think we have had successes in terms of getting the general adoption of the principals across all the g-20 and fsb membership. i work closely with my counterparts to make sure that not only are they adopting these principles, but they are implementing them, and our staff sit with the staff of the international financial authority and the pri in great detail, and we are trying to be as granular as we possibly can to make sure that as our implementation proceeds, there's does as well. obviously we each have different national, legal, and regulatory environments, so there will necessarily be moments where, for instance on dodd-frank, we move forward with our legal framework more quickly than the europeans did, but we have similar implementation deadlines come and we are all working extremely hard. they are similarly as committed as we are and i think they see the same risks to their system, which are more evident today, perhaps, than ever before, of not moving forward on those key

requisites for a sound financial system. >> we could spend hours on this debate in this, but here is my impression. my impression in having worked with the european union for many, many years, part as governor, more intensely as secretary of agriculture, this is a very unusual governance system, something we are not used to. you have this umbrella organization out there and at it is not really a central government, but it kind of tries to act like a central government. you have all these other countries that are member countries of the european union. they are forever proclaiming their sovereignty, because it is important that they proclaim their sovereignty to their citizens in their country. when you talk about principles being adopted, it is not very reassuring to me, to be honest with you.

all that tells me is that we are having a lot of meetings. i think you are working hard, but i will bet when we look back 12 months from now, 24 months from now, 36 months from now, we are going to see little activity by the member countries to embrace anything near what we did with dodd-frank, putting our financial structure at a serious disadvantage. i hope you can call me in 12 months, 24, and 36 months, and say mike, you were really wrong about that and i am here to call you and tell you you are. i don't think i will be wrong about that, unfortunately. if i might move on to what probably is occupying our attention right now, that is the financial crisis. we are all worried about it. here is another impression and i

would like your reaction to this. we have a handful of countries that really are struggling. greece would leave that --lead that. also portugal and ireland. they are really trying to figure out how to deal with what is the crisis, there were huge protests increase yesterday for example. they are really resisting the efforts -- huge protests in greece yesterday. you have a second group of countries, spain, italy, that somebody said to me, and it describes it well, too big to fail, too big to bailout. large economies, if somehow the problems with the other countries cannot be walled off, they kind of get tangled up in it and their cost of borrowing dollars up, etc. you have serious under capitalization of the banks. you have stress test that nobody has regarded very seriously. i think they made an attempt, but quite honestly, our financial community is not relying on their stress test.

then in the midst of all of this, you have a european system and you have got citizens like mine -- it would be like for germany to embrace the idea of bailing out greece, it would be like nebraska up with a balanced budget amendment and an obligation that we cannot borrow any more than $100,000, so we have no debt, bailing out another state that spent wildly and borrowed money. you can only come to understand how the germans are looking at this and going, are you kidding me? then you begin to realize, how do you move those dynamics with this system to the kind of resolution that is necessary? we are not talking about a few dollars.

if the market does not have confidence that this is a big enough fire wall, and guaranteeing 20% or 30% of the dead is not going to be sufficient, c and sufficient,alm the market's down -- and you cannot calm the markets down, at this thing is serious. i would love to have your reaction. what have i missed read about this? where am i wrong about this? >> i think the risk to point to are real. i would say, though, on the other side, that europe has the resources. it has the capacity, and we have heard from european leaders that they have the will. the things that need to be put in place i think are fairly

clear, and of course as you said, i think there is mixed public support. if you look at the vote in germany on the efss, the overwhelming majority is in favor of supporting the july 21 reforms which expanded it and enable it to do the critically important functions of providing precautionary financing and backstop in the banks. so you are exactly right that europe will need to muster the political will, but everything we have heard is that european leaders are determined to do so, and have the capacity. they have the ability to leverage up the efsf to a level that is commensurate with the size of the challenges that have come to take the risk of contagion to italy and spain off the table entirely, and we will see over the next days and weeks how they are going to confront those challenges. they have the ability to take

the risk of contagion to italy and spain off of the table entirely. we will see over the next days and weeks how they are going to confront those challenges. as you indicate, over a slightly longer period of time -- there are talking very clearly about this -- they will be to put in place mechanisms that gives them the fiscal capacity that to really matches their monetary union. that is a piece that will take a little longer. they are going to need to have much more fiscally unity and much more centralized government over time. i think that is something member states are clear and about in the face of this crisis. >> if i might, does that require a treaty change? the last step you have just described? >> it depends very much on how

they decide to move forward on creating a more unified fiscal structure. some of the ideas that are being discussed would require treaty changes. others would not. they already have put forward some very important reforms in terms of surveillance and penalties for not meeting fiscal targets. if some of these issues -- we already have sense of where they are moving. on the broader sense of where fiscal governance is likely to be in several years time, i think there are still working on that. there are committed to it. >> changing their treaty is akin to amending our constitution. this is no easy task. it is a complicated problem is what this all comes down to. >> i would first of all agree.

i think we have a little bit to carry on with the aaa bond rating. the fact that it nebraskan government was well, but if the banks financed california's budget, he would have a little bit of the problem we are looking at in germany where one way or the other, germans are willing to have some level of responsibility directly to their people or the -- or the bank's exposure. i think one thing we had a spirited debate about god frank, it is important. the reaction -- the debate about dodd frank.

at least a america went first. because we have advanced capitalist standards and we have more transparent stress tests. the fact that we are intertwined whether we like it or not, if we did not have these coordinated standards, slipping to the lowest common denominator is not going to help anybody. i believe -- and a scare some of his concerns about how we do this in an organized basis. -- and i share some of his concerns about how we do this in an organized basis trade in the u.k., they may even be taking more structured approach than what we do. when you hear some of the leaders in france and germany in terms of transaction tax or other things that would go way beyond dodd frank, while we may

disagree about got frank, i think we would need to have not this arbitraged, consistently moving forward. at the end of the day, i think we in the eu, probably the japanese, when we get to the g- 20 framework, how do we make sure that there is not that kind of allied air in this interconnected system that does become -- there's not this allied air that becomes -- it does not agree to me to international standards. what are we doing to grapple with that? >> as you said, i think we derive a tremendous advantage from moving first and pulling the world to our high standards.

"we had seen in the g-20 is that we have succeeded in having all of the members of the g-20 sign up for tougher standards on capitol liquidity and coverage at maps -- at banks. sign up for resolution. sign up for a host of been a very profound changes that will make our derivatives markets less opaque, more transparent, less risky. in terms of getting emerging financial centers to come on board, that is why we thought it was so important to be working through the g-20 where the major financial centers and the emerging financial centers sit together. we have a variety of bodies --

we have emerging financial centers in taking on the same obligations, the same principles and commitment uniform across all members. i think that the concerns that you raise are very real. we are working very hard on them. we have to stay extremely engaged at a level of detail on implementation which we will continue to do. i think we have a real chance of having a system that have

regulatory arbitrage risks and disadvantage our financial institutions. and you have to leave in a couple of minutes. i want to ask you one more question to make sure my colleague has another crack at you. in a scene in the news there is some resolution, we are already talking about a second summit. they may not get there. a lot of pressure on the meeting in canne. how do we make sure this crisis does not just -- is there anything we can do they continue to urge you to ford in the administration? to make sure this does not just

drag itself out? at some point, we staunched some of those dramatic actions in 2008. what is your best guess that we will see definitive action within this next 30-day period with this summit coming and probably another summit in the next 30 days with this overhang that is going to take months to work through? >> but just say this. the european leaders are very intensively engaged on this. i think this toys good sign that they are meeting intensively on this. president obama has been on the phone with european leaders and has spent a lot of time asking them about the comprehensive plan that they are developing.

he is very, very committed to ensuring that the u.s. economic recovery is as robust as it can be and as insulated as a candy from shocks emanating from abroad, recognizing that had winds from europe have slowed our recovered somewhat. i think that the set of issues on the table are the right set of issues. european leaders are focused on the firewall, the bank recapitalization plan, insuring greece is sustainable, and then that longer-term set of governance reforms. again, i think they have that capacity. they have stated repeatedly that they have the will, that have the resources, and i think they know from discussions we have had among finance ministers and central-bank governors at the g-20 last weekend that this is an issue that the world cares a great deal about, that the emerging markets that are part of the g-20 also see european

financial stability as central to their own economic growth. this is the most important priority for the g-20 meeting, and we see every indication europeans are working very hard to come with their plan and to have a plan that succeeds on the four dimensions they are talking about. >> i understand your answer, and i appreciate your comments and appearing before me, hoping you recognize we are inexorably tied and there will not be continued ratcheting back of expectations. the eu has already decided a second summit, and there are the first two steps of the plan in terms of the fire wall and a bank recapitalization. we do hope the g-20 will

continue to show that these kind of large international organizations can be successful, but dragging this out is clearly not in europe's interest nor in the interest of the united states. again, we appreciate your time, secretary brainard, and we will move on to the second panel. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> if we could go ahead and move to the second panel, and as they get settled, i may go ahead and start to make some introductions, recognizing that we will probably have another

round of votes at some point. in all our second panel we are going to continue this question of the g-20, the european crisis, and currency issues in terms of making the point that all our economies are enormously intertwined. we have three very distinguished panelists, dr. uri dadush serves as director for the carnegie endowment for international peace. his work focuses on trends in the global economy and the implications of the increased rate of developing countries and their pattern of financial flows, trade, and migration and

associated economic policy. he has served as the world bank director of international trade and director of economic policy. he directed the bank's world economy group before that he was president and ceo of the economic groups intelligence unit. thank you for joining us. dr. john macon is an american scholar at the american enterprise institute. he is a former consultant to the u.s. treasury department, the congressional budget office, and the imf. he specializes in international finance and financial markets including stocks, bonds, and currencies. he is also -- research's monetary policy and tax and budget issues as well as the japanese economy and the european economy.

he is the author of numerous books and articles on financial, monetary, and fiscal policy. dr. fred bergstrom has been director and widely squirted think-tank economist at the peterson institute for international economics in 1981. he has been ranked -- the type is getting smaller and my eyes are getting worse. he is ranked as someone who can move the markets. he was the assistant secretary for international affairs of the u.s. treasury under the carter administration. he also functioned as undersecretary for monetary affairs in preparing the g-7 summit in 1981. during 1969-1971, he coordinated u.s. foreign economic policy in the white house as an assistant to dr.

kissinger at the national security council. he is well published scholar and has served in several distinguished institutions on economic matters throughout his career. i want to thank all of you for being here today and the timeliness of this hearing could not be more important. we will start with mr. dadush. >> thank you very much, mr. chairman and mr. ranking member for inviting me here today. on the euro crisis, i think it has been apparent from the discussion that just preceded that everyone understands that a set of sovereign defaults in europe, possibly leading to a collapse of the eurozone, would

have major repercussions in the united states and could lead to a lehman like event. in my view, one of longer duration. i think what is not sufficiently understood is that the eurozone may not be able to handle this crisis on its own. this is because of two dimensions. one is the politics, and the other, even more importantly, is the economics. the politics, because europe remains -- the commission is not the federal government and european central bank is not the federal reserve bank. therefore, the example of

nebraska bailing out another state, i think, is extremely appropriate in terms of understanding the dynamics of the current situation, but i would take it one step further. i don't think there is any question about nebraska and other states, considering themselves part of one country, americans. we are far from that situation in europe. the second aspect is the economics. whereas the eurozone as distinct from the european union is quite a bit smaller economy than the united states, the subprime crisis was between one trillion dollars and 1.5 trillion dollars, but the sovereign debt of the periphery countries is 4.5 trillion dollars. furthermore, banks are much more important in the european union economy and heroes on

economies than in the united states. there are just a much bigger part of the financing. as you have already recognized, policies largely are the bullets. it is important to recognize that the european stability fun, there is an element of smoke and mirrors in it. the guarantees come in part from countries that are themselves in trouble, and even the country's that were thought not to be in trouble, like france, now are confronting a borrowing cost which has doubled the it spread -- has doubled in the course of the last several months in excess of 100 basis points. that is an indication that the market is now going into

questionable capacity. in the most recent moody's decision to put france on credit watch, referring to the guarantees at the current levels, not at levels contemplated for the next age as being one of the reasons that day are considering -- that they are considering a downgrade of france. that is why my written testimony, have proposed that there is an emergency, and as a precautionary measure, the imf's resources should be expanded by a trillion dollars. i am audacious enough to say with the u.s. making a contribution to that expansion, audacious because i know that the previous expansion has not yet been agreed, but this is the situation that i see. i see it as an insurance against a very bad event.

emerging think the markets want to contribute, i don't think the emerging markets will put all of that amount by themselves, and even if they wanted to, the yet -- the united states would not necessarily want to see its interest diluted. >> the current imf balance sheet is about $300 billion, isn't it? >> according to the managing director, is four hundred dollars billion. -- $400 billion. $400 billion is the port capacity. -- the forward capacity. >> thank you for the opportunity to testify.

i am going to focus my comments on the european situation. it is appropriate to remember that the g-20 was first established in 1999 after the asian debt crisis, which was tied to excessive rigidities of exchange rates in the region and tends to avoid those adjustments. my contention today is that the european crisis will not be contained until some of the problems inherent in an unstable and nonviable currency regime are addressed. i think if i go in detail as to how we got here, how did we get in this situation where last april were all thinking we were out of the woods before starting to invest again, and

the economy was looking good, to a situation where we are looking at a weekend where once again, europe is delaying needed adjustments, with good reason, because they face some very formidable problems. europe's current problems, i would term internal systemic driven. they have a flawed currency system. how did they get here? when the european monetary system was sit -- was set up, the assertion was made that if he became a member, greek dad was the same as german debt. if you were a greek -- a german bank and greek debt was commanding an interest rate where greek debt was above german debt, you would lend to the greek government. you could use that claim on the greek government to borrow from

the european central bank, and the process began. in effect, the european monetary system initiated a massive increase in the credit ratings of the weaker southern european economies, whose unit labor cost suggest they were in no position to continue to compete with germany. over time, the european debt crisis was built on a premise that is if sovereign governments don't default, the systemic financial crisis was built on the premise that house prices never go down. those problems come back to haunt you. why is it so difficult to address this crisis? first of all, there are four ways to address it. one, the one that is being contemplated now is to engineer massive transfers from northern europe to southern europe, and as others who have testified have suggested, really we are down to germany, because even the french have their problems. the esff is a bit of smoke and mirrors.

when we were discussing that earlier, when you take away the funds that are already committed, you are down to 275 billion, and when you look at the commitments from italy and spain, which are prospectively going to be recipients, you really don't have any fun to. the idea that you could leverage that up by saying it will somehow guarantee the first 10% or 20% of the 20 -- of the countries involved i think it's wishful thinking. the second way to do with the problem, the resources or not there to make asset transfers. last year, the idea was to say to the greeks, we will give you money if you will blow your brains out, that is a few will make massive increases in taxes and cuts in spending and boost the economy into a tailspin. that means the debt to gdp ratio will be higher this year

that it was last year. that is where we are with greece. that is conceivably where we could be headed with some of the other countries. a third alternative which is being rejected is to force wages and prices in southern european countries to go down to rapidly they are able to compete with germany. that is not going to happen. greece, italy, spain are not going to turn into germany, so that is not a realistic alternative. the fourth alternative is to allow currency adjustments within the currency union that would address some of the stresses that are there. i think that is probably where we are going to end up, although we are certainly going to exhaust lot of pain and suffering before we get there. i don't see a way to make greece a viable member of the european currency union. neither do its citizens. i do make sure this crisis -- is there anything we can do

other than continue to urge you to move forward and the administration and others to move forward to make sure this does not just drag itself out? at some point, we staunched some of those dramatic actions in 2008. what is your best guess that we will see definitive action within this next 30-day period with this summit coming and probably another summit in the next 30 days with this overhang that is going to take months to work through?

>> but just say this. the european leaders are very intensively engaged on this. i think this toys good sign that they are meeting intensively on this. the strong countries in europe are consolidating. they are -- they should be tightening their policy rather than expanding. moreover, at the central bank should cut interest rates substantially. unless europe get some growth, and none of the financing is going to work. unless the united states and

europe can get to -- unless the in the state's to provide stimulus to the u.s. economy, the world will follow as well. the good news, half of the countries that make up half the world goes the economy is expanding by more than 6%. we should now ask the emerging markets who are the leaders of global growth to do more. they can't do it. they can certainly expand further. they have been worrying about inflation. with this country's slowing down, that is no longer a deep concern. they have been the beneficiaries of global growth strategies led by us and europe for 30 or 40 years. it is time for them to take the lead the economic achievements

provide. i would say, this summit needs to replicate at least to a degree what the london on g-20 summit did in april of 2009, namely take parallel and coordinated actions to get the world out of the crisis. we have to do it again led by the emerging markets but with europe and the u.s. chiming in as well. it is critical how the emerging market growth takes place. it has to be done by expanding domestic demand, collecting their big trading surpluses decline. that means letting fair currencies go up much more rapidly. on the european crisis, let me just make four quick points. i think they do needed to leverage the european instability up to two trillion

euros. i disagree that it is a failed experiment. it is a halfway house. it is going to have to complete the other half. i think the way to do it is to complete the fiscal union, not to abolish the monetary union. with respect, i will disagree with an analytical point. nebraska and other surplus u.s. states due to a degree bailout u.s. deficits states -- not by direct loans, but through the federal budget. when you transfer your surplus to washington and it transfers that to test the fit -- deficit mississippi, there is some degree a bailout. when you import citizens from states who have had high unemployment and rising, you help bail out to those losing states. the european do not have that kind of mobility. i agree with a key point,

particularly if the europeans to not get their act together quickly, plant the would have to set on the international monetary fund. if they cannot put together an adequate safety net, --, only the imf can provide it. that money would have to be borrowed from the big surplus emerging markets. china, korea, brazil, they can provide the money. it they should do so. did they need to pay back. finally, what should the united states contribute to this? our government needs to get its act together to get growth in track. we need to move to tangible credible means in bringing our budget deficit down over time. i think we ought to take on a new commitment. it is a commitment to eliminating our trade deficit. and that is a way to create

something like 3 billion to 4 million jobs over a five-year period. we have been exporting the growth of these emerging markets. they have piled up huge reserves as a result, partly by cheating on the exchange rates. i think we are perfectly justified. it is not projects -- it is not protectiveist, we are the world was the biggest debtor country. in all tallest cannot keep building in the top. every summit means trading the u.s. trade deficit. it would create 3 million to 4 million jobs. if we are serious about getting back to full employment, you have to add that. i would add that as an employment to a g-20 strategy. we have to do something serious about it like the budget deficit. i getting growth growing through domestic demand here.

>> you did not disappoint. one part of the provocative part that he just said, what do you think -- is there any realistic chance that through the g-20 mechanism we could really see a challenge or coordinated action or a the emerging nations would take on these growth policies?

it seems to me that there has been for the most part an enormous lack of coordination amongst the more industrialized nations on issues like currency. when we try to deal with china, maybe not the most effective troll -- tool i will grant. his first start with prescription. what do you think of any chances that could happen? >> i will just focus on europe. if i in china or india, why would i want to finance the european experiment that has been struggling since 2009? why would i want to ed -- invest in a system that will not work?

fred says, let's have a fiscal unions -- we will not get a fiscal union in europe. we have a monetary union that is not viable. are the chinese going to invest 500 billion yours to try to turn greece into germany? it will not happen. while the chinese certainly view their aggressive ambitions will want to appear to be stepping in here where the united states is not able to do so, i would be surprised if they were not willing to commit any resources. >> can i just ask one thing here? i understand the point -- the direct assistance -- i will come back to your questions. the more macro agreement that there could be coordinated growth policies across the emerging nations.

is that even a realistic -- >> what have we been doing since 2008? remember in 2008 after the lehman crisis for the fed cut rates aggressively, which engineered a large fiscal stimulus, china engineered the largest a stimulus in the world. the it had a cheek -- a stimulus that was worth 14% of gdp. but they had the fortune that situation that they have lots of resources and lots of things they needed building. they made a huge contribution to global growth in 2009 and 2010, although it had its downside in the sense that china is such a new force, they were pushing up commodity prices and energy prices and so on. i think if i were the chinese, i

would say, look. we did a lot. it was in our own interests. we wanted to stimulate our own economy. the spillover was positive. what i think is realistic now is to see if the chinese are prepared to back off a little bit on a camping down the growth rate because they are seeing higher domestic inflation which some estimates put as high as 10%. they are involved in a situation. this is a tough situation. >> is your prescription in terms of china -- is expectation in terms of china or other emerging nations as well? >> in china is so big, they are in a very good physical shape. my bottom line is this. i would not bet on a lot of help if i were a realist.

>> first of all, i agree that the merging markets played an instrumental role in 2009, in particular in supporting global economic activity at a very difficult moments. i think we need to recognize that was a very particular situation. as the emerging markets accelerated extremely rapidly beginning in the second to third quarter of 2009, within a about a year or a year and a half they were running into what is called a supply constraints. they were basically -- inflation

was building up. there is also a real concern in asset price baubles in a number of them. they were reaching their natural limit. now, again,fred burks makes a good point. global activity deteriorates any significant way, i think the emerging markets can provide a cushion if you see what i mean. they do have room. it will take a while. it is not evident right now, but it might take six months or nine months for the inflationary pressures built up over the last couple of years to abate the emerging markets and then they can accelerate their growth again because they have capacity. i think it is safe to say that

to their contribution in this kind of scenario will be relatively modest. as i put in my written commentary, we should always remember that american gdp is to take one example -- i could take other examples from other countries. american gdp is composed of domestic demand and not exports. the problem is, domestic demand is about 34 times bigger than exports. even in the best of circumstances, simple arithmetic tells you that the real key to the american growth is the internal dynamics in the united states. it the trade imbalance will help a little bit at the margin.

by the way, i also would stress the fact that there is virtually no conceivable increase in demand from china that would have a significant impact on american economic activity. the result is a fact that china -- the deficit is a relatively closed economy. it is about domestic activity. it is about domestic reforms. it is about fiscal reforms. that is the essence of what will drive american growth in the long term. finally, if i may, i also want to disagree with john about not helping you -- and not because i am a french citizen.

should you not be able to get its act together. i fear that it might not or could not to a sufficient degree. that leads to a collapse of the eurozone off of this half and built experiment as john wood describe it, if that were to lead to a collapse in the eurozone, then i assure you we would have a crisis of global proportions. as i said at the beginning it would be a much longer duration than the lehman episode. >> could i come back at some point? just three points, quickly. on the argument about the fiscal began in europe. the europeans are not going to give up. it would not let the year rose collapse. that has been their goal in life for over 50 years. it will not let it collapse. the history of european when

they face crises, out of all the uncertainty in the different voices comes former progress to a greater union. i think we better understand and support their move toward a fiscal union because that is the positive outcome for us as well as them over time. on the debate about the emerging markets grow, i agree with my colleagues. china play a decisive role in the world economy from the big crisis in 2008 and 2009. i applaud what they did. i draw the opposite inference. they did it last time and they can do it again this time. the supply-side constraints that john talked about have declined sharply. they have huge for their infrastructure needs and demands. they have programs out there. they have plenty of financing to do that. the issue is when. from their standpoint as well as the world standpoint, now is the time to do it. some of the emerging markets

have already reversed policy. indonesia just last week began to cut interest rates. brazil has begun to cut interest rates. the time is quickly occurring were other emerging markets are moving in the direction i suggest, i believe china, which is by far the biggest, can do it. i think the g-20 can push that process. these emerging markets taken together are half the world's economy. there are growing three times as fast as the rich countries. they are raising half of a percentage point each year. they can be drivers if we can get them to do even a fraction of what china did last time around. finally, i want to take up the point that the external side is not very important for the united states because we are a closed economy. we are looking at two% growth,

maybe. it is perfectly feasible for us to strengthen our external position by one-half to one percentage point of gdp per year for the next four or five years. that would take our growth up by a significant increment and create a big amount of jobs. we are a relatively closed economy in the sense that he mentioned. at the margin, we can do a very large benefit for our economy by growing are as external support. exports to china alone are not going to do that. if we can get the kind of pickup in world growth that i talked about at the asset with all of the emerging markets, plus a little more than europe, there is no reason why we cannot expand our international contribution to gdp growth in a

major way. we are missing a may rate -- we are missing a very major bet by not implementing that as part of our job strategy. >> as i look at these issues -- the debt of the european union and the countries and the united states, slow economic growth, just a whole host of things going on. i wonder what the potential is that inflation kind of readers its head in. we probably worried more about deflationary in the last few years. we have historically low interest rates. it just an accord it to be that

the pressures out there are enormous to roll over debt. you have a situation where countries will be struggling to finance debt. what is the potential that inflation becomes more serious of a problem as we look two years and five years down the road? i'd like everybody's thought on that. >> i am going to work my way across the panels. everybody will get a shot on that. >> right now, inflationary pressures -- you are seeing some pickup headline inflation in europe. a lot of that is a reflection of -- the delayed reflection of commodity prices to a large degree.

there is so much risk aversion. tendency by people to manage cash and banks to manage cash as they possibly can. even with the expansion of the central banks' balance sheets that we have seen, the actual expansion of credit remains relatively constrained. that is a general phenomenon in the advanced countries. in the developing countries, you are seeing -- have seen a very significant acceleration of inflation. i think if you look some years for word, a lot depends on what you assume is the capacity of central banks as the economy recovers to withdraw the massive amount of liquidity they have injected into the system over

the last few years. central bankers will tell you, we know how to do that. the problem i have and at the risk that i see, i know they know how to do that, they have the instruments to withdraw the liquidity with changing reserve requirements. the big question is, will they be able to do it eloquently? will they be able to do it in a way that you avoided a very rapid rise in interest rates as this has happened many times in the past. it has may be triggered over a period of years. >> i am not concerned about inflation right at this point. i would add, however, that if two trillion dollars of additional resources were made

available to try to shore up a fixed exchange rates in europe, the possibility of inflationary risks would rise. in the great depression, usually after financial crises there is a bigger risk of inflation and deflation, if we learned in the great depression, the way out initiative in 1933 by the devaluation of the dollar versus gold, it is exchange rate adjustment. our friends in europe would like to maintain a single currency. i understand that. i understand the furnace of their commitment to that. i think the risks of following that path to include some inflationary potential. .> i agree with my colleague

you have to make two a key distinctions. over a two-year period, i would not worry about inflation. if we do not get our act together here, the terms of fiscal policy in a credible way. inflation risks over the near term in the u.s. or europe or japan the give and the high capacity levels. developing countries have had that risk. i do think they are recognizing the need to prevent their own policies. nevertheless, they are closer to capacity margins. supply constraints are better. i do not expect them to do as much as china did into those that aid in 2009. i still think they can change

the sign of their policy. if they do it and the germans do it and we do it, that can have a huge effect on resolving all the problems we are talking it out. >> i would just ask one more question. it may be one of the most complicated things to try to figure out. if you look at the published polling numbers in germany and france, leadership there is really struggling. people are looking at what is being asked and required and recoiling. it is a difficult situation. the political issues here are significant. what happens if you get a year and a half out there and all of

a sudden in response to actions that have been taken, you have governmental change, campaigns that have been run on an anti this or anti that approach, all of a sudden you have a different set of circumstances from a leaderships are -- situation. try to factor that in and give your best thoughts on that. i have read a long time he would get populist politics in europe that would go in that direction. i must say there is virtually no evidence to support it. the germans bitch and moan, they vote strongly on every occasion in favor of the pro european policy, the pro european parties including those with the bailout. the fundamental fact is, germany is a huge beneficiary from the euro and the european union.

we know the underlying politics going back to the war's, and the germans do not forget that. in pure economic terms, the euro is nirvana for the germans. they are the largest surplus country, but their currency stays weak. that is the dream of the other german leaders i used to work with. every time they would run a big surplus, there currency would go off. now they have overcome that. germany is such a massive beneficiary from the economics of the eurozone that the business community knows it, the labor unions know it. the one party that has opposed the european bailout got thrown out of the government in the last election in berlin. you get 80% or 90% votes in the

popular vote for the parties that are in favor of continuing the policy. the opposition in germany is even stronger in favor of it and tense alert angela merkel's party. it is a risk that we need to keep our eyes on. it could happen. i would say watch what the germans do, not what they say. >> i always know when i get to fred i am devoted. i think that again looking at germany, germany has been a great beneficiary of the monetary union. now that the financial complications of the currency area have begun to jeopardize the stability of the financial system and you have a failure of a national institution two weeks ago in belgium, german economic

activity is slowing rapidly partly i would argue because things are slowing in china and also partly because european citizens pick up the paper every day and they look at the headlines in greece and a look at what is going on. they think something is not working. if we listen to german leadership carefully over the past several weeks, i am sure they are competent -- contemplating their options. the german public was never asked -- was never permitted to vote on germany joining the currency union. the german elites are powerful. they manage the system very well up to a point. i think we may be approaching that point. we may see some of the pressure and some of the political pressure which is obvious and greece on the receiving end of the adjustment, the political

pressure is rising in germany. it could continue to rise. since they are being asked to pay the bills, that would be a destabilizing factor that could be pre-empted by being more realistic about what is a viable currency regime for europe. >> i tend to agree with fred. the european project goes very deep in germany. of all of the parties, the least likely to desert euro is germany not just because they are beneficiaries. right now, i could make a very machiavellian argument that germany is actually benefiting some way from the crisis because of low interest rates and because of the low euro.

more fundamentally, if germany which is actually benefit thing and not under direct pressure at the moment or to say i am fed up -- i am leaving. that really would be the end of the european project. it is very different if greece says -- i am not ready to predict how things will develop in the europe. let me point to the fact that domestic demand -- consumption + government spending in ireland is down 20% compared to 2007. the magnitude of that number is striking. in the case of greece we are already down 15% in 2007.

what we are witnessing in these countries is the equivalent of a great depression. it is just not called the great depression because it happens to occur in some small countries. but for all intents and purposes, it is a great depression. in spain, unemployment is up to 24% and 5 feet -- 25%. i think it is remarkable the degree to which the structure is held together. i believe it is a structural crisis more than a fiscal crisis, a competitive crisis that is the affecting -- if we are talking another five years of adjustment, it is very difficult to say whether the policy can actually stay together in these countries. that is one of the arguments why

the condemnation of the commitment to the european project and the incredible stress under which the system is being put is one of the arguments to say europe should be helped in a situation like that. >> two court sentences he says the germans paid the bill right. net they are huge. they can keep their big winnings. he also suggested that agree to a fault would equate to exit from the euro. i disagree. they have to default. i think both the economics and the politics suggest they will do it inside the euro and come

out better for doing its. >> one of the things, if you paint an appropriate challenge. there is the idea of currency union about a fiscal union. the implication is that you're going to have some short-term discussions seriously cracks . >> giving hadas is good. -- getting out of this is good.

but of that infected tick, is to be a positive thing. and don't know how it is worse from going to we can to weekend. we said we would settle its. the 440 billion euros was agreed to in july. it was agreed to are the past several weeks. , it is enough? it will not shock many people if greece defaults or leaves hte union. >> everybody has been generous with their time. this has been fascinating. i hear one major consensus.

it is whether this leads to currency break up or continuing the alignment. it i am hearing they would concur on that. >> if we will ensure run shoring it up. >> agreed. if we could have no more than two or three sentences. give me your best projection in terms of what if anything well happen. what should we realistically expect in a few weeks.

>> what comes out of the eu is further steps toward the ultimate objectives we are talking about. they cannot do it all in one leap. they will take some steps th that will lead to the outcomes. it will provide a fence around spain and italy. >> there will be so much cacophony and uncertainty generated trailing the market pressures that the crisis will continue. at the g-20, there will be more pressure on the europeans to

complete that process. there may be some steps. i think there may be some steps. the finance ministers reached a fair degree of consensus needed. the imf i think is not as clear. it is putting in the train. it would enable it to plug the gaps. it got to be pursued any way. who knows when it will be needed. it to a clearly galvin as that. the cracks we're going to have

another meeting next weekend. it's the alternatives are so unattractive. there will put at a number that is over. nothing much will get it done. they will come up with more money. it will be with more problems. it is a bad idea to go down this road. the comex i was going to say you can read the last statement. they said the global recovery was broadening. they would say it is narrowing and we have problems. what else can they do? >> first of all, the crisis will

continue to fester for another year or two. with regard to the next two months, i think you will see gains recapitalization decisions. you will see a structure for the forgiveness of greek debt. you will see a better articulate it one. i believe with all that you will also seek some great chair engagement.

i do not know how much it'll involve the united states. i believe that will be part of the game going forward. with all of that, in the crisis will continue to reap its ugly head. this is a crisis of economic structure and growth. it is not a fiscal crisis. >> thank you. the hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

collect any team moments, reaction to the death of gaddafi. the un special represented for libya. then at the met romney's at town hall meeting in iowa. we will really arid the hearing on any world economy. in >> carl levin is speaking to the council on foreign relations about afghanistan. 2.ve coverage is on c-span's >> i was for many connected with a large company. they have to pay to me as

liberalism. i was a level before many of them. i fought for the reforms of theodore roosevelt and woodrow wilson. >> who's a member of the democratic party. he saw and won it. he left his mark in political history. he became the foreign ambassador. his order of the 14 men featured in the knees series. it is friday a o'clock p.m. eastern. come>> may 5 to 8 minute video.

get it to c-span by the deadline. he could win the details. >> gaddafi was killed today near his home town. president obama spoke about it. good afternoon, everybody. today, the government of libya announced the death of muammar gaddafi. this marks the end of a long and painful chapter for the people of libya, who now have the opportunity to determine their own destiny in a new and democratic libya. for four decades, the gaddafi regime ruled the libyan people with an iron fist.

basic human rights were denied. innocent civilians were detained, beaten and killed. and libya's wealth was squandered. the enormous potential of the libyan people was held back, and terror was used as a political weapon. today, we can definitively say that the gaddafi regime has come to an end. the last major regime strongholds have fallen. the new government is consolidating the control over the country. and one of the world's longest- serving dictators is no more. one year ago, the notion of a free libya seemed impossible. but then the libyan people rose up and demanded their rights. and when gaddafi and his forces started going city to city, town by town, to brutalize men, women and children, the world refused to stand idly by. faced with the potential of mass atrocities -- and a call for help from the libyan people -- the united states and our friends and allies stopped

gaddafi's forces in their tracks. a coalition that included the united states, nato and arab nations persevered through the summer to protect libyan civilians. and meanwhile, the courageous libyan people fought for their own future and broke the back of the regime. so this is a momentous day in the history of libya. the dark shadow of tyranny has been lifted. and with this enormous promise, the libyan people now have a great responsibility -- to build an inclusive and tolerant and democratic libya that stands as the ultimate rebuke to gaddafi's dictatorship. we look forward to the announcement of the country's liberation, the quick formation of an interim government, and a stable transition to libya's first free and fair elections.

and we call on our libyan friends to continue to work with the international community to secure dangerous materials, and to respect the human rights of all libyans -- including those who have been detained. we're under no illusions -- libya will travel a long and winding road to full democracy. there will be difficult days ahead. but the united states, together with the international community, is committed to the libyan people. you have won your revolution. and now, we will be a partner as you forge a future that provides dignity, freedom and opportunity. for the region, today's events prove once more that the rule of an iron fist inevitably comes to an end. across the arab world, citizens have stood up to claim their rights.

youth are delivering a powerful rebuke to dictatorship. and those leaders who try to deny their human dignity will not succeed. for us here in the united states, we are reminded today of all those americans that we lost at the hands of gaddafi's terror. their families and friends are in our thoughts and in our prayers. we recall their bright smiles, their extraordinary lives, and their tragic deaths. we know that nothing can close the wound of their loss, but we stand together as one nation by their side. for nearly eight months, many americans have provided extraordinary service in support of our efforts to protect the libyan people, and to provide them with a chance to determine their own destiny. our skilled diplomats have helped to lead an unprecedented

global response. our brave pilots have flown in libya's skies, our sailors have provided support off libya's shores, and our leadership at nato has helped guide our coalition. without putting a single u.s. service member on the ground, we achieved our objectives, and our nato mission will soon come to an end. this comes at a time when we see the strength of american leadership across the world. we've taken out al qaeda leaders, and we've put them on the path to defeat. we're winding down the war in iraq and have begun a transition in afghanistan. and now, working in libya with friends and allies, we've demonstrated what collective action can achieve in the 21st century. of course, above all, today belongs to the people of libya. this is a moment for them to remember all those who suffered and were lost under gaddafi, and look forward to the promise of a new day. and i know the american people wish the people of libya the very best in what will be a challenging but hopeful days, weeks, months and years ahead. thank you, very much.

>> ban ki moon says the death of gaddafi is historical. this is a little more than 20 minutes. >> ladies and gentlemen, good morning. before we begin, let me say a

few words about this morning's use of headlines. we have seen reports of the death of gaddafi. this date march a historical tradition for libya. this is a means a celebration. this is only the end of the beginning. the road for libya will be difficult and full of challenges. now is the time for all libyans to come together. libyans can only realize the promise of the future through unity. it combatants on all sides must

lay down their arms in peace. this is a time for healing in building. it is not for revenge. only they must be able to recognize the nation's government and leadership. for the high hopes sustain after revolution must translate into opportunity and justice for all. >> the mission is on the

grounds. they are along the path. >> and nobody should be surprised. this is a country that has a strong sense of the value is, accountability, and transparency. there are the values. thank you. >> thank you. >> i think we will go over to questions now.

please, could you introduce yourselves and say who you are and who you are working for? >> bessie love very much. thank you. you said following the death of gaddafi there's a sense of security. >> i did not say it was now a sense of security. i said there would have been a sense us in security. there is a lot that has to be done to bring security to all sectors of the community.

i am among those who appealed that fighters should try to bring the conflict to an end that does not pose further challenges. there has been significant abuses. i believe commitment of the leadership to address that is a real. we have seen that it is one place where there was a genuine supporters of gaddafi to the end of the conflict. they are going to need to embrace all sections and the future. >> this has been done by other leaders. what is the reconciliation? >> there are many issues.

there are those in detention without a justice system functioning to redo their cases with irresponsibility. beinge only just now transferred over. there are considerable issues that have to be addressed by the interim government. >> is than any news about the

sons of the gaddafi? klebs there are various reports. i hesitate to give them currency. i'm not privy to any privileged information. and think they made clear. it seems fairly well established. the reports are even less clear. >> would you encourage them deaths bids is. could they surrendered their weapons back as any

consolidation? >> they have clear ones that excludes from amnesty. they created crimes against humanity. this is the position that is reflected in a approach. they announced this. it reflects that principle. i want to see justice done. it is a very serious issue. they brought it across the border. there's serious concern about the implications of that spirit

they brought about this armaments from former fighters. >> it will be up to you. aboutre's a lot concern gaddafi getting spun around the region. >> i do not have any particular

information. >> thank you. >> what do you know i've got before and after? what can you talus about the moments? >> i cannot say to you anything. they were dependent on reports. there are considerable ones.

there were clarifying. >> is it your understanding? >> it is on behalf of these. they are aware of photographs. >> i'm coming here. cracks i know your mission is a political one. what can you tell us in terms of humanitarian situation stacks what are the immediate needs? >> especially on tripoli and the

other ones. there has been recent fighting. they were reasonably satisfactory. the concern is following the most recent fighting there have been carrying out the humanitarian assessments missions to assess. what they have found are considerable coping mechanisms. >> the fighting is hopefully stopping. will you be sensing this?

will it be sending anything to them? >> the missions we have carried out were carried out inside the libyan mission. it will be accompanying them. >> thank you. >> i wanted to ask you. i heard that there is some discussion of working with the libyans in terms of who could vote. they were given citizenship. is there some moved to deny them the right to vote or strip them from citizenship? do you believe the mandate?

what is the position tax is this the end? >> they have made this to this. you will hear back from them. as far as the eligibility, indeed there is a discussion about the eligibility of whether people brought the citizenship. am not got to the stage. it is not something that we are addressing yet. it may prove to be an issue. >> does the un have a position

on this possibility? do you have any guidance? >> we have to understand what the issue really is. you're describing one particular way. we need to understand what has gone on. >> we're coming to you. >> i was concerned about the possible one at in libya. what you say was announced by this?

it was laid to run by the council. >> i think the reason early statements came was it was because it was the bird grade predicted as the brigade -- it was the brigade. too not think there's more be read into it than that. as for the future role, there is social and political life. does the overwhelming view. they're not expected to be politically divisive. >> gaddafi was wanted.

there are reports that they said don't shoot. when do you investigate exactly what happened so? it is how they died. what do you know? there is resistance. it to be looted or killed or raped. they are not controlling. do you know anything about their reports coming out? >> bid to set in the context.

people were resisting as individuals. they were scared. it is clear they were resisting because they were the remaining core of fighters. it is clearly important that in addressing the consequences that they ensure that all of those fully respect the human rights of those who may have been gaddafi loyalists. that is their responsibility. a lot of people were allowed

through the revolutionary lines. they're disturbing incidents that may have happened elsewhere. >> when ed they going to investigated? >> if there are investigative responsibilities, i only have a for my mission. >> is it too early to tell? is that a real possibility? >> there has been a debate as to what they would state.

libya would draw on it. that is a debate that will take place principally when new constitutions come to be drafted. they would be drafted for another eight months. there will be no debate around that. >> the do you have reports? is it your understanding that there would be a need for a new resolution from the security council?

>> they have to be with the security council. this is a matter for the council if they address that. >> any final questions? >> does t he ncc plan to brief the committee in libya? and do they plan to seek recognition? >> i do not know when they will reach the community. we had expected a briefing.

as for recognition, i think they feel it is overwhelming recognition. we look forward to any remaining countries joining. thank you so much. >> mitt romney's town hall meeting in iowa. then the head of common security testifies about her department operation. >> we will speak with

republican representative frank wolf of virginia. the congressman will discuss his new book about human rights. then we will take your questions about the youth vote in the next election. we will look at the economic indicators. our guest will be the associate director of the program. "washington journal" is live every day at 7:00 a.m. eastern. >> met romney says the republican party needs to better define its message to voters. he is speaking at a town hall style meeting. this is just under one hour.

>> i went to take this opportunity to introduce candidate for president of the united states, governor mitt romney. >> thank you. thank you so much. i was just on the radio with sam this morning. he asked some good questions on the air there. thank you for joining me this morning. a number of students from morningside as well. how many of you are morningside students? great. good turnout. i have to be honest with you guys.

i do not know how any young person in this country could vote for a democrat. i just mean to say to you that my party is focused on making sure that america is strong and prosperous for you, not just how well we can do for ourselves and how many benefits we can accrue for my generation, but instead, how can we make sure we can care for our own folks at the same time we care for the next generation and leaves america stronger and more prosperous than we found it. i'm 64 years old. i enjoyed the results and the contribution made by the greatest generation. not those folks. these two here. they made a real contribution in holding off tyranny in the

world and building the strongest economy in the world and leaving a nation that had an economic base that was second to none. right now the question is what are we going to leave? will we leave a stronger america? is this going to be an american century or the century of some other part of the world? i want this to be an american century. i want us to have the strongest values, the strongest economy and the strongest military in the world. i am committed to keeping america strong. i foreign-policy can be boiled down to keeping america strong -- my foreign-policy can be boiled down to keeping america strong and doing what ever it takes. our economy is in trouble, and you know that. this president points out that he did not cause the recession,

and he is right, but he made the downturn worse and made the recovery last longer than it should have. i do not think he is a bad guy, i just do not think he understands how the economy works. i think he is over his head. the evidence of that is that you have 25 million people today, three years after he was inaugurated, 25 million people out of work, or stop looking for work, or are in part-time work looking for full-time. when you get your certificate for morningside and you go out to look for work, you'll find it is not as easy as you might have expected. home values continue to go down in this country. the median income of americans over the last three years has

dropped 10%. this is just an president and -- just unprecedented. what i want to do is get this economy going again and let people know that the economy will be brighter for them and brighter for their kids than it has been in the past. right now, we of the president campaigning. he is in north carolina today. he is campaigning for his stimulus. someone needs to tell him that the stimulus is dead, gone. the emperor has no clothes. what he needs to do is stop campaigning, stop blaming, and go back to washington and sit down with democrats and republicans and work on legislation that will get america working again. [applause] leadership is hard. reaching across the aisle with people who disagree with you on issues and finding common ground, that is tough. he has not been able to do those things. he likes campaigning, so that is what he is doing. but we did not elect him to campaign.

we elected him to leave. we need leadership. i have laid out a series of things i think you need to do to make sure it the foundation of our economy is so strong we start creating jobs again. i described them as in four major categories even though it is a much longer list than not, but just to remind you of those seven things you have to do. one comely have to make sure that the tax rates for our employers are compounded -- one, you have to make sure that the tax rates for our employers are competitive with other nations. right now, hours are the highest in the world. businesses will go places where the tax rates are more competitive. number two, you have to have regulations.

as republicans come up we cannot pretend we just want to get rid of all -- republicans, we cannot pretend we just want to get rid of all regulation. but the regulations need to be streamlined and the regulators need to be encouraging the private sector, not killing it. right now, our regulatory burden is killing jobs in america. this president has added regulation by a factor of four times more than the prior president on an annual basis. number three, you have a tough trade policies that open markets for american goods. when people cheat, you have to hold their feet to the fire. this is an exporting state, as you know. iowa exports goods around the world. i want to open more markets for iowa goods, american goods, goods for all of our states. now, we of a president who has been in office for three -- have a president who has been in office for three years and stalled on trade agreements.

he is negotiated no new deals to open up markets for america, while the chinese have put together some 40 deals. that means they're going to have trade relationships, distribution, brand awareness and so forth that will make it harder for us. we need a president that wants to open the markets. number four, we have to have energy policies that get us on a track to becoming energy secure an energy independent. that means you do not say no to all of the sources of energy in the country. you develop coal, oil, natural gas, renewable resources, ethanol, wind, solar. and you encourage the efficient use of energy. number five, you have to have

the rule of law. in order for america to have confidence to invest in the future, you have to believe that the law will be followed. when the presidents? the national labor relations board with labor stooges -- when the president stacks the national labor relations board with labor stooges and tells boeing they cannot do what they need to do, you violate the rule of law. number six, you have to have capital. what do i mean by that? we're in a capitalist system, as you know. sometimes people do not like that word. i like capitalism and free enterprise. capitalism and free enterprise are the only antidote to pottery the world has ever seen. even china -- to poverty the world has ever seen. even china has started to copy it.

but you cannot just have capital for physical goods and assets. you have to have human capital. we have to have institutions that build human capital in an exceptional way. let's think about what they are, schools, k-12. unfortunately, our kids are treated to schools that are performing at the bottom quartile of the world. you also have to have great institutions of higher learning. we have those, but they're more expensive than they ought to be. then you also have immigration policies that open the doors to the best and the prices -- best and the brightest, welcome legal immigration and stop illegal immigration. illegal immigration is the enemy of legal immigration. i mentioned there were seven things, and i will tell you the last one. if he were thinking about investing your life savings in america, or if you had some big companies were asked to run and you were wondering where to put

your money, he would not put it in a place where the dollar was not going to be worth anything in the future. if you're of a government the consistently spends more than it takes in, you are going to worry about the future of the country. we cannot continue to spend more than we take in. we have to cut our spending. we have to capture much the federal government will take out of our economy -- cap how much the federal government will take out of our economy, and we have to balance our budget. i know that this is a town meeting format. this is not officially a town meeting, the kind of a town hall, so you are going to get a chance to ask questions. i know there are friends in the audience. i see some romney stickers, although i have learned that sometimes those are just

camouflage. there are some romney stickers in here. there are some obama stickers in year. there are some folks that are voting for other people. that is what is fun about this nation. we can disagree as long as we do it respectfully. i will try to be respectful too. >> you were on governor huckabee's show a few weeks ago and talked about how you would support a life begins at conception amendment. that would essentially banned most forms of birth control. 98% of american women, including me, use birth control. could you tell me understand why you oppose the use of birth control? >> i do not. i am sorry. life begins at conception. birth control prevents conception. my view is this, and let me clarify it so that you

understand it. what i believe is the right course in regards to abortion and life is that i would like to see the supreme court returns this right to the states and let states create their own legislation with regards to live. that is my view. states will make different decisions, which is their right to do so. my view is that i am not out campaigning for an amendment of some kind. i'm campaigning how to see justice's -- i am campaigning to see justices appointed to the supreme court that will ultimately returned this decision to the state. >> i do not know if you want to have your staff look into this, but hormonal forms of birth control work differently. they prevent implementation -- prevent implantation, not conception. as someone that uses birth control, this is a terrifying

prospect to me, so that i hope you can look into that. >> what do you think about the fact that our democratic run senate has not passed a budget since this president has been inaugurated? to me, and that has caused most of the financial problems because we are running on resolution after resolution, which they created a crisis over, waste a lot of our time, and nothing is getting done. would u.s. president do if the to get an actual budget done? >> i would lead.

one of the qualities of leadership is that you not only work with your own party, but you reach across the aisle tohad he been spending the last 1000 days inviting people to the white house, working with people, back and forth, trying new ideas, i would say well, he has tried, and they can i get the other side to live. but he has not been doing that. he is in north dakota campaign. the job we elected him to do happens to be right now in washington. he is not their leading. when he came into office, one of the things i found most surprising was his decision to delegate the stimulus to nancy pelosi and harry reid. my guess is they had probably about as much experience in the private sector as he had, and none. so they crafted and $800

billion stimulus plan the projected government jobs and did not get the economy going -- and $800 billion stimulus plan that protected government jobs and did not get the economy going. i agree with you. the idea of a budget process is to make the tough decisions we need to make as opposed to just kicking the can down the field. look, washington is broken. i said that four years ago. it is more true today than it was four years ago. washington is broken. it is not doing its job. that is not because of realit is not because of the 535 members of the senate and the house. it is because right now it does not have a leader. america needs leadership. i think he is a nice guy. but he has never led before. he did not lead in the legislature in illinois.

he did not lead in the united states senate. he has not had that experience. i do not know the answers to all things by any means. there are a lot of things i can be educated about and learn from, but i have learned how to lead three different experiences doing that. i could come down and complain that the dinner table is not respectful, that there is too boys should get there on time, it would be my fault if those things were going on. family. and mom see. i learned throughout my career. if i'm president of the united states, i will do everything in my power to get the congress to work together for the good of thank you. >> there is a huge appetite today for getting rid of the

irs because it is a book of special favors and opt out for friends of legislatures. also, there is about $800 issues? >> there is a lot we could do to try to reform our tax code to make it work better. i would like to see a tax code that has lower tax rates that are flatter tax rates were a lot of the special deals are taken out of the tax code. we need to do right away, through a complete restructuring of our tax code is going to take a long time. i have some ideas of ways to do that. i will not go through the right now, but let me tell you what i want to do immediately. i want to help the people that have been hurt the most by the

middle class. when i am looking to do is provide an immediate tax relief package for the middle class. quickly if i'm lucky enough to become president, perhaps in the first 100 days or so. $200,000 a year or less, we would eliminate the tax on your savings. that means no tax on your interest, dividends or capital gains. you could save your money for college, retirement, home or whatever you want without having to pay taxes on it. that lowers the burden on the middle class in america. that is a relatively simple change, and therefore could be employers have their tax rates brought down from 35%-25%, which is competitive with nations around the world.

to do that without losing special breaks that have been put in by lobbyists and interest groups over the years. what other tax ideas i work? one would be to go to something called the fair tax. that is to replace the income tax with the sales tax, a national sales tax, a consumption tax, if you will. there are a lot of positive features to that, and we could look and see if we could make cons would be. the current their tax has a problem that in my view, it keeps me from endorsing and the fear tax proposal as it currently stands, and that is this. it raises the taxes on middle- income families. therefore, it lowers them on the other two since, the poor and the wealthy. i do not like the idea of raising taxes on middle-income americans. i think we ought to be lowering taxes on middle-income

americans. for me, that is a non-starter, although the concept of a consumption tax makes sense. the flat tax that steve forbes championed in 2000 has positive features. then again, you have to look and americans. for me, one of the key criteria in looking at tax policy is to make sure that we help the people that need the help most. in our country, half the people that need the help most -- in our country, the people that need help most are not the poor, which have the safety net, or the ridge, up who are doing just fine, but the middle class -- the rich, who are doing just fine, but the middle class. the best way to balance our budget in addition to cutting

spending is to encourage growth. those are my principles. pardon? subsidies are deductions. there are corporate subsidies that if you had to take some of those out you get the tax rate for corporations from 35-25. mortgage. some are saying get rid of that. aired deducting the interest on will -- who are deducting the interest on their mortgage on is costing them money. we probably do not want to hurt. people say get rid of the charitable contribution deduction, the home mortgage those things would be pretty have a careful evaluation of middle-income america. yes, sir? >> first of all, governor, i

want to thank you for being here. the first time i ever saw you was when you were governor of massachusetts. i got to hear you speak. i was impressed about how you spoke about reaching across the guy, -- when he spoke in your over his head. there are a lot of us here who feel that way. but so far, you have not campaigned much in iowa. we have had candidates here who are spewing vitriol. one say the nation is plagued with aladdin being shown in the classroom. we have a candidate selling a 9.99 pizza deal, i mean tax plan. we have another whose only claim to fame is that he shot a coyote.

is your campaign an alternative to that? >> yes, to answer your question. look, i want to get the support of iowa. this is not my first trip to iowa, as you know. i will be here yet again, campaigning here. i want to get the support of the good people of iowa. i would love to in -- win in iowa, as any of us would. i want to become the president of the united states. i did not imagine that that was going to be part of my life's experience, that i would campaign for president. had i known that i was going to get involved in politics, i am not sure i would have chosen

massachusetts as the place to do so as a republican. a little tough there as a republican. and yet i find myself now in a position where having spent my life in the private sector, 25 years working in small business and big business, having started a business, having run other enterprises, i have, in my view, the kinds of skills that america needs right now to get our economy going again. and so i am running for president and now will take me around the country and you guys have a big said. iowa comes first. you have an enormous say in who the next president is going to be. i think the american people are increasingly aware that president obama can i get elected to a second term, should not get elected to a second term. president obama was on the today show a few weeks after his inauguration. he said look, if i cannot get this economy turned around in three years, i will be looking

at a one-term proposition. i am here to collect. he has not gotten the job done. and here he is today, inexplicably, campaigning, talking about a new stimulus. it is like mr. president, we let you have your way with the nation for three years. he ignores the fact that his first two years he had a democrat house and democratic senate. he put in place a $787 billion stimulus bill. he ignores that fact. he ignores the fact that he pushed through obama care, another piece of legislation that the american people try to stop in every way they could, even elected a republican senator in massachusetts. and yet he went ahead with those things and he is trying to find someone to blame. we have gone from hope and change to divide and blame. the american people have seen

enough of it. they want to see someone who will lead. i can tell you, i am not going to agree with the democrats on all of their issues. i'm not going to agree with liberals. i am not going to compromise my principles, but i am going to look for common ground because i happen to believe that there are democrats that love america just like there are republicans that love america. the old ronald reagan he said it is not that liberals are ignorant, it is just that what they know is wrong. he seeks to educate the opposing side and you see to find agreement right now. given the state of our budget deficit and the massive, massive total debt that america has, and the fact we're take -- facing challenges around the world of an extraordinary nature, i think o'neill who sat down with ronald reagan, there

are good democrats who will sit down with me andi proposed this change. i predict it will do this. if it does not, i will give you something you want. that can happen. i have seen it happen in my state. i have seen it happen in other states. i have seen it happen in this country under leaders. i intend to be one of those leaders. [applause] >> i have two questions. one is easy. one is a little more difficult. the easy one is, what are you going to do about zars? or keep him? the other question is, how are you going to stop the influx of illegals?

to me, you have to shut the spigot off and put the fence up. >> zars. i thought you were talking about sars. remember that infectious disease? i do not know how to get rid of that. i hope i never get to a point where i have to do that. there will certainly be on voice. -- envous. tsars that are managing it, it does not make sense. the structure of this is strange. i was in the business world as i have mentioned a bubble of times. -- a couple of times. they reorganize.

they find a way to do things better. they say you have it organized wrong. people are reporting in wrong order. businesses do that. we have the same structure. there are programs that could be eliminated. i do not expect to appoint the czars. i can tell you that. i am from a strong american out there -- america now. i want strong values.

i want a strong economy. everything i do will be focused on making america stronger. we are a shining city on a hill. i will do everything in my power to keep the strong. and you have another question. what would you do about illegal immigration? >> i mention that. the interesting thing is that it is not that difficult to solve intellectually. it is the politics. how did they do this? this is hard. how do we deal with all the various nations? that is a tough one. illegal immigration is a tough

one. i was there was some border patrol agents. we have a big festa there. they said people still get across the fence. they build ladder's side of rebar. they grab the ladder and go to the next. what do we have to do? he said i agree with. do you have to have a fence. to have to have enough agents to patrol that fence. you have to turn off the magnets. i do not know what he meant. >> he said when you have the employers that knowingly hire people that are in this country

illegally and they're getting 10 times as much as they get paid in their home, and they will find a way in. you have to crack down on employers. you have to have a system that identifies who is here illegally. you look at that card. you slide it. if they are legal, you can hire them. if you hire someone illegal, you can get sanctioned for not paying your taxes. once you do that, you close that magnet. >> they passed the dream act. texas was the first. they should give tuition breaks to illegals living in our country. taxpayers should funds illegals college education. i vetoed that. there are other people that have a different course.

you have to turn off the magnets. build a fence. patrol its. turn off the magnets. we will stop illegal immigration. we want legal immigration. a lot to file a legal process will be bringing people that speak english and has skills that we need. thank you. >> a good leader knows the weaknesses. they're willing to bring them out to make them stronger.

what is something that you struggle with. that your party my struggle with that you want to see bettered? >> one of the things my party needs to do is this spirit make sure we communicate clearly. we do not do a good job of that. when i jokingly said that if anyone here is going to college should not ever vote for democrat, i meant that jokingly but also seriously. almost colleges do not vote for us. we have not been good at creating a message. ours is the party of trying to protect opportunity and making the economy so strong that you get jobs when come out of school. theirs is the party of benefits

and handouts. that does not treat the opportunity you want. i want to give benefits to people in my generation. we are passing of the burden. i am going to be dead and gone before that $14 trillion is paid off. the interest on that, year after year, will be paid by your generation. my part is trying to find a way to stop that from happening. not because we do not care about the things we spend money on. the all like to buy lots of stuff for everybody. giving away free stuff will kill the general action -- will kill the next generation. i am not in this race for me. i am almost 65 years old i am in this race for my kids. if we do a better job

communicating, we will be able to get the support of young people. we can communicate the kinds of choices we have. i think we do in an effective job too often in communicating with young people, with hispanic voters. that is another weakness of hours. we're not doing well with hispanic voters and other minorities. this is a very large portion of our national voting public. ours is the party that wants to preserve the american opportunity. this is what we are about. the number one weakness?

do a better job communicating. i hope of i get the chance to debate barack obama, i will be able to post that i am in favor of making sure our military is second to none. not for me but for the coming generations of america. i believe this is an exception on nation. i think our president is among them. there are some that think america is another nation with a flag. it sectionalism is like greek exceptional listen. i disagree. we responded on a radical principal that our creator endowed us with and alienable rights. it is life, liberty, and the pursuit of happiness. that swept the world. nation after nation adopted those principles. this is an exceptional nation

with an exceptional mission. i want to do a better job of communicating that. thank you. my staff says one more question. >> how do you speak of the cuts that the process means that what type? >> there are a number of things we could do right away that it is on the treachery of balancing the budget. one is to take our discretionary spending back to 2008 levels. number two is to stop obamacare. turn back the responsibility to the states. take medicaid and send that back to the state and say you care for your pour.

we will give you the money you got last year. we slowed down that. we cut better implement by 10%. maybe more. we can do that through attrition. we have baby boomers are retiring now. police said federal compensation to equal that in the private sector. do not quote me. with these cameras, it is not possible. i saw a report the said the average compensation of a federal employee is $125,000. that strikes me is higher than the private sector. looking response ability to irresponsibility, we should link compensation with that that

exists. if you do those five things -- [applause] you balance the budget. we have to be honest to young people coming along. we're talking about college kids. these are the promises we make. i want these programs to stay in place. i want them to be there as a safety net. i want to make sure we're not laying upon them a massive burden that they cannot carry out and live in a country that has opportunity. i propose ways to make is sustainable. you do all of those things and thank heaven you're able to do it. you have a balanced budget amendment. i did that. not quite at the federal level. i did it at the state level.

the numbers or smaller. our budget gap was $3 million. we made the tough decisions. we put agencies that used to have different offices together. we got rid of press secretaries and lawyers. we said you can use the same press secretary. i action eliminated some budgets. we found a way to balance it. this is what i will bring to washington. the idea consistently borrowing hundreds of billions of dollars, actually it will provide dollars trillion borrowing that, knowing we cannot pay back and asking the

next generation to get stuck with the interest. i do not understand how this can go on. i think it is immoral. it is wrong. we have to stop that. i will make sure that happens. [applause] thank you for spending time with me. those that have come in from the community, thank you for spending some time. i appreciate the chance to be with you. this is an important election. you know that. we're walking on an economic tight rope. on one side, we could slip into a double-dip recession. with all the borrowing that has been done, it would be real tough time to go into a double dip.

the other side is a long sidelight japan has experienced. it to be essential for us to restructure our economy. they get the energy policies on track to allow american to compete globally. i want to make sure we get america's economy strong as we can protect ourselves with a strong military and promised a next-generation that they will have a good job with rising incomes and the future will be brighter than the past. that is why i am running. i hope i made that clear. i love america. we are an exception on nation. i love this country.

i love the principles upon which it was founded. i believe that in america. i believe in free enterprise. i believe an opportunity. -- in opportunity. we have a role to pass a generation that is strong and free. i will not die without and everything in my power to the phil -- to fill -- fulfill that. i do not want to go down in history as being part of the worst generation or a mediocre generation. we can be a great generation. i want to be one of those. the only people to say thank heavens that people like my mom and dad went back to cut back on the excesses of government. this is a great country with a

great role and responsibility. it is our responsibility to get to the eviction ration in america. i appreciate your willingness to be here. thank you. it is great to be with you. >> good to see. thank you. >> can i get a picture? >> absolutely. thank you for being here today. it is good to see you. thank you. it is good to see you.

and when to follow up with the exact same question. -- i am going to follow up with the exact same question. you want your name on it? this is exactly right. his shirt is lighter. >> thank you. >> thank you. thank you for answer my question. -- for answering my question. >> you are welcome. thank you.

i think you have it backwards. where are you? any make this thing where? turnaround. there we go. a really appreciated. we need your help again. thank you for coming by again.

thank you. the blood. -- good luck. we have a couple of business guys in there. how're you? i will do that. touchstone energy. thank you for being here today. it is nice to meet you. how're you? this is your daughter? just your student? are you a faculty member here? it is nice to me. what do you steading? >> premed. i want to get my doctorate and ph.d. and do research.

hopefully i am not broke. >> that is what my son wanted to do. then he found himself being attracted to radiology. >> thank you so much for coming. >> thank you for being here. what you think will happen after we appeal obamacare? there are a lot of things i do. they like what we did in massachusetts. one thing i do is i think the discrimination that exists ought to be eliminated.

the corporation they get a tax advantage. they do not get this. individuals have the same tax treatment as companies. they did not lose their insurance. >> what process do you think you'll used to come up with these ideas? >> there in the process of gathering information for people across the country. you come in. >> how about the experts? >> have everyone so that the table and express their views. i think people are pretty convinced of it. you let individuals purchase it.

they can continue to get it through their company. it is at a relatively fair price. continue the story about the shining city. >> thank you. it is good to see you. thank you so much. is this for me?

i will sign that. i will do that. july sign it? thank you. take care. that is your camera. the eu wants to get in the picture? -- don't you want to get in to the picture? all right. we will be back.

how're you? thank you. appreciate your being here. you have to shake hands and say

thank you. the world is a better place with adolphe gone. -- with gaddafi gone. that works. thank you. goodlatte. -- good luck.

thank you for coming. >> congressman ron paul is in iowa. he is speaking at the university of iowa in iowa city. our live coverage is tomorrow night at 9:00 p.m. eastern. watch more of video of the candidates. see what political reporters are saying in check the latest contribution with the c-span's website. it is easy to use an crumpton advocate -- and helps you navigate the political scene. this is all that c- span.org/campaign2012.

>> and a few moments, a hearing on the g-20 and world economy. in less than two hours, president obama's reaction to the death of muammar al-gaddafi. >> the chairman of the armed services committee is speaking on the council of foreign relations tomorrow morning. live coverage is at 8:30 eastern. next, a hearing on the g-20 and the global economy. the group of 20 was established in 1989 to bring together advance and emerging economies. the next meeting is early next month. this hearing is just under two hours.

>> i like to call order to this banking subcommittee. this year and subjects, which is more timely than when we initially planned it. we are fortunate to have on our first panel. i will be very brief in opening comments. the timing today is particularly important. the g-20 finance ministers just

met this past weekend when they issued a new communique. we have the european union summit this weekend. summit. the single most obvious challenge at this moment is the european economic and financial crisis. it is not the sole responsibility of the g-20 to fix euro's problems, and item on the g-20 agenda it in november. if the g-20 is to prove itself useful in the long run, and demonstrate its ability to react and at times get in front of the next economic or financial crisis, then these next few weeks are going to be extraordinarily important. the world economy now faces a variety of crises.

we still have an american economy that while technically in recovery, a huge number of americans have not felt that yet. are further shock to the system coming about -- of further shock to the system coming about from a non structured default by greece or any other country or even a contagion spreading across europe that could freeze financial markets will have a dramatic effect on our economy, and effect -- an effect that if not properly monitored and dealt wit, could even rivaled the challenges of 2008. the challenge right now is we don't have all of the same tools available to us that we had in 2008, both in terms of monetary policy and stick rejects -- fiscal stimulus, and a growing level of concern and skepticism among the american public that some of the actions

in 2008 disproportionately help financial institutions or many of our fellow citizens. so we are very pleased to have secretary lael brainard year. she has an enormous challenge. i would like to now turn it over to my good friend and colleague, the ranking member. >> let me just say to my colleague, senator warner, thanks for your willingness to do this. this cannot be more timely and cannot be more important. secretary brainer, i think he said it very well and very directly, i was reading through your testimony and right here you say europe's financial crisis poses the most serious risk today to the global recovery. that is what this hearing is

about. we want to hear about that and what you see on the horizon. if i might just offer a couple of thoughts about what i see, because i would like your reaction to that at some point. on one hand, i think there is consensus about the need for action, obviously. you have countries like greece and portugal that are really struggling, and trying to figure out how they better position themselves. on the other hand, you have political realities, too. how far can other leaders moved to deal with the crisis they are facing? every day is a day of concern. every week is a week of concern. as we continue to move down this pathway, if there is not some hint of resolution or some pathway, then it appears to me that what ever since of security the financial markets have in

the potential for resolution, the underpinning for that really gets hit. they began to be more and more concerned and then it gets tougher and tougher to fashion a solution. so again today, this cannot be more timely. we apologize for putting everybody off, but that is the way of the senate. my life is more dictated today by what mitch mcconnell and harry reid are doing and what my wife is doing, and that is a terrible thing to admit in an open hearing, but it is true. some of this is just unavoidable, so we appreciate your patience. with that, i am very anxious to hear from you, secretary, your thoughts on this. this is informal enough for i think we can actually engage in a dialogue about what we see and what we need to be thinking about in the weeks and months ahead. thank you.

>> with both of us being relatively new year, it is particularly painful for us as former governors, we used to make the agenda. >> as you said, this hearing is very timely. today americans are focused on securing good jobs, providing for their families, build and opportunities for their children. that is why it is so important for us to strengthen america's recovery, which still remains to vulnerable to destruction beyond our shores. europe's financial crisis poses the most serious risk today to the global recovery, while the direct exposure of our financial exposure is moderate, we have substantial trade and investment ties with europe and european stability matters greatly for consumer and investor confidence. last week at the g-20 meetings in paris and on an ongoing

basis, the europeans are discussing their methods to deliver a comprehensive plan to address the crisis by early november. the plan must have four parts. first, your needs a powerful firewall to ensure -- europe needs a powerful firewall to ensure they can borrow while they bring down debt and strengthen corporate european authorities are taking steps to ensure their banks have sufficient liquidity and a stronger capital to maintain the full confidence of depositors and creditors and a capital backstop. third, europe is working to craft a sustainable path forward for greece as it implements very tough fiscal and structural reforms. finally, european leaders need to tackle the government's challenge to get at the root causes ensure that every member support growth and stability. for our part in the u.s., pro- growth policies in the near term and meaningful deficit

reduction in the medium term provide the best insurance policy to protect the u.s. recovery from further risks from beyond our shores, to promote near-term growth and job creation, the president has put forth a series of proposals that would put veterans, teachers, and construction workers back on the job and more money in the pockets of every american worker. president obama has also proposed a framework to put our medium-term public finances on a stronger and more sustainable flooding, placing the nation rejuvenation debt to gdp ratio of a declining path by the middle of the decade. with overall demand in the advanced economies likely to remain weak, it is essential for emerging economic powers in the g-20 such as china to move more rapidly to a pro-growth strategy that is led by zero domestic consumption, by allowing their change -- their exchange rates -- to move towards a market oriented

exchange rates. we made this our top priority would china and we have seen progress with appreciation of over 10% real term bilaterally since june, with exports to china growing process fast as other markets. the exchange rate remained substantially undervalued and many to see appreciate faster. there are two other birdies i will touch on briefly in the g- 20 and the financial stability board. first, we have been working very hard to level the playing field across major and immediate -- and emerging greenwich centers. in the wake of the most globally synchronized financial crisis world has seen, we are working to implement the most globally convergent and enjoy protections world has attempted. we are trying to do so in lockstep as we implement reforms

here under dodd-frank. the g-20 endorsed a new global capital standards in november 2010. it will endorse a new international standard for resolution redeem at this summit so that large cross border firms can be resolved without taxpayer exposure to losses. it is very important that we move forward in sync with our g-20 partners on the reforms to derivatives markets that were enacted under the dodd-frank act and that are extremely important for ensuring that there is much greater transparency, that with the risks in the system, and efforts to mitigate them. finally, sustained and strong american leadership through the international financial institution is vital to achieving our role in the g-20 and at home. where were instrumental in 2009 in strengthening the imf, which helped strengthen the global economy and our continued leadership as vital in the imf to provide us with outside influence at the -- as the imf response to challenges such as the european crisis, which matters greatly to american

jobs and growth -- whiteford to working -- we look forward to working closely on this continuing challenges. >> rather than putting time on the board, have a couple of questions. we can go back and forth in a more informal way. the first question is, and here we are a year after dodd-frank, three years after the 2008 crisis. one of the things we saw in 2008, i am not sure we would have predicted that not only lehman but then the exposure with aig, because we did not have actor, real-time ability to figure out counterparty

exposure overall. this is not directly your area, but with the financial stability oversight council in place, we have seen a lot of published reports about u.s. bank exposure to greece. what level of confidence to you have at the regulator level that we have enough knowledge, not only depository exposure, but we have talked about money market exposure, counterparty exposure, obviously direct and indirect exposure. do we have enough current, real- time knowledge in terms of our financial institutions exposure to greece and some of the other

countries that are talk about -- talking about being in the path of contagion? >> some of the reforms under dodd-frank and some of the confirming reports in the international system will help over time, although these are in the process of being implemented as we speak. fsoc has spent time on the risks from europe and it does provide a forum for sharing of information among the supervisors and regulators so that they have, assessments of risk. as you said, there is the direct exposures, particularly to the most vulnerable periphery countries are relatively modest at this juncture. there is also -- >> not just depository institutions. >> direct exposure from depository institutions. in terms of the intermission have on some of the other entities in the system, there is much greater information, much more detailed information available now.

money-market funds and that immigration is publicly available and that is a critical development. i think we are going to see that moving along at a rapid pace as well. of course the reforms that are just in the early stages on derivatives will provide extremely important transparency into what was previously a very opaque set of markets between central clearing, between the information being reported on a real-time basis, trade depositories, those reforms will make a material difference in terms of our regulators and supervisors visibility into the system. >> again, i hope we recognize that we are doing as much as possible at this moment and time in terms of the counterpart exposure of some of our institutions. we had chairman bernanke in

around lunch to do a small breathing around some of these issues as well. one of the things i think europe is wrestling with, we focused on greece, and we are looking at what the europeans directly have done in terms of the european stabilization fund and potential ways to lever that up. mr. bernanke made the point that if we were to see contagion if recent defaults, it would be challenging but if this were to spread to italy -- if recent defaults. -- if greece defaults. 500 billion euros in debt over the next year to roll over. when you look at the size of the european stabilization fund, even if you layer on top of that the imf dollars, our reserves, those reserves are not

enough to take on the kind of challenges, and the far wall dimension to, it did that have enough -- the firewall you mentioned. the the have and a framework to provide that are wall? >> it is very important as you say to emphasize that in order for europe's financial stability to return, what they categorically need to do is take the risk of cascading defaults and bank runs off the table. order to do that, they need a fire wall of sufficient -- in order to do that, they need of our wall of sufficient force and size to overcome the markets. that is something we saw in our own financial crisis was critically important in helping to restore orderly functioning

to our financial markets and it is something that european leaders are talking about as they are moving forward on this comprehensive plan. they have quite substantial resources in the european financial stability fund, but they will need -- they have 440 billion euro under the structure that was just approved by the national parliaments in the euro area. that funding is going to be critically important for doing those things that we talked about earlier, which is to ensure that large sovereigns with sound policy such as spain and italy can fund at affordable rates so that they can implement those critical reforms that will allow them to grow and bring their debt down. they also need to have adequate bank capital backstops, so as they move forward with their plan to set strong capital buffers in the banking system,

that were needed, they have public capital backstops. in order to do that, the esff will have to lever up. these goals are achievable with the capital that have, but that of course is one of the key issues that will be part of their comprehensive plan. >> you did say you think within that european stabilization fund, it is adequate? >> the funding that is available in european financial stability fund can be leveraged up to adequately address the needs that we were talking about, to ensure that italy and spain and other large performing sovereigns have adequate funding, to backstop adequate funding, to backstop the banking