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. as you indicate, over a

slightly longer period time, and they are talking very clearly about this, they will need to move forward on putting in place mechanisms that give them the fiscal capacity that really matches their monetary union. that is the piece that will take little longer, but they are going to need to have much more fiscal unity and much more centralized the school governance over time. i think that is something members states are clear about. >> does that require a treaty change? it does, does it not? >> it depends on how they decide to move forward. greeting a more unified fiscal structure, some of the ideas would require creaky changes,

others might not. they have already put forward some important government reform in terms of surveillance. some of these issues have already -- we have already got an idea of where they are moving. on a broader sense of the fiscal government is likely to be in several years, they are still working on that. they are committed to it from everything we hear. >> i only raise that because changing the treaty is akin to amending our constitution. this is no easy task. complicated problem, i guess is what this sounds like. >> first of all, i would agree with the complexity of this. i think what we have got, to carry on your analogy, is a

balanced budget state with aaa bond ratings. i get what you are saying. the fact those that nebraska government was well-run but the basque -- nebraska banks finance california's government. you have that problem. we are looking at in germany, one way or the other, the germans are going to have some level of responsibility, whether it to their people or to the bank's exposure. one of the things we had a debate about dodd-frank, it is imperfect but the reaction i've heard from our european colleagues was thank goodness that america went first. again, echoing senator johanns said, because we have advanced capital standards, we have had

more transparent stress test, for example. the fact that we are intertwined, whether we like it or not. if we did not try to have these coordinated standards, slipping to a lowest common denominator is not going to help anyone. i share senator johanns's concern. i think he may see it in the u.k., they may be taking an even more structured approach than what we took. when you hear some of the leaders in france and germany about things that go beyond the dodd-frank in terms of financial constraints, while we may disagree about dodd-frank, we would both agree that we need to have not this arbitrage and

consistently moving forward. we in the date you -- we and the eu will mesh, as we get to this g-20 from mark had do we make sure, that even if all the west moves forward, there is not this outlier that does become the equivalent of a tax haven but with a low standard financial sector that does not agree to these things? what are we going to do 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. what we have seen in the g-20 and the fsb, is that we have succeeded in having all of the members of the g-20 and it fsb sign up for tougher standards

on capitol liquidity and the leverage at banks, sign up for resolution, higher provincial standards, greater intensity of supervision. sign up for a host of profound the changes that will make out derivatives market less opaque, more transparent, less risky. in terms of getting emerging financial sectors to come on board, that is why we thought it was so important to be working through the financial stability board and the 20 where the major financial centers and the american financial centers sit together. so we have a variety of bodies. the fsb, where we have emerging markets represented and taking on the same obligations, the same principles, commitments,

basil 3 standards, uniform across all members. we are engaged with singapore on our derivatives reforms. we have received repeated assurances from the of financial supervisory authorities that they will move as europe and the u.s. come together on their derivative regime. the concerns that the rates 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 has far fewer major areas at present regulatory arbitrage and a

disadvantage to our financial institutions. >> we will want to monitor that. we need to establish what does metrics ought to be. i know you have to leave in a couple of minutes. i want to ask one more question. i think we saw, you may not have seen the news. while there was some anticipation the eu mike resolve these issues, they are not talking about a second summit. -- they are now talking about a second summit. they may not get there. how do we make sure that this -- 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 drag itself out? at some point, sta weunch some of that with -- we staucnh some

of that with dramatic actions. what is your best estimate that we will see definitive action within these next 30 day periods -- within this next 30 days. period. is this going to take months and months to work through? >> the european leaders are very intensively engaged on this. it is a good sign that they are making intensively on this. president obama has been on the phone with european leaders. he has spent a lot of time asking them about the plan as they are developing it. he is very, very committed to ensuring that the u.s. economic recovery is as robust and insulated as it can be from shocks emanating from abroad,

recognizing that europe has headwinds from europe have slowed our recovery. 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 greek is sustainable -- greece is sustainable. again, i think they have that capacity. they have stated that they have the will. they have the resources. 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. the emerging markets that are part of the key 20 also see european financial stability as central to their own economic growth. this is the most important

priority g-20 for the meeting. -- a for the g-20 meeting. they are working hard to come with their plan and have a plan that succeeds on the four dimensions they are talking about. >> i understand your answer and i appreciate your comment and your appearing before me. i hope the but recognizing that we are inexorably tied, that there will not be continuing friction that seems to be the news of today. the european union has already decided for a second summit as opposed to putting up the first two steps of the plan. we hope that the g-20 will continue to show that these large organizations can be successful.

dreading this out is not in europe's interest or the united states is this. senator johanns did not have any other questions. we appreciate your time. we will move on to the second panel. thank you. >> 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 -- quoted 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.

why don't think the emerging 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. reecet see a way to make a viable member of the european currency union. neither do its citizens. the parallels with the argentinian debt crisis are there. they are not prepared to undertake the adjustments that are required of them.

i think it is not wise, i would disagree with my fellow panelists. to put more resources into sharing of what is not a viable system. why would it be a viable system? to say, to impose a central bank on an area as diverse as europe -- the nebraska allegory breaks down. it is not a workable system. the sooner we recognize that the better. thank you. >> two out of three, this panel is not going to let for some question. -- lack for some questions. >> i will try to give you a basis for a few more. i will like to make a few points that will complement what the earlier panel discussed. i think the most important role for the g-20 summit is to inject the impetus for world

economic growth. we are not going to solve the european prices whatever financial engineering is done unless they can get more growth going. the strong countries in europe, led by germany, holland, scandinavia, are consolidating. they are tightening budget. under no pressure from the bond market. they should be at least stopping their tightening of policy rather than expanding. moreover, the european central bank should cut interest rates substantially. they are the only major central bank which is considerably away. unless your tickets graves, none of the financing is going to work. -- unless europe gets growth, none of the financing is going to work. unless the u.s. can get together and provide some new stimulus to the u.s. economy, the world is going to continue to swallow as well. the good news is that half the world economy is still booming.

the emerging markets and developing countries that make up half the world economy are expanding by an average of more than 6%. they have policies based to do better. they have low budget deficits and debt ratios. they have high interest rates. we should ask the emerging markets, the leaders of global growth, to do more. they can do it, they can certainly expand further, they have been worried about inflation. with the countries slowing down and commodity prices leveling off, that is no longer a concern. they have been the beneficiary of global growth strategies led by us and europe for 30 years. it is time for them to take the lead that their capacity provide. i would say, this summit needs to replicate, at least to a degree, what the london g. 20 summit did in april 2009,

namely, the coordinated action to get the world of an economic crisis. we have to do it again, this time, led by the american market with europe and the u.s. chiming in as well -- led by the emerging market with europe and the west chiming in as well. it has to be done by expanding domestic demand. lifting trade surpluses decline so as to impart growth in the world. that means letting their currencies go up much more and much more rapidly. on the european crisis, let me make four quick points. they do need to lever the european financial stability facility up to something like two trillion a year rose. i disagree with john makin. it is not a failed experiment.

it does have to complete the other half. you have to complete the fiscal union, not abolish the monetary union. i am going to disagree with a point made by senator johanns. nebraska and other surplus u.s. states do bail out the opposite u.s. states. not by direct loans, but through the federal budget. when you transfer your surplus to washington and a transfer it to deficit mississippi, there is some visit -- degree of bela. when you import citizens from states that have high unemployment you bail out those losing state. the europeans do not have those types of mobility. that is why they need fiscal unions. i do agree with a key point, if the europeans do not get their act gather, plan b would have to

center on the international monetary fund. if europeans cannot put together a safety net, only the imf can provide it. that money would have to be borrowed from the big surplus emerging markets, china, korea, brazil, etc. they can provide the money. they should do so. they need to pay back. what should the u.s. contribute to all this? our government needs to get it at the other to get growth in track. we need to move to do -- to get our act together to get growth in track. we have to take on a new commitment. a commitment to limit our trade deficit. -- eliminate our trade deficit. that is a way to greet jobs over a five-year period. we have been facilitating the

export-led growth of these emerging markets. they have piled up huge reserves. partly by cheating and manipulating exchange rates. we are justified, it is not begger thy neighbor, to eliminate our deficit. we are the largest debtor country. that means to limit the u.s. trade deficit. by the way, it would greet 3 million u.s. jobs. if we are getting people back to implement, we have to add that. i would say a u.s. commitment to implement agreed g-20 strategies, we have to do something serious about it. like getting growth going in domestic demand here. >> you did not disappoint. um.

let's -- there's so many different places to go with this. i would like to ask doctor makin to respond to one part of the provocative art that was just said. what do you think -- is there any real mess -- realness that through the key 20 mechanism we could see -- g-20 mechanism we could see a challenge with the emerging nations would take on these policies? it seems to me that there has been for the most part a lack of coordination among the more

industrialized nations on issues like currency. when we tried to deal with china on a one off, it is not the most effective tool. let's start with dr. bergsten's first perscription. what do you think chances are that could happen? >> i will focus on europe. if i am china or india, why would i want to finance this european experiment that has been struggling since 2009? why would i want to invest in a system that is not going to work? what have a fiscal unions -- we are not going to get fiscal unions in europe. we have a monetary union that is

not viable. are the chinese going to invest 500 billion euros in trying to turn greece into germany? it is not going to happen. while the chinese certainly in view of their aggressive political ambitions will want to appear to be stepping in here where the u.s. is not able to do so, i would be surprised if they would be bling to commit many resources. >> can i ask one thing here? >> it would be nice. >> i understand the point, the direct assistance. i want to come back to your question. the more macro-agreement that there could be coordinated growth policies across emerging nations, but in their currencies depreciate. is that realistic? >> what have we been doing since 2008?

in 2008, after the demint crisis -- lehman crisis we engineered a large stimulus. china engineered the largest stimulus in the world. it was with 14% of gdp. they get their economy going. they have a lot of resources and a lot of things that need 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 that their contribution was so quick that they were pushing up commodity prices and energy prices. i am not as sanguine as fred is. if i were the chinese i would say, we did a lot, we did a lot, it was our own interest. we wanted to stimulate our own economy. the effect was positive.

what is realistic now is to see if the chinese are prepared to back off a little bit on and bring down the growth rate. they are seeing higher domestic inflation. some estimates put it as high as 10%. they are in a conflict situation. this is a tough situation. >> is your expectation for china for other emerging nations as well? >> china is so big, the south koreans are in very good physical shape. they are not in a position to do what the chinese would do. i would not bet on a lot of help if i were a realist. i would not bet on a lot of help from the yoruba -- emerging- markets. >> yes, first of all, i agree

with john makin that the emerging market played an instrumental role in 2009, in particular in supporting global economic activity at a difficult moment and with china plain a disproportionate role. i think we need to recognize that was a very particular situation. as the emerging markets accelerated extremely rapidly beginning in the second, and third quarter of 2009, within about a year, a year and a half or running into a supply constraint. they were -- inflation was building up. there was a concern in asset price bubbles.

so, they were reaching their natural limit. now, again, fred makes a good point that now you are aware global economic activity deteriorates in another significant way, emerging- market can provide a cushion. they do have room. it will take a while. it is not evident right now. it might take six months, nine months for the inflationary pressures that have built up over the last couple of years to abate in the emerging markets, then they can excel it their growth again. i think it is safe -- accelerate their growth again. i think it is safe to say their contribution will be modest. as i put into my written statement, we should always

remember that american gdp, to take one example, i could take other examples, is composed of domestic demand and exports. the problem is, domestic demand is about 34 times bigger than exports. even in the best of circumstances, simple and arithmetic tells you that the real key to american wrote, particular american broke, -- growth, particular american growth, is the internal dynamics of the united states. trade balance will help a little bit. i also would stress the fact that there is berkley no conceivable increase in demand from china that would have a

significant impact on american economic activity. it is the result of the fact that china 1/3 the size of china. the united states is a closed economy. it is about domestic activity. it is about domestic reform. it is about domestic structural reform. it is about domestic fiscal reform. that is what will drive american growth in the long term. finally, if i may, i also want to disagree with john makin about not helping your. not because i am a french citizen. should your not be able to get its act together, i fear it might not, it could not to a sufficient degree.

that could lead to a collapse of the eurozone. this failed experiment as john would describe it. if it were to lead to a collapse, then i assure you, we would have a crisis of global proportions. debt would be for a much longer the rush -- duration. what could i come back on that? let's just three points quickly. -- >> could i come back on that? just three points quickly. europeans are not going to let the euro collapse. that has been the role in life for 50 years. they are not going to let it collapse. the history of european integration is that when they face crises, out of that and all the uncertainty comes progress

towards greater union. i think we better understand that and support the move towards this goal union because that is the positive outcome for us as well as them over time. on the emerging market growth, i agree with my colleague. china played a decisive role in the world's recovery from the crisis in 2008, 2009. i said that in my testimony. i draw the opposite inference. they did it last time, they should do it this time. the supply constraints have declined. growth prospects have declined. they have huge for the infrastructure needs and demands. they have those programs out there. they have financing to do that. the issue is when. from their standpoint and the world's, now is the time. some of the other 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 occurring where other emerging markets are already moving in the direction i suggest. i believe china, which is the biggest, others as well can do it. if the g-20 can push that process, i will reiterate what i said, these emerging markets taken together are half the world economy. they are growing three times as fast as the rich countries. their share is rising a couple percentage points each year. a decade from now, it will be 2/3 of the world's economy. they can be drivers. i want to take up john's. point. the external side is not important because we are a closed economy. we are looking at 2% growth, maybe. it is feasible for us to strengthen our external position by 1% of gdp per year

for the next 5 years. that would take growth up and greet a big amount of jobs. -- create a big amount of jobs. we are a closed economy. at the margin, we can do a very large benefit for our economy by throwing our external set for. -- growing our external sector. exports to china alone are not going to do that. if we can get the pick up and world growth -- in world growth plus a little more in europe there is no reason why we can expand our international contributions to gdp growth. we are missing something in not emphasizing that as part of our current jobs strategy.

>> as i look at these issues, debt of the european union, countries in the united states, slow economic growth, a whole host of things going on, i wonder what the potential is that, that inflation rears its head again. how does that fit into the equation or does it fit? maybe that is an odd question when we worry more about deflation in the last three years. we have low interest rates. it just occurred to me that the pressures out there are enormous. you have a situation where countries will be struggling to

finance that that. what is the potential that inflation becomes a more serious problem as we look two years and five years down the road? i would like everybody thought on that. >> can i? >> i am going to work my way across the panel. >> right now, inflationary pressures are quite muted. you are saying some pickup in headline inflation in europe for example. a lot of that is a reflection -- a delayed a reflection of commodity prices. there is so much on capacity. so much risk aversion, in other words, tendencies by people to

amass cash. in the developing countries u.s. seen a very significant acceleration of inflation. i think if you look some years forward, a lot depends on what you assume it is the capacity of central banks as the economy recovers to which rocked 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 the risk that i see, i know they know how

to do that. they have the estimate to withdraw the liquidity by selling bonds and changing reserve requirements, etc., etc., but the big question is will they be able to do it in a way that you avoid a very rapid rise in interest rates. this has happened many times in the past. against a background of a lot of over extended debt. it may be triggered over a period of years by the abundance of liquidity. >> i am not concerned about inflation at this point. i would add, however, that if $2 trillion of additional resources were made available to try to shore up our fixed exchange-rate regime in europe, the possibility of inflationary risk would rise.

in the great depression in the united states, and usually after financial crisis, there is a greater risk of deflationary than inflation. secondly, the requisite way out of a great depression initiated in 1933 by the u.s. devaluation of the dollar against gold, a sharp exchange rate adjustment is exchange rate adjustment. our friends in europe would like to maintain a single currency. i understand that. i understand the firmness of their commitment to that, but i think the risk of following that path do include some inflationary potential. >> i agree with my colleague. but, again, you ought to make the distinctions. you made one, which is timing. over a two-year horizon, i would not worry about inflation.

over a five-year horizon, i would. if we do not get our act together here in terms of fiscal policy in a credible way. the other distinction is between groups of countries. i do not see any inflation rest over the near-term for the u.s., europe, or japan. the developing countries, emerging markets have had that risk. i do think they are now recognizing the need to give it their own policies. i mentioned brazil and indonesia already. nevertheless, they are closer to capacity margins. supply constraints are potentially greater. i would not expect them to do nearly as much as china did in 2008 and 2009, but i think they can change the sign of the policy. but if they do it, the germans do it, we do it, that could have a huge affect.

>> i would just ask one more question. it is one of the complicated things to try to figure out. it is no secret if you look at the polling numbers in germany and france, leadership there is really struggling. people are looking at what is being asked and required. >> lower than the united states congress? >> i am not sure i could add any thoughts on that. it is a difficult situation. the political issues 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 government change, campaigns that have been run on an anti-

this or anti-that approach, and all of a sudden you're of a whole separate set up -- all of a sudden you have the whole different set of circumstances. try to factor that in and give me your best thoughts. >> certainly that is a theoretical risk. you get populist politics in europe that will go in that direction. but there is virtually no evidence to support it. the germans bitch and moan, pardon my german, but they vote in favor of the pro-european policy, the pro-european party. the fundamental fact is he germany is a huge beneficiary of the euro in the european union. we know the underlying politics. back to the wars and the millennium of concentration in europe. the germans do not forget that,

but 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 helmut schmidt and other german leaders i used to work with when i was in german -- when i was in government. every time the currency would go up, they complain about the weak dollar. they have overcome that. germany is a massive beneficiary from the economics of the eurozone. the business community and the labor unions know it. the one party who is opposed to european bailout, the democrats, got thrown out of the government last year in berlin. you are getting 80%-9% in the popular vote for the party in favor of continuing the policy. the opposition in germany is

even stronger in favor of it than angela merkel's party. it is a risk we need to keep our eyes on. it could happen, but i would say watch what the germans do, not what they say. >> i always know when i am getting to fred. [laughter] >> it shows what good friends we are. >> looking at germany, and germany has been the beneficiary of the monetary union, but now that the financial complications of the currency area have begun to jeopardize the stability of the financial system and you have at the failure of a major financial institution two weeks ago in belgium, german economic activity is slowing rapidly partly because of things are slowing in china, but partly because european citizens pickup

the paper every day advocates the headlines, i increased and as something is not working. i think if we listen to german leadership carefully over the past several weeks, i am sure they are contemplating their options. the german finance minister said a default may be necessary. that is tantamount to suggesting that greece leave the currency union. at the public was never permitted to vote on germany and joining the currency union. the german elites are powerful. they manage the system very well up to a point. in the we may be approaching that point. we may be seeing some of the pressure, some of the political pressure, which is obviously in greece, but the political pressure is rising in germany and could continue to rise. they are being too -- they are being asked to pay bills that

have babies they believe it -- that have a destabilizing factor. >> i tend to agree with fred. the european project goes very deep in germany. a very, very deep. of all the parties, these least likely to desert the aero is a germany, not just because they are the beneficiaries. right now i could make a argument that germany is actually benefiting in some way from the crisis because of low interest rates and because of the low euro. more fundamentally, if germany,

which is actually benefiting and not under pressure at the moment, it is tough to say, no, i am set up. i am leaving. that really would be the end of the european project. it is very different greece says i cannot pay any more. finally, i am not ready to predict how a things will develop in the european periphery. let me just point to the fact that domestic demand, consumption + domestic, plus the government's spending in ireland is down 20% as compared to 2007. greece is already down 15%. what we are witnessing in the periphery countries is the equivalent of a great depression.

it "is not called a depression because it happens in small countries. for all in it -- for all intensive purposes, it is a great depression. in spain, and um -- unemployment is up 25%. it is remarkable the degree to which this structure as come together and the enormous economic pressures, but if we go -- i believe it is a structural crisis more than a fiscal crisis that is affecting the european periphery -- if we are talking another five years of adjustment, it is very difficult to say whether the polyptych can stay together in these countries. that is one of the arguments why the combination of the commitment to the european project and the incredible stress under which the system is

being put is one of the arguments, i think, to say that europe should be helped in a situation like this. >> two quick senses -- two quick sentences. the germans paid the bills are right, but that is a gross misstatement. net, they are still huge winners in the eurozone. and can keep their very big winnings growing at the table. 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. >> we are not in a good situation here, right? getting out of it will be difficult. it seems to me that addressing a reality, which is that gris cannot coexist in a currency union with a journey without massive transfers in their direction and without affecting the rest of the system was doing -- is. to be a positive thing.

i do not see how it is worse going we can to we can and saying we were going to sell it we can, but we will do it next. the 440 billion euros was agreed to in july and was largely agreed to of the past several weeks. it is not enough. how much is enough? getting a resolution to this problem at containing the fallout is not going to shocked many people in the financial markets if>> getting out of this is good. -- if greece defaults or les the union. >> this is been a fascinating panel and provocative. i hear at at least one major consensus. -- one major consensus point.

whether this plea to a currency breakup are continuing the european alignment, but the current resources available, i am hearing everybody could concur on that. >> if we are going to insist on shoring up the currency. >> agreed. give me your best projection in terms of what is going to happen out of the eu activities this coming weekend and what should we realistically expect coming out of cannes in a few weeks? >> i will just venture to say what comes out of the european union this weekend is further steps toward the altar of objectives we are all talking

about here. they cannot do it all in one leap. too many players, too many different actors, but they will take some steps forward on a path that will eventually lead to the outcome, at least i was talking about -- namely, a highly leveraged e.f.s.f. further institutional reform that eventually will lead to fiscal union. but in the meanwhile, there will be so much cacophony and so much uncertainty generated by trailing the market pressures that the crisis atmosphere will continue. but i think they will move forward. at the g-20, the will be more pressure on the europeans to complete that progress. i think there may be some steps along the growth path, not as much as i would like to see, but there may be some steps. the finance ministers last

weekend actually did -- a fair degree of consensus on the direction needed, including a stronger europe, certainly in the u.s., and encouraging the emerging markets. the imf stuff is not as clear. that would depend on how the europeans lead. if they leave a lot, i would not be surprised to see some movement towards what i would call plan at b. an expansion effort that would enable them to plug the gap, which typing should be pursued any way. who knows when and where the imf will be needed? a european failure to act on their own will galvanize that. >> this weekend, i we of already heard what we will hear. we will have another meeting next weekend or the middle of next week. the alternatives are so

unattractive, it is very debacle to step up to the plate. what the french will do is put out a number over $1 trillion. somehow it will be a shock and all number. nothing much will get done. if they do come up with more money and try to shore up the system, six months from now we will be back with more problems and looking for more resources. that is why a ticket is a bad idea. >> g-20, you can read the last date of the came out in april. they said the global recovery was broadening. they will have to say the global recovery is narrowing and we have problems and we hope everybody gets everything straightened out. what else can they do? >> my projection is, first of all, the crisis will continue to fester for at least another year or two.

the second is, with regard to the next two months over to the g-20, i think you will see bank recapitalization decisions. you will see a structure for forgiveness of greek debt that will be fleshed out. i think you will see a larger and better articulated e.f.s.f. i believe with all that, you will also see some engagement on the part of the international monetary fund. i believe you will see that. i do not know exactly how that money will be found and how much it wouldn't -- how much it will involve the united states, but

it is a point to be part of the game going forward. with all that, but the crisis will continue to occasionally wear its ugly head. -- rear its ugly head over the course of the next several years. this is a crisis of economic structure. it is a crisis of growth. it is not just a fiscal crisis. >> thank you, very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> bread and obama hosted norway's prime minister at the white house third day. their comments to reporters are 10 minutes.

-- president obama hosted norway's prime minister at the white house thursday. their comments to reporters are 10 minutes. [no audio]

in our discussions, we covered a wide range of issues. we discussed our partnership in afghanistan where norway has been a consistent partner. we discussed how we are going to move the transition forward so the afghans can take full responsibility for their security by to the other 14 as we agreed to in lisbon.

we discussed the world of economy. we shared our intentions to work closely with our european partners, to stabilize the eurozone area, but also make sure we are creating a system of free trade, coordinated commercial practices, in which our focus on growing the economy, issues like energy security, all involve close coordination between our countries. we appreciate the partnership there. we discussed the heartbreaking situation that occurred in norway in july. as i said before, everybody in the united states was horrified by the events there. i have complemented the prime

minister and the people of norway for the grace with which they handled this situation. it underscores the importance of all of us collaborating in preventing terrorism of all kinds. the united states and norway have established a very effective intelligence cooperation system. that is continually being enhanced and improved. we both agree that we are very pleased with the progress we have made in making sure that we are working closely together to prevent the kind of senseless violence we saw in norway so recently and we a scene around the world over the last several years. we also discussed the range of international issues of great importance. we both share the belief that we need a two-state solution in the middle east and want to work barry closely with both the israelis and palestinians to arrive at a celebrant. we discussed the situation in

south sudan and the conflict between sudan and south sudan. we have been important partners in moving towards a peaceful resolution to the conflicts there. we discussed how we could work together on the united nations or around issues like climate change. i think the state of cooperation and respect between the united states and norway has never been higher. i personally have a great affinity for the people of norway and am grateful for the friendship and partnership they have provided. i hope this is not the last visit, but one of many we will have together. i hope i have a chance to visit norway sometime soon.

welcome, mr. president. >> thank you. thank you so much, mr. president, for your kind words. i also thank you so much for the hospitality you have shown me and my delegation. we are very much impressed about your political agenda and by your global leadership you have shown and we appreciate very much in norway. we are also very grateful for the sympathy and condolences the people of america conveyed to the people of norway after the actions in july. it was great comfort for those who lost their loved ones. sometimes the importance of cooperation in fighting all kinds of terrorism, we will continue to do so.

we will see how we can expand our progression in fighting terrorism. we have worked together on many different issues. we cooperate on many different areas. one of them at is -- we have accomplished our aim for the military operations in libya. we protected civilians. we were able to stop gaddafi from killing his own people. i think it shows we are able to implement decisions by the un and by nato. that is important in itself. we appreciate the cooperation we have in afghanistan. we are looking forward to focusing even more on the transition. we will stand together with our allies and lead together with our allies. i appreciate also very much that

we have the potential to focus on the high north. it is an area where we are seeing new possibilities and new challenges, but also new dangers. the ice is melting. in the high north, we see the consequences of global warming. at the same time, that opens up new possibilities for energy developments, but also parcae routes. it increases the needs. i appreciate that we can continue our cooperation on climate change because we worked together on opening deforestation. that is a way we can achieve this. we will work together on deforestation. i appreciate very much that we work together on child

mortality and maternal health. that is an area where we have achieved together. i appreciate the chance to visit you and you are always welcome in norway. >> thank you. >> thank you very much, everybody. it is good to see you. there is no doubt that we did exactly what we were going to do in libya. in think it underscores the capacity of us to work together as an international community. the united states, obviously, has a unique capacities. we are proud of the leadership we showed in the process. increasingly, where ever we have the possibility of working with outstanding partners like norway, in think we are going to

be even more effective. the united states will always preserve its right and duty to protect ourselves, our allies, and our interests. i think what this shows is that on a whole range of international issues, there is enormous capacity and we are able to leverage greater resources more effectiveness at lower costs will we are able to work together. so i am very proud of the work we did all this operation. most importantly, i am proud of what the libyan people achieved. they have a lot of challenges ahead of them. we have now given them the opportunity to determine their own destiny. that is something we have seen across north africa and the arab world.

there is nothing unique in a sparring to freedom -- in aspiring to freedom, human rights, and democracy. it is something all people want to enjoy. i am very pleased the libyan people will have the opportunity to do so. all right? thank you 3 much. >> in a few moments, janet napolitano testifies. on washington journal tomorrow morning, we will speak with the republican representative frank wolf of virginia about the role of the u.s. in libya after the death of muammar gaddafi. he will also discuss his new book about human rights. heather smith, president of rock the vote, will take questions about the youth vote in the next election.

then will look at the economic indicators regularly provided by the census bureau. our guest will be william bostic and kenneth simonson. washington journal is live on c- span every day at 7:00 a.m. eastern. >> haleh secretary -- homeland security secretary, janet napolitano, testified before congress about her coat department's operations. senators also asked about psa airport screening procedures. this is two hours.

>> good morning, everybody. thank you for being here. it has been another good week for our federal law-enforcement efforts. last tuesday we learned of a foiled assassination attempt. based on a was in the press, we know that would have been a disaster the weight they wanted to carry that out. this case involves the department of justice, the dea in a coordinated effort to stop a terrorism act on u.s. soil. i want to praise the agencies involved in the investigation. they did not engage in armchair quarterbacking about whether the suspect should be sent to guantanamo bay. a terrorist attempt to blow up an airplane on christmas day, some politicians used the occasion to criticize the attorney general after the suspect was arrested and made all kinds of claims, none of which came true. people are asking why he was given miranda rights.

if someone is going to confess, they will confess given the miranda rights or not. it is more difficult to make them stop talking. we got a lot of useful intelligence from the suspect. people complain about him going to federal court. we showed that our courts work, they are open. he pled guilty and faces a potential life sentence. prosecution can feel happy that they followed the way they did and not listen to the monday quarterbacks. he now faces a potential life sentence. that means more than 400 terrorism cases prosecuted by the department of justice since september 11, 2001. the president and the national security team have done a

tremendous job of taking the fight to our enemies. earlier this year the president ordered a successful strike against osama bin laden. he stayed focused on destroying al qaeda from his first day in office. i know teams were put together after the president came into office. i commend him and the cia and others on that. a terrorist operative was located in yemen. one case was horrible and tragic, the case at fort hood. do we remain vigilant? of course. in the aftermath of 9/11, the country has spent trillions of dollars trying to shore up our

security. there were some wasteful and ineffective measures in the early years. the bush-cheney administration shifted our focus from bin laden to saddam hussein in iraq. we continue to take money from programs in the united states including education and medical research, and we dump it into iraq. we are ready for any discussion about a new chapter in our efforts. secretary napolitano, we first met back in the days when you were a prosecutor and ag. i have a great deal of admiration for you and the way

you run your office and i think you for joining us today. i look forward to hearing from you today. our priorities should be moving forward. i hope that your department can strengthen its efforts to provide knowledge -- others have been devastated by these recent natural disasters. this is much needed. i do appreciate all the department's efforts in rebuilding after the devastating floods we experienced this spring and summer. i was born in vermont and i've never seen anything so disastrous in my life. it reminds me of the stories my parents and grandparents were talking about 100 years ago. this is difficult for americans as winter approaches. we should not complicate the situation with the certainty that comes from ideologically -- the result in inaction and

funding for disaster relief. the american people wait for disaster assistance should not be victimized again. americans should help other americans as we have for generations. as somebody said to me, we seem to have an unlimited amount of money to build roads and houses and bridges in iraq and afghanistan. americans will protect them and use them. we bear the full brunt of hurricane irene. businesses were destroyed. i want to compliment the minister for fema and the staff. my wife and i have visited some of the fema offices and we thank the people that were doing that.

from border security and other areas, we have a progress report. i think it is time to renew a discussion on comprehensive immigration reform. the discussion went off track after a bill was passed in 2006. i look forward to your help there. change is never quick or simple. the kind of change depends on determination. i realize it is a different world than when my grandparents emigrated from italy to the united states to vermont, but we have to realize that we're a nation of immigrants and we have to have a better immigration policy. i look forward to the day when barricades began to fall. hearts and minds will change. new doors of opportunities will

spring open. immigrants want only to live the american dream. so with that, senator grassley, i yield to you. >> it is often an overlooked function for members. it is not always glamorous. it is hard work and it can be frustrating because of bureaucratic stonewalling. the president-elect was talking about the most transparent government ever. unfortunate, this administration has been far from transparent. today's hearing will give us an opportunity to ask questions. i am frustrated by the less than forthcoming and just we have received from me administration. we need a little bit more straight talk. i feel our concerns are often

dismissed. last week, 19 senators received a response to a letter that we sent to the president about immigration policies. the response did not come from the secretary. it came from a bureaucrat in the office of legislative bureaucratic affairs. it is as if our concerns are trivial or insignificant. we wrote to the president. a memo encouraged immigration and customs enforcement officers to exercise prosecuting discretion. officers were asked to consider the aliens' lanes of presence in the united states, particularly if the alien came as a young child, their age, service in the military, and pursued an education in the

united states. on august 80, the secretary -- on august 18, the secretary announced an initiative to establish a working group to sort through a number of cases currently pending before the federal courts to determine if they can be closed. combined these directors are alarming, especially to those of us who believe in the rule of law. we have many unanswered questions. we want answers and we want transparency and accountability. we are a part of the process. the american people are shareholders. americans also want the truth. i am frustrated about the administration's tactics in clan that had deported more undocumented people than ever before. the secretary continues to use

statistics that are inflated. that office has been around awhile, since 1883. so i would like to know why the secretary jury picks what -- cherry picks what numbers she wants to use or refuses to use the statistics provided by the office of immigration reform. i will point out to all of you to look at the poster. the department has a credibility problem. there was a headline that says -- "unusual methods help ice break deportation methods." there were padding the numbers. the secretary gave a speech on

october 5, saying in 2010, ice removed over 200,000 criminals. there was a difference of 27,000. we do not know what to believe. the department is using different methodology from one year to the next. homeland security personnel are encouraging people to do what they can't to increase the removal numbers. there is funny business going on and the department's credibility is at stake. but don't just take it from this senator. even the president and knowledge that the numbers are dubious. president obama said that the statistics are a level deceptive.

-- a little deceptive. i would like to hear from the secretary about what they continued to use these deceptive statistics and when the continue to use ice figures. i like assurances that this administration is not using creative ways to keep as many undocumented people in this country. we have talked about deferred action and parole. one of the most egregious options in that memo was a proposal to lessen the extreme hardship standard. "to increase the number of individuals applying for waivers and improve their chances of deceiving them. -- receiving them. they could issue regulations specifying a lower the evidentiary standard for

extreme hardship. if the standard is lessened, there will be able to bypass the bars that are clearly laid out." i expect to hear from the secretary anything is being laid out. i will wonder that such an warn her that such an action will be a blatant attempt to circumvent the laws that were put in place. i am concerned by the administration's position when it comes to suing states when it comes to immigration laws. news reports claims that there are challenges in utah, georgia, and south carolina. what about cities and states that ignore federal law? will the administration turn a blind eye to them? i've asked secretary napolitano about the involvement of custom

officers been detailed to phoenix to the operation. -- fast and furious. i ask the secretary about whether she had any communication about fast and furious with her former chief of staff who was the u.s. attorney in arizona responsible -- i did not give any response back. mr. burke is to be commanded to be the only person to resign and take responsibility for the failed operation. i do not feel he should be obligated to be the only fall guy. others should step up to take responsibility. thank you. >> thank you. secretary napolitano, the free to start. i thank the senators. others will be joining us.

there are a number of other hearings going on at the same time, as you know from your own experience. most of us served on half a dozen different committees. someone not be here. please go ahead. >> thank you, mr. chairman, for the opportunity to testify today. i would like to update you on the progress we're making, particularly with respect to our efforts to prevent terrorism and to enhance security and to secure and manage our borders and to enforce our immigration laws. we have continued to grow and mature as the department by strengthening our existing capabilities, building new ones, enhancing our partnerships across all levels of government and with the private sector, and streamline our operations and increasing

efficiency. we know the terrorist threat facing our country has evolved significantly over the last 10 years, and continues to evolve. we thought face a threat environment where violent extremism and terrorism are not defined or contained by international borders. we must address threats that are homegrown as well as those that originate abroad. dhs has worked to build a new architecture to better defend against this evolving terrorist threat. we're working with law enforcement and community-based organizations to counter violent extremism at its source, using many of the same strategies that have proven successful in combating violence in american communities. we are focused on getting resources and information out of washington, d.c., and into the hands of state and local

law enforcement, to provide them with the tools they need to combat threats. we continue to participate in joint task forces and work with our partners at the department of justice on the nationwide suspicious activity reporting initiative. we encourage the public to play a role -- if you see something, say something. we replaced the color-coded alert system with a new national terrorism advisory system to provide timely information about credible terrorist threats and recommended security measures. these steps provide a strong foundation that dhs and our partners can use to protect communities, engage and partner with the international committee, and protect the privacy rights and civil liberties of all americans.

this administration has dedicated unprecedented resources to securing our borders. we have made the enforcement of our immigration law smarter and more effective, focusing our resources on removing those individuals who fit our highest priorities. these include criminal aliens as well as repeat immigration law violators, recent border crossings, an immigration fugitives. the efforts are achieving unprecedented results. overall, ice remove nearly 397,000 individuals. 90% of those fell within one of our priority categories. 55% or more than 216,000 of the people removed were convicted criminal aliens. 89% increase in the removal of criminals over fiscal year 2008.

this includes more than 87,000 individuals convicted of homicide, sexual offenses, or driving under the influence. more than 2/3 in fiscal year 2011 fell into recent border crossing and fugitives. as part of the effort to continue to focus the immigration systems resources on high prairie cases, ice has implemented policies to insure that those enforcing immigration laws make appropriate use of the discretion they already have in deciding the types of individuals prioritize for removal from the country. this policy will help immigration judges and the federal courts to focus on adjudicating a high priority

removal cases more swiftly and in greater numbers, enhancing ice's ability to remove convicted criminals. this will promote border security. it will allow for the expansion of ice operations along the southwest border. we have stepped up our actions against employers who hire illegal labor and take action to identify visa overstays and combat human trafficking. smart enforcement is just one part of the overall puzzle. this administration is committed to making sure we have a southern border that is safe, secure, and open for business. we are two years into our initiative. the additional manpower and resources we have added with

bipartisan support are working. illegal immigration attempts have decreased over the past two years and are less than 1/3 of what they were at their peak. we have matched decreases in apprehension with increases in seizures of cash, drugs, and weapons. violent crime has remained flat or falling in the past decade. cbp is developing an index that will represent what is happening at the border and allow us to better measure our progress there. i look forward to updating this committee. uscis continues to provide immigration benefits and services to those eligible in a timely manner by streamlining

and modernizing its operations. we know war is required to -- more is required to address our immigration challenges. president obama is firm in its commitment to advancing immigration reform, and i look forward to working with this committee and with the congress to achieve this goal, and to continue to set benchmarks for our success in the future. i like to thank this committee for its support of our mission to keep the united states safe. i want to thank the men and women who are working day and night to protect and defend our country, often at great personal risk. i'm happy to take your questions, mr. chairman. >> thank you, madame secretary. all prosecutors have to make at least some decisions based upon

resources. the state's attorney in vermont or an attorney general. we have to be realistic about the situation we face. it will be impossible to deport all the immigrants in the united states who are undocumented. nobody is asking the government to redirect billions of dollars to try to remove 10 million individuals, even if you could. that is not an amnesty policy. not all people are going to be given the opportunity to work. dhs is still deporting record number of immigrants each year. over a million in this administration since taking office. so, let me ask you this.

how does is discretion policy strengthen law-enforcement and border security? is it a good use of our federal resources?

. [captions copyright national cable satellite corp. 2011]

>> thank you for your patience. >> i'm sorry. i wasn't commenting on senator

alexander. i wanted to offer an amendment. maybe i'm out of order. >> a quick comment in support of the amendment. i think the highly qualified teacher program -- >> i think we should be on record as to whether we agree with central aspects of regulation or state control. i think there is too much federal regulation. it is important to be on record. i think the folks in the room that think they are supportive of teachers will hear from teachers. i think 95% of them will say let's ged rid of the federal degnafplgtse i think put everybody on record, and let's

vote on it. >> thank you, mr. chairman. i think we have a better chance of making our positions clear, and i'd be glad to work with him from now until the time we get to the floor. i think we have a good chance of winning this amendment on the floor. several senators have maken itemments and withdrawn them and i'm willing to withdraw this, but i fully intend to make this amendment on the floor. i appreciate his suggestion, and i look forward to working with him when we get to the floor. >> i would say a lot of what i just heard the gentleman from at the point 10 -- tennessee say, i agree with.

as far as highly qualified teachers, i would much rather have a highly effective teacher. that's why we want to go to an evaluation system. some of that was amered out as well. this is something we might be able to work on as we move ahead. i appreciate the senator's comments. >> the first issue i would like to bring up is number one. this has to do with extended learning time specifically targeted for those

low-performing schools. i think that the calendar that we have in our country today is extremely antiquated and out of date with the rest of the world. students in the united states spend much less time in school than students in most other industrialized nations. if you look at the dates, the days in school, right now we are at 180 days, and most of the school systems are at 240 days. so if you think about the time that these students spend in school, on average, students in other countries spend another year or two years more than grades 1 through 12 than our students do. i think this amendment would have expanded the earning time that would have taken steps to ensure that students in america would receive an education that would ensure them success in

careers and in college. i'm disappointed that we're not going to vote on this. i wanted to mention it for -- to this committee that i think it is a way that we need to be looking at to really make an impact on low-performing students to help them with good programs that would prepare them for careers. so i would like to withdraw that amendment, mr. chairman. >> i thank the senator. i want to say, that i agree with the senator having an agricultural calendar in an information age doesn't make much sense. i do think we need more learning time. i see the different elements around the country. i see the mayor of chicago is moving to longer school days, and we need to also. >> i'll be glad to bring this

amendment back. >> i think we will have good strategy for relevant amendments. i would like to work for the senators as we move ahead. >> i think when we are competing on an international basis and where we stand in science, technology and reading, we are falling behind, and we continue to fall behind. we have 365 days in the year, and i think we need to seriously look at an amendment on this. >> my own view on that is i felt all along we basically ought to do it like the european model. we have an 11-month school year, a month off in august and appropriate holidays and holy days in the year, but that's my feeling about it. >> mr. chairman, earlier i said i hoped people would come up

with the turn-around model. on this one, one of the difficulties that i have is in those areas, in those schools, part of the reason that they are failing is the kids don't come to school for the number of days they are supposed to right now. if they have extra days, they just drop out. >> i don't know enough about that, but i hope we can get information in regard to that. these might be the worst areas to extend the school time, but have extra incentive for the kids to be there during the year when they could be learning. i got in a lot of trouble in wyoming once because we spent -- at that time, and this was many years ago, we were spending $7 a student. i suggested what we ought to do is charge every kid $7,000 tuition to go to school and then give them a full ride scholarship provided they showed up, they did their homework, and

they didn't disrupt the classroom. i got beat to death on it. i still don't think it is too bad an idea. if the parents showed up the day they were gone to get their homework when they were gone, that was not a missed day. i got a lot of exteppingses to it. that might not have been a good turn around model. >> i think you bring up a good point, senator enzi, and that's part of this amendment. we need to be sure we have quality time in these extended learning programs, with quality instruction that would keep the students' interest and i think be beneficial in the long run for not only the individual students in the school systems, but the states, too. >> now, mr. chairman, i would like to -- i did neglect to say, i do appreciate all the hard work that chairman harkin has put into this bill and i

appreciate the efforts of both of you. thank you. i have a second amendment i would like to discuss, and this is hagan amendment title 2. this is about the low-performing schools receiving school improvement grant funding. when they are looking at 1-6 strategies for turning around their schools, this is discussing the replacement of the principals. i think we have all been in schools, and we know when you see a good principal. you can see it in the school, you can see it in the students. i want to be sure that under -- when we look at our consistently low-performing schools, it doesn't do good to replace one effective leader with an ineffective leader. what this does is the support

and foster program that will train school leaders. what this amendment does, it enshures when a school or district selects a turn-around strategy, then the new principal has to have a demonstrated record of success in increasing student achievement or training and experience in turning around the low performing schools. i think we understand every school needs a great leader, and this has been cleared, and i would ask for a voice vote. >> i would agree with the senator. i think research has shown a good principal is one of the most important if not the most important ingredients. i've seen it for myself. i've seen schools that were just low achieving, disruptive students, truancy. they brought in a good principal. turn around literally within a

couple of years. i think what the senator is saying is that when a principal is replaced, to have specified turn around. is that the intend of the amendment? >> yes, that that new principal has been trained in turning around the school or has succeeded in doing so before. >> there is a student -- school in high point which has been consistently a low performing school. this last year i took a day with the new principal, and the difference is night and day. i believe this principal is the one that just won principal of the year. to see the success of the students in the school with an effective principal coming in for the turn around, it was --

it's remarkable. >> i'm trying to understand why they didn't tell the people in high point that they ought to replace a bad principal with a good one. do they assume we don't know that? i mean, if they elect to get rid of a principal in a bad school, i mean they are electing to do that. do we think they are going to deliberately go out and depet someone that doesn't know what to do? >> we hope not. >> who is going to decide whether they made the right decision or not? are they going to have to ask secretary duncan whether this person meets the criteria that we've just discussed? or does that need to be considered by the education committee or by people in the education department in washington? why don't we leave that to their decision? >> i want to clarify one point

>> we're talking about the 5% of the school -- they have five options, but we hope six oppings -- to select the local school district, and then they say, we're going to pick the person for principal. what if they are in a rural area and they can't find anyone who is in -- had success turning around a school and they just get the best person in town who they that i think might be the best person but might not meet that federal definition? >> this amendment sets aside funds for the improvement of principal performance from a training perfect expective to help build up that cadre of principals that could be deemed to have training and be effective. >> this is a definition that --

isn't the definition that this person has to have experience in turning around scompools? >> experience and or training toward turning around a low performing school. sometimes you are not going to find the one that's been successful. so we have to have that training component. >> what if you might have had a returning general of the army from a small town. what if they say, you have come home and you are one of the most successful leaders we know, and we're going to put you in charge of it. that might be the smartest thing they can do, but he shouldn't fit the federal definition. it just seems to me that we should go that far in defining what local people ought to do. that's my point. >> and there may be an amendment offered designed to address the shortage of skilled principals

in high need schools. >> it's my understanding that the senator raises a good point that in is say difference between rural districts. i think the bill recognizes that because it allows rural districts to waive the turn-around i hope that's what is meant by the base language of the bill. if not, we should talk about it. the second thing, this goes back to the discussion we were having earlier today. it is one thing to have a well intentioned policy in washington, turn around the schools. it is another thing to execute on that. everybody should understand we don't have the capacity in this country to do the work well. that's why i think this amendment is so important.

the other efforts of senator franken and i are around the issue of school leadership in this country. principals have been ignored. i used to say the instructional reforms, many of which senator alexander would recognize, that we were engaged in, in denverks were breathtaking in their lack of originality because we were stealing these ideas from around the country. the one thing we did that was different, i started virtually every day when i was superintendent meeting with a group of 15 principals in their schools. every week i saw every prings pal in the school district for two hours, literally, and then we started again. i think in the four years i was there, i missed two of those meetings. it had a huge effect. in one year in the district the union survey asked the question

of our teachers, my principal respects me and engages me in the work in this building went from 30% yes to over 70% yes. and it's continued. i think frankly at this point, the superintendent in denver is a cherished friend, if he left, the principals would just carry the work on. we've given them autonomy to make decisions for the kids. i strongly support this decision, but also the rest of the work to lift up the principal. with that leadership capacity, we are not going to get the work done. with it, we can make a profound difference. schools in this committee can't order people to do anything they don't want to do. it is a cultural issue, but a principal that can lead can make

all the difference in the world. >> do you know what that limitation is? >> lines 13 and 14? >> do you know what the experience described in clause -- >> "programs such as new leaders for new schools." >> i guess what i'm trying to get at is, this says demonstrated record, training, or experience described in that clause which seems to be or gives a lot of flexibility to the system in terms of how they qualify. i was just looking to what limitation that paragraph might be.

>> on this amendment by senator hagan, all in favor say aye. >> aye. >> opposed, nay. [new response] >> the ayes have it. >> i have one more amendment. should i wait? >> i'm sorry, i'm told i have to do this thing. senator paul. >> i have an amendment directed toward all titles. it is called amendment number one, and it is repeal of no

child left behind. while i know i may not be able to get together a majority on this, and there may be symbolism to this, i think it is important that when a law has 37 states that have asked for waivers, d.c. and puerto rico. i would like to -- there is something seriously wrong. there is a significant portion of people that think we made a mistake. i know we are well intentioned. point national association of education says this bill relies heavily on outcomes of test scores, provides top-down models of e -- of schools, takes away teacher's rights to have a say in the evaluation system. a conservative organization, heritage, said while more

schools are rige crying out for freedom from red tape and to have their educational authority restored this further impowers the u.s. department of education while weakening accountability to parents and teachers. the performer assistant secretary of education, diane ravich, under the esteemed senator from tennessee, was a big proponent of no child left behind, as were many americans that have seen many of the problems that came about from no child left behind. you have a strange coalition here, conservatives, liberals, democrats, teachers saying there are big problems with no child left behind. she has written a book called the death and life of the great american school system and said how testing has undermined our school system. "this has dumbed down the curriculum, narrowed the curriculum. so much time is being spent on

test prep and tests that are not good tests and in some cases even fraudulent scoring of the tests. the kids are getting a worse education with no child left behind." my amendment would scrap this. there is no objective evidence, looking at test scores, that no child left behind is improving things. it is a top-down model. it ignores and negates the aspects of education. it is impossible for washington to judge who is a good teacher who who is not a good teacher. it shouldn't be done in washington. most states have policies toward trying to develop testing. most states have policies with regard to having to judge which teachers are successful. it is not perfect. to presume that any of us in washington can tell the difference between a good teacher and a bad teacher is a

mistake. i know you will see my proposal as being too dramatic, too much, and that you can't support it, and i will probably get very few votes. go home and ask your teachers. ask your teachers if they would vote for a repeal of no child left behind. i bet if you polled teachers, i bet 80% to 90% of teachers would vote for repeal of the whole darn thing. it is not working. it is top down. it is complicated to determine who is a good teacher and who is not. you need to be in the classroom if you are a superintendent or school board or parent to determine. tests are part of it, but they are not the whole thing. you need people on the local level determining who are good teachers and quho are not good teachers. so while i don't have high hopes for winning on this amendment, i would like to put people on record, and if there are those

of us that think the preponderance of evidence is that no child left behind is not working and would like to signal to the teachers and educators that you would take a more dramatic step and eliminate the whole thing, this would be your changs. thank you, mr. chairman. >> senator. >> it does refer to the elementary and secondary act that was first enacted in 1965. the second act says the elementary and secondary act of 1965 shall be implemented as if such act, that is no child left behind, the 2001 act, had not

been enacted. so i assume what that means is, we would have to go back to the reauthorization of elementary and secondary education act that we did in the clinton administration in 1964, so that your suggestion is not that we repeal the elementary and secondary education act, but instead that we put back in place the version of the elementary and secondary act that was in place in the clinton administration. am i writhe right about that? >> correct. there are other ways -- see, i would love to do it that way instead of trying to fix something that is so horribly broken. i suspect more than 37 states want no part of this. rather than fix it, let's get rid of it, let's go back to what we had, and let's see what we can do. there is still federal money dispinspensed to schools. let's work on incentives.

for example, in my child's high school. they go to public school in bowling green. there is one teacher that comes before school and after periods, he does all this advanced placement help. he does most of without any additional remune racial. he is one of the best teachers i've come across. reward him with more money. >> we spend $140,000 per classroom. i think we could give a really good teacher $140,000. we can't always do that, because there are middlemen. let's not make more middlemen in washington. no child left behind doubled the funding for the department of education since 2001. let's take some of that money and go back to a smaller

department of education, and for some of that money let's use as incentive to give to better teachers. let's not judge who the better teachers are, let's let the state and localities determine who the better teachers are. let's in essence sort of bloch grant that money back, and let it be spent at the lower level. >> mr. chairman, senator paul's argument sounds familiar to me. 30 years ago, as a young governor, i went to see president reagan, and i asked him to swap all of elementary and secondary education for medicaid. in other words, the federal government would get completely out of elementary and secondary education, i thought that was the state's responsibility, and federal government would take over all of medicaid. i still think that would be a

good idea. that's not going to happen. president reagan and i were the only people who were for that at that time. we moved on down the road. i think the better course for our children and our schools is to try to fix no child left behind, not end no child left behind. while i respect his argument, the course i prefer to take is to fix it. and this bill, and we're beginning a process here that i have high hopes for, because we might actually legislate on this bill, that is to amend it in committee some, amend it a lot on the floor, take it to conference with house members and bring back something and get a result. i think that's within et relevant many of possibility, fixing -- within the relm of possibility, fixing no child left behind. when we discussed this before we thought fixing eight or nine problems would be easier unanimous writing a new bill.

this draft moves us that way in some important ways. it sets a more realistic goal. it requires states to have high standards. it eliminates 95,000 public schools from the business of washington deciding whether schools are succeeding or failing. it helps states fix the bottom 5%. it encourages teacher-principal evaluations related to student achievement. that's an important step forward. it continues the reporting requirements of no child left behind, which have been a valuable addition of no child left behind. it creates a teacher's report card. it beefs up the teacher incentive fund which has been useful in evaluations, and it authorizes race to the top. that has a number of provision ns it i would like to get out of it which in effect create more of a national school board. i'm going to keep trying to

remove those provisions and get closer to the legislation that senator burr and others introduced a few weeks ago. i think i may have a good chance of doing that, as we go through this process. so i respect that point of view. but i disagree with it. i think the more reasonable way to deal with the problems in no child left behind, is to fix it, not end it. i think we should try to fix it promptly. we have been working on it four years. if we don't fix it, our in action will turn the secretary of education into a waiver-granting czar over every school in the country because he says there will be 85,000 schools in the country failing. if we wanted an education czar, anie duncan would be a great one, but i don't want one. i think we should fix this no child left behind, and i think we should open it up to

amendments and have votes and be willing to accept some provisions that aren't the provisions any one of us would prefer if we were writing the bill by ourselves. >> first, i would like to endorse everything that lamar alexander just said. secondly, i would like to thank secretary duncan for responding to the communities in this country that are asking for relief from the laws that exist today. you know, people have been critical of that. but i think as we open, the wavers have been asked for by 37 states, you have an ad -- administration that's responding at the local level, and i think it is important that we acknowledge that response. i am glad we are legislating now because i think it is important for us to do that work and respond to our local community as well. third, i think it is important to have a discussion. we're having it in this

committee. about what the appropriate federal role would be. no kid in denver would ever remember who superintendent was when they were there. my job as superintendent was to make sure they remembered their teachers. our own jobs ought to be to expect more of our stadse and our school districts. we should assist them. we shouldn't be telling them how to do the work. having said that, i want to say for the record, that we have a vital national interest in what happens in our schools. even though a lot of the work is at the local level. you know, it would amaze people to know -- people don't know this, b that by the eighth grade only 16-100 children living in poverty can read proficiently.

only 18 can read at their level. only 17 are doing math at grade level in the united states of america in 2011. they are not going to be able to contribute meaningful to this democracy or this economy if they can't do math at the eighth grade level or read. i know that the senators, i hope, agree with that. we have a pite vital national interest. the future of this democracy depends on this. the worst the unemployment rate ever got in this recession, in this recession, the worst since the great recession, the worst it ever got for a college degree was 4.5%. we have a structural issue in this economy that cannot be addressed if we continue to fail the children that are going to america's schools. and we didn't know what i just said before no child left behind

was put in place. we didn't know it. there isn't a fiercer critic -- maybe one -- a fiercer critic of the existing law than me on this panel. but we ought to understand the value of it as well. we ought to understand that what flows from this discussion, i think, is that we need to radically overhaul in this country the way we deliver public education. we are not going to do it from here. i agree with that. but we have to do it. we have a completely obsolete system that was developed in colonial america that was brushed off when we had a labor market that discriminated against women. we have two people, one a nurse and one a teacher, so why don't

you teach julius ceasar every year of your life. i can't imagine paying the person more than we should. we should. i think it is important we keep the focus here and the attention here at a national level and say this isn't just something that should be left to other folks. that we have to set a standard and a set of expectations, and then we have to empower people to do the work at the local level. they are the ones that can do the work. you know, we spent a lot of time talking about people's moral rights or this or that and health care and other kinds of things. let me tell you something, as a parent of three little kids, i can tell you that if my kids faced the odds that children living in poverty face, i would quit my job tomorrow and spend my time making sure that those odds changed. that's the way we need to think about this.

>> can i make a quit -- quick response. >> i have complete respect to the senator for kentucky, but we are avoiding the obvious. the reason there are 37 schools looking for wavers is because this committee didn't do what it was supposed to do with no -- the reason there are 37 states looking for wavers is because the committee didn't do what it was supposed to do with no child left behind. we didn't know whether people were getting left behind. we finally created a measurement where we could disaggregate people by race and ethnicity. we created a measurement called adequate yearly progress, which when they made adequate yearly

progress in year one, they had to do better in year two. and the reason you have so many with "needs improvement" is because the better they did in a.y.p. the more difficult it was to meet a.y.p. next year. while i agree there are things we need to do, we need to not dilly-dally around. i don't agree with the amendment. i think we should do what we should have done four years ago now and address the positive things no child left behind brought about and correct those things that have done their duty and no longer need to be in place and never lose fact that for the first time 10 years ago we started focusing on individual children and their achievement and got away from mean test averages. we never need to go back. i will oppose the amendment, and i appreciate the good things

that have come out of the elementary and secondary education act passed in 2001. >> if i might add one thing, this is a great discussion. i would pay close attention to it. i would just make one observation. if everyone thinks the wavers are going to -- waivers are going to do anything, those waves -- waivers might affect eight to 20 states. the need is that all states get relief. not as few as eight, as many as maximum 20 states. there is an urgency for us to complete our action and move this through. senator paul. >> i would make the point that i think there is so much wrong with no child left behind that rather than reducing some of the burden, let's scrap the whole thing. if there is anything good in no child left behind, let's add it

back in. i think the preponderance of no child left behind is a mistake. i think the fact that 37 states want out of it and two territories want out of it is say significant indication of its failure. my son's high school was ranked by a national magazine as being one of the top performing high schools in the country. it is an award they are proud of. they have the magazine cover when they -- when you walk in. they are ranked as a failing school by no child left behind. it is not working. a school we are very happy with. it has high achieving kids and low achieving kids, too, and that's complicated. it has some extraordinarily good things. i don't care if you are poor and barely have shoes on your feet, if you are smart and work hard in your classes at this school you can take a.p. college credit courses and be started in college before you go. it is there for you regardless

of ethnicity. it is complicated why some succeed and some fail, but i don't think we know the answer here. if we repeal no child left behind, it wouldn't be as if there is no federal involvement. in 1965, there was very little involvement. it evolved for 30 some odd years before we doubled it. the other thing is, we are broke as a country, and we are spending dollar after dollar. we are borrowing 40 cents for every dollar. we don't have the money at the federal level to spend money on things that are not working. when it doesn't work, i think we should get rid of it. if there is any part of it that might be useful, let's start from scratch and work backward instead of trying to fix something that i think is horribly broken. >> what we're doing now is repealing no child left behind. >> if there is no more

discussion, then those in favor of the paul amendment will say aye. >> aye. >> opposed no. >> could we have a recorded vote, please. >> the senator wants to record a vote. >> you got that right. >> call the role. >> senator mccull ski -- barbara mikulski. >> senator murray. >> no by proxy. >> senator casey. senator hagan. no by proxy. >> senator franken. >> no. >> senator whitehouse. >> no. >> senator bloom that you will. >> senator alexander. >> no. >> senator burr. >> aye by proxy. >> senator isakson. >> no.

>> no paul. >> aye. >> senator hatch. senator mccain. senator roberts. senator -- >> no. >> chairman harkin. >> chairman harkin. >> no. >> 17 nays, 3 ayes. >> the amendment is not greed to. >> senator hagan. >> senator sanders. i recognize senator sanders. title 1, right? >> yes, this is sanders k title 1.

>> the senator is recognized for amendment 1. >> this is a pretty simple modest amendment which i hope is not too controversial. i think everybody in the congress is deeply concerned about the high level of dropouts that we see in our school systems. approximately 30% of our children drop out. among african-american kids, unbelievably that number is 50%. kids were dropping out. in latino kids, the number is higher than that. and i know that in this bill there are various tools that we are developing to try to address this issue. all this amendment does is give us a little bit more information about the number of kids who are dropping out. as i understand it, what the bill says, is we will keep track of kids from grade nine on. the kids will enter high school,

drop out, we now know who those kids are. the problem is, there are kids who leave elementary school, graduate from the eighth grade, who never go into the ninth grade. all that this amendment does is say that states should keep track of those kids as well to give us a better understanding of the magnitude of the drop-out problem. that's about it. >> question? >> i have a question about how the local education agency would know who has transferred and enrolled into a system outside the local education agency. >> the process would be the same as is currently the case for tracking kids from the ninth grade. what the school district and entity would not be asked to do

is to track kids for example who have left the state. the issue is, if kids are staying in their same area and drop out, we want to know who those kids are and what the numbers are. it would be the same process as is currently in the bill starting at the ninth grade. >> and you can do that with information that is already collected under this bill? >> yes. >> mr. chairman, graduation rate is a big important issue. i compliment the senator for his interest in it. i hope that between now and the time that we have a hearing and go to the floor we look at this amendment and the provisions in the harkin amendment carefully. because skates and local school districts have had a difficult time deciding what they mean by

graduation rates. it sounds easy, but it is not easy. the real role of public education would be surprising to people today. we have classrooms along the border but even in places like tennessee when students arrive in october and leave in march. no one knows where they go and no small school district has any capacity to keep up with them. maybe if we had some capacity to keep up with them, it would be a good thing if we could do a better job of following the child from school to school so if his military parents move from here that the records go and in our mobile society, we deal with that. i hope we are careful. that's all i'm saying.

i don't oppose it, i just have questions. >> i think, senator alexander, i am told this amendment only applies to districts that depet these -- get these competitive grants. in other words, they apply to these competitive grants, they have to agree to do this. that's what i'm told. it doesn't a-- >> that's correct. >> but it doesn't apply to all of them? >> that's correct. >> there is currently not a mechanism to track from middle school to high school. >> if this is going to require anybody to apply to these grants to figure out what happened to somebody, because there is no -- mr. bennett may know if there is. i don't think there is any existing way for which you can know that. you have to create a mechanism

to do that, which means you probably have a create a person to carry that out. >> that you must -- in order to receive this competitive grant, that is correct? >> it is a question of tracking the records that go from the eighth grade to the high school. >> senator, i made a good point. this is complicated. all we're trying to do here, i think we all agree, the dropout

rate is unacceptably high. what i would like to do is track it further. if a kid leaves the eighth grade and doesn't get into high school, we know it, that's all we're trying to do here, ascertain how significant the problem is. >> mr. senator, i am going to be bringing up an amendment later that brings our focus on drop-out prevention that begins not at middle school but at the earlier years. i think we all know that kids don't wake up one day when they are a sophomore or in eighth grade and say i'm checking out of here. it happens over a long period of time. so understanding and being able to track, i think, is important.

i share some of the concerns about how we actually do it. you think this is a simple amendment, i think it is simple in concept. we want to know where it is happening for kids. we want to know where they are going. how we implement it may be a little mere challenging. we have a lot of military students that come to our state and they are there for a couple years and we don't know and i understand that those are not the one us are tracking. i like the idea. i think we need to try to determine how we can actually make it work. >> mr. chairman, this amendment gives the states the opportunity to figure out what methods work best for them. so we are not mandating methodology, giving the state of alaska the opportunity to depig out anyway they can. >> mr. chairman, as i understand it, students who have not transferred or enrolled outside the local agency in the state.

so this applies to students that don't transition in that local education. >> in other words, people are going to pick up and move to another state. we are not asking the district to track those kids. >> in the bill we set up criteria for finding out graduation rates. we haven't had a good criteria before. we are going to find out about that. now we are going to find out about this transition from eighth to ninth grade, but it does impose an extra requirement from washington on the states from what they have to do, and i think most of them will just put down that they left the district . for any of them missing. i don't think it would really achieve what we're trying to achieve with this. while we get the bad rap for doing another federal requirement. i would have to impose it.

>> i think if people are applying, states are applying for competitive grants, the least we can do is ask them for this kind of information. >> a more important point, from my perspective, is that districts all across the country, until recently, were calculating their drop-out rate based on who started the 12th grade and who finished the 12th grade. that's why they were able to sarkse oh, we only have a 5% drop-out rate. oh, we only have a 6% drop-out rate. senator sanders said it well, among african-american students in the country, the drop-out rate is 67%, and in latino students it is higher than 50%. with district after district after district. that trandsigs between eighth and ninth grade is a critical

transition. days good example of how obsolete our system is. these transitions from elementary to middle to high school are all invicinity -- invented in the deep past. that's where the transitions ought to occur. it is not that hard. it is not a mandate. >> we had several kids that did not graduate from my high school. we still don't know what is happening, what is the process through that eighth through graduated year of high school.

i think what is important, there is a lot of language in this bill, intent on being college ready or career ready, but we are going to have to work to collect the information to understand what's going on. i think it is important. it will help us understand the problem more broadly and be valuable for the entire set of schools for this country. >> if there is no further discussion, we will go to amendment 1. those in favor say aye, those opposed, nay. the ayes appear to have it. the ayes have it.

>> senator bird is not here right now, but this brings up the discussion that we were having about, this would allow state educational agencies to

develop their own model for developing 5% of the schools. the lowest 5% of the scooleds are the worst performing schools. this would add a sixth category for the a -- isakson bill we put in earlier. several of us support thad bill. it authorizes this turn-around model for the lowest 5% to allow state agencies to develop their own strategies, come to the secretary, and say, that -- instead of us telling states what to do, they would come to the secretary and say, this is the way to do it, and the secretary could say yes or no.

i would like to offer that. senator burr approved it. i would like to see if that is something that would be approved by others, and then that is something i would like to with draw. >> am i wrong about the numbers? they already have six? >> this would be the seventh. >> i wasn't counting. >> mr. chairman, i support the amendment. i think the amendment ast