""the wall street journal"" says there are up to 11 million are words that are under water and cannot refinance. good morning, it is tuesday, october 25. if you are a republican, here is the number to call. here are the numbers to call if you are a democrat or independent. who is eligible for this new program? homeowners can refinance their mortgages and did this program if they meet the following criteria. the mortgage must have been sold to fannie mae or freddieon or b. homeowners must be current on their mortgages, with no late payments in the past six months and no more than one budget -- one late payment in the last

year. the mortgage cannot have been previous to be financed under unless it is -- under harp unless it was a fannie mae loan from 2009. the home affordable refinance program was started in 2009 and helps homeowners to refinance rates. homeowners bypass the usual requirement of having 20% equity in the home. as of august 31, fewer than 900,000 homeowners and 72,000 under water homeowners have refinanced through the administration's program. the administration had said that it would help 4 million to 5 million homeowners. the front page of open quote usa today," -- the front page of

"usa today," marc sandy says it may lead to millions more loans. host: tavis from "usa today." -- host: that is from "usa today." the announcement from president obama made many papers this morning. we want to give your word on this. what is the will of the federal government in refinancing mortgages? caller: i think that the principle has to be cut. as long as they are staying away from the principal being cut on these properties, the problem

will persist. one late payment in one year will cut out more people. they have to get these republicans out of the way so that we can start building america for the middle class. republicans are acting like fascists. host: have you tried to refinance, personally? caller: it was such a nightmare. they said that i made too much. they said this. they said that. it never worked. i walked away from my property. and i make over $100,000 per year. if i can walk away from my property with that kind of income, this country is in real trouble. host: but was it worth, if you do not mind telling us? caller: the house was paid for. it was refinanced. it was valued at $190,000.

after the refinance they promised me, based on a strong income and everything else -- when i went to closing, they said that it was worth less than half. host: say that again? $50,000? caller: it was valued at $190,000. it got devalued to $90,000. and then they wanted to pop open an adjustable in my face. it was a ridiculous business decision. tell the people of america not to look at their homes as a personal check of personality. look at it as a very bad business decision that was hoodwinked by wall street and

the bankers, as we all know. host: let's get some other voices in here. samuel? caller: i do not think that it will help the vast majority of homeowners. they say that this program will only help 1 million. at the end of the day, the people that make these programs and decisions are rich. they are so far removed from the average working person, they cannot come up with any program to help the average working person. the jobs are not there. the wages are so low. this is the new america, where the majority of people have very little and the minority has everything. host: is there a role for the government in refinancing mortgages?

caller: a good question. i think that they should help the rate -- regular american person, the same way that they helped the bankers and the rich. but they can help americans start over again, making money, they will start buying things. why not do the same for the average person that they did for the bankers and the rich? host: "the wall street journal," said that 11 million people are under water. new home appraisals may not be needed under the program. this would lower refinancing costs as well. the changes will not help every barrault or who would like to refinance. -- every borrower who would like to refinance.

host: that is what the administration is estimating. they are also saying -- host: matt, republican, south carolina. what do you think? caller: the simpler something is, the better it is. mortgages are a vaults to protect yourself. the problem is, everything has become so computerized now. it really hurt us, in actuality. listening to your liberal

scholars, they keep blaming it on everyone else. it is the fault of the american people. budgeting, not purchasing houses they can afford. you have to take some responsibility in life and say -- i signed on the bottom line. i bought the house and i will pay for it. if you've lost your job, there are so many people just taking advantage of the system. it was our president who was pushing for these home loans. now you have wealthy people and poor people living in these homes. when they leave a hole in the bank, it is not the best money. the point is, low income people have been bailed out through

this process. not just the banks. they were the ones that purchased this overpriced real estate. they are the ones that did not budget their money. c'mon. let's be real. can we get back to common sense? proper budgeting? just go back and reenact the glass-stiegel from franklin roosevelt. acquiring 20% down. the american people did not want that. they want everything out. they said give me that house now. and then they turned around and complained and said -- what happened? how can not -- how can we not accept responsibility for this? host: "the financial times," talks about allowing borrowers

to refinance, when their homes are worth less than they're paying for, it says that in reaction to this news, prices of mortgage bonds fell to their lowest levels in six months as it leads to a wave of early repayment . caller: that is right. why should anybody loan money to banks? why would anyone? that is the problem with the system. they have proven that when they give people a break on their mortgage and reduce it, six months later they cannot afford the new payments.

other people might say that they have been playing by the rules all of my life, maybe i will try to get away with this not paying payments. people cannot take responsibility for their budget. the government cannot tell you how to spend your money. nor should they. if the government has to take that much care of us, there is something sad and wrong in that. host: sorry, matt. we lost them. president obama was in loss they guess -- was in las vegas talking about this new programs. >> millions of americans work hard and acted responsibly. now that their homes are worth less than they added to the mortgage, they are having trouble getting refinancing.

soon that will change. last month i directed my economic team to work with the federal housing agency and their partners in the housing industry to identify areas of refinancing, knock down those barriers, and explore every option to help american homeowners refinance. host: they put it this way in "the hill," "obama takes flight to mortgage battleground." on the front page they have a chart showing the number of homes with negative equities in 2011. these red states, somewhere a round of 40% to 60% of the negative equity. the next darker shade of pink, 31% to 41%.

60.4% of homes with negative equity in that state. tom, the role of the government in financing mortgages? caller: it should not have to be that way. if wall street and the bankers were doing their job properly years ago, the u.s. government should not have become involved. but they were. this has been going on for decades. they were selling new packages of thousands of mortgages, treating them on the open market. and i have a family member that worked in the mortgage business. hanover has, of course, been sold. traded, sold, whatever you want to call it. right now is a necessity because

wall street failed -- was bailed out. it was not just wall street. they were trading securities on the open world market. that is why the world is faltering right now. i am not a trained economist. i have been reading the midwest edition of "the new york times," for 25 years. i think that i know a the but about economics. anyway, thank you for c-span. i hope that we educated some people. host: lynette, wilmington, delaware. you are on the air. caller: thank you for c-span. i wanted to say that the government's role in refinancing mortgages, the big bailout caused everything to happen.

i also think that they should go back to capitalism and drop the fascism. thank you. host: we lost her. florida, john, republican. caller: living in the florida real-estate market is really tough right now. i got kind of lucky. i sold my house at the top of the market, seven years ago. it was not even that smart. i got divorced. i have been renting since then. i think that if obama really wanted to help out the real- estate market, he ought to consider renters as well. give a tax subsidy to landlords at that rent out houses. renters are good people, taxpayers.

they should not take renters' tax money and give aid to people that make bad decisions. thank you. host: this is "the wall street journal," this morning, about the president's plan. they say that it highlights a sharp political split.

host: next to that is "the wall street journal," article -- the presidential campaign has been loath to address the issue since the beginning of the campaign. "president barack obama's announcement on new ways to stimulate the economy are less about laying down a marker as they are about syria's policy initiatives." -- serious policy initiatives."

host: here is president obama, yesterday, in nevada, on this. >> people up here do not have a lot of time and patience for the nonsense in washington. if any member of congress thinks that there are no unemployed workers or neighborhoods in the district that would benefit from the proposals in the jobs bill, they have got to think again. they should come talk to the families in nevada. these members of congress still have a chance to take meaningful action to put people back to work and help middle-class families and homeowners. but we cannot wait for that.

host: it has become a new hashed tag in the republican response, taking advantage of the new slogan from the president. john boehner put this out this week -- we cannot wait for amendments to the constitution. he also said -- we cannot wait for president obama to work with house republicans to remove government barriers to private sector job creation. the senate gop put out a statement yesterday, in reaction to the president's announcement -- and we cannot wait for senate democrats to stop blocking bills that would create private sector jobs. michigan, good morning. caller: i have a 650 square foot house that i got for $80,000.

like most people, i am behind on the mortgage. i lost 80% of my clientele when the economy started going down. my home is not just a place to live. it is my home. for six months i have been dealing with bank of america and they have been horrible. i am at the end of my loan. since it is a 30 year loan, it is eight months anyways. it is not worth $80,000. but i never bought it as an investment. i bought it as a home. if my clientele was better, i could do better. everybody's case is individually different.

the people have no problem taking a paycheck from the government for the job that they do. host: this is from "usa today." host: independent line, good morning. caller: i just switched my administration to independent from democrat, because of the obama administration. my husband and i did everything right. we worked really hard we saved it for a down payment. we did not buy a house that we could not afford. i do not want to pay for someone else's house. we are rewriting history conveniently for the election

by writing barney frank of the myths -- barney frank out of the myth. they forced banks to give loans that they could not afford. people can say that they were fooled, that they were not smart enough, it should not hold up in congress. i do resent the fact that the president had the first two years of free rein to concentrate on jobs, but he chose not to do it. he chose to travel round the world he had not seen. to work on health care reform that no one wanted in a manner that he did it. he did not focus on this. now because it is an election it is easy to focus on the people and put the burden on people like me. host: it every week, wednesday, in our last hour we take a look

at a recent magazine article. this wednesday we will be talking about a new article written by meghan mcardle, at the atlantic -- "the atlantic." "capital gains -- are members of congress guilty of insider trading -- and does it matter"? go to our website and you can find a link to the article there, if you go to the "washington journal" web site. or you can go to "the atlantic," web site. connecticut, rich, you are next on this topic. caller: good morning. host: good morning. caller: everyone should have to take responsibility for what they have done.

banks, the government, and the homeowners. they are the ones that signed the mortgages. they could not make those payments. redirecting funds to meet their responsibilities. they needed to buy their iphone, ipad, fancy clothes and fancy things. take the money and pay the banks the way that you said they would. host: does the government have any role in refinancing mortgages? caller: they should try -- they should get out altogether. host: have you tried to refinance? caller: i tried to, under harp. the closing costs were too much for the situation. host: what was a process like? caller: very easy. i was working with chase, it was

very easy. host: your house was under water? caller: not quite. 80%. host: you felt that the closing costs made the big difference? caller: i had an adjustable mortgage. host: the process was easy? caller: it was. they were not going to do an appraisal. based on my credit, which is not perfect, but they took it anyway. host: what is your interest rate? caller: right now? 2.75%. adjusted. host: when is it expected to go up? caller: it could go as high as 10% sunday. host: right now you are on time with your payments? caller: i have not missed a payment ever. host: you were just trying to get something permanent with low

interest rates? caller: right. host: flint, michigan. democratic caller. caller: these people that are calling are drinking the wrong coffee. obama is doing a good job. he should be helping people right -- like me. i am a vietnam veteran. things were set so high, they had two loans. they called an 80-20. -- call them 80-20. this would be a welcome thing for me. when the appraiser gave it to me, it was 95. host: do you plan to take advantage? caller: yes, ma'am.

yes, ma'am. the telephoto complex is how we do this. anyone know who we contact to get this started? let me know. i am a disabled vietnam veteran. host: it comes from the federal housing administration. if you were to googled that, i am sure that you could find it online. maryland, the niece is next. democratic caller. go ahead. caller: actually, i am an independent. please do not cut me off. i have two things i would like to say. first, i would like to respond to the connecticut caller. it is funny to me how some republicans and other independence, who talk about people leaving to take responsibility are the same ones that want to take advantage of the harp. i also heard that he got an

adjustable-rate mortgage. telling people that he needs to take personal responsibility? that is really funny. i am in the process of refinancing right now. i have never missed a payment. i make more than $100,000 per year. what you have to do is you literally have to call every single day and just bother them. you have to call every day. they put you list so that when these programs, but, they actually call me. i bought my house at $370,000. in my area, that is kind of the average. i did not buy anything extravagant or over my means, anything like that. it reduced in value to $270,000. there are a lot of people like

me, with stable jobs and good income. however, i would never be able to sell my house because i am so far under water. i would actually like to get a single-family house, because i want to have another child. i cannot do that. host: you are in the process of refinancing with bank of america. are you taking a manager of a federal program? caller: i am doing it on my own on -- with the bank. host: what about the expanded program? caller: i am not going to wait. that is not really going to -- not everyone can take advantage of that. i am just going to go ahead and continue with the process with

the bank of america. host: what kind of interest rate of a promising new? -- promising region interest rate are they promising you? caller: 4.5%. currently 6%. what point is that there are millions of people like me with stable jobs that would like to buy another home, but i cannot. people like me would help the housing economy, but we cannot get out of what we currently have. host: let's say that you go from 6% to 4.5%, what is the difference in your pocket every month? caller: a little over $200. host: do you think that you will spend it? caller: i will say that. host: so, that is the hope from the folks advocating for this

program. the theory is that you put money in the pockets of consumers and they go out and spend it, but you say that you will save it. house -- caller: right. let's go to this message from gary duncan. -- host: let's go to this message from gary duncan. host: if you would like to send us a twitter message, journal@c- span.org -- twitter.com/c- spanwj is our twitter handle. bonnie, go ahead. caller: my family income has been connected to mortgage- backed securities since 1978. do you recall president bush, george w. bush, at a time when wages were stagnant, speaking to

the american public and saying that everyone should own a house. even if you have lousy credit, you do not have to get a lousy house. i found out about derivatives and found out that this situation was going to explode within a matter of time. it just did not make any sense, like so many other things in this financial system. sure enough, people were sold mortgages these were people that could not understand their credit card contracts. they were talked into subprime loans when they could have had prime loans. it is a situation -- i mean, look. mortgage-backed securities were the safest investment. always had been.

so much so that people's ira's and pension funds were invested in it. what they did, with removing glass-stiegel, the phil gramm bill, it made our lending and financial system a casino. host: we have to run and catch up on other headlines. this is from "the baltimore sun." "taking up the unpopular 3% withholding tax." this is from "the washington times." "gio said $1 trillion in savings is not sufficient for stability." by the way, that super committee panel has met mostly in private, but will hold a public hearing on wednesday with doug allen door for -- elmendorf.

and this headline, "u.s. ambassador pulls out of syria." "fresh worries of a recession gripped europe," is the front page of "the wall street journal." we will take a look at how the european debt crisis might impact consumers, live on c-span 3 at 10:30 a.m. eastern. also, the repair a flat tax plan. -- rick perry flat tax plan. we will be covering his announcement. go to our website, c-span.org, for more information. john, what do you make of this new role for the federal government in financing mortgages? caller: the reason that i am calling, in 2006 i purchased a

house for $240,000. at the time, my wife and i were making $250,000. the market went down. when the market went down, my house is worth about $60,000. the reason i am calling, if obama wants to help people, the people should go to the bank. obama should go to the bank and tell those people to let them write -- let them allow the people to rot -- refinance with what they have now. we sold a house for $75,000. they have refused to lower the

price of the house for me. paying $200,000 for house that is worth $60,000. host: john, democratic line, florida. our producer found out how to apply for harp assistance on ehow. coming up in 45 minutes, we will be talking to cliff stearns, republican from florida, about the investigation into the solar among otherme inlyndra, topics. next, adam smith in debt reduction. we will be right back. ♪

host: although this headline proof falls, but do we defeat of truman approved iconic -- the dewey defeat of truman prove the iconic. influence in national politics in the elections of dwight eisenhower and richard nixon. "the contenders," live, from the roosevelt hotel. >> middle school students, high school students, time to get those cameras rolling for the

studentcam competition this year. get it to c-span by the january 25 deadline. for complete details, go to studencam.org. >> every weekend, let the c- span network speed your source for public affairs, nonfiction books, and american history. c-span 2 has put tv with nonfiction books and authors. american history television on c-span 3, showcasing the people in the events that shaped our country. the c-span networks. it is washington, your way. >> "washington journal" continues. host: we are back with congressman adam smith. we invited you want to talk

about your recommendation for spending cuts. but i wanted to start with these headlines. the u.s. ambassador was pulled out of syria. what you make of this? what comes next? caller: primarily, it is just a safety concern. they were in danger of becoming involved with an increasingly violent situation in syria. obviously, he is not going to go willingly. there did not seem to be much in terms of military strength to drive him out. you are in for a long and intense, violent situation. caller: would you support a libya it -- host: would you support a libya-type situation? guest: not at this time.

the arab league supported it, first of all. united nations supported it. you had universal support for that action. there was a clear and set objection. you do not have anywhere near that clarity in syria. the absence of a clear military objective factors into missions like that. host: what does that mean for syria? caller: it will be -- guest: it will be a long and difficult period for syria. there is no easy solution. host: there is no military involvement on our part? guest: i do not support that at this point. times change. i do not think that that would be a good idea. host: on the record about the

iraq troop withdrawal last week, do you support the decision? guest: absolutely. is exactly the right decision. we have got to start turning responsibility over to the iraqi people. they wanted. iraq made it clear that they wanted troops. is their country and we have to respect that sovereignty. the president was right to say that by the end of 2011, we would allow the troops. host: in this "usa today," editorial, they disagree. it says --

host: file and ordered to do this, he is saying we should reopen negotiations with iraq. guest: i disagree. as we significantly reduce the troop presence, they have managed to have a reasonably stable government. the things that i disagree with, this assumption that somehow the u.s. military might is similar to foreign countries. a foreign country where the people of iraq have mixed emotions. primarily, they are opposed to it. it is not clear at all that the president would magically make

this go away. this notion that iran seamlessly moves in and controls iraq ignores centuries and decades of history between the conflict of persian iran and arab iraq. certainly, i agree that it is a difficult time. i do not agree that a u.s. presence will make that go away. host: let's get to your recommendations for the reduction committee for defense cuts. what do you want them to do when it comes to the pentagon budget? guest: there was already an agreement to cut somewhere in the neighborhood of $450 billion. i say somewhere in the neighborhood because the language is not 100% clear. we have many national security

needs right now. and it can be done. in light of the security environment and the ranking needs. i care a great deal about making sure that entitlement programs are maintained. making sure that infrastructure is not affected. within that context, getting to $450 million is ambitious, but doable. it is appropriate and savings can be found by looking at what it is that we want to ask the military to do. to go beyond that, certainly to go to sequestration, it would be an entirely different story. then you are talking about significant reductions in the military force and equipment. an impact on the industrial base and a challenge to come up with

a cohesive national security plan. it mandates across-the-board cuts. every account line in the department of defense has to be cut by the same amount, eliminating any possibility for sequestration. it has to be avoided. further cuts in defense beyond the $450 billion already authorized would be deeply challenging. does that mean to you cannot cut beyond what has been authorized? i would not say that, but we must be aware of going beyond that. host: but if we really cut the pentagon budget -- host: this proposal, "what if we really cut the pentagon budget"?

host: the defense budget has doubled since 2001. guest: rightly or wrongly, that money has been spent in afghanistan. it is not quite the same as the reagan buildup of the 1980's. we had a lot of the equipment that was spent during the 1980's. there were horrific spending decisions on the acquisition side. spending an enormous amount of

money to round up way over budget. in most cases, we wound up canceling the program. it is frustrating, but the money is gone. we cannot get it back. leslie, i would say that we have fairly significant national security challenges -- last week, i would say that we have fairly -- lastly, i would say that we have vfairly significant national security challenges. let's have a strategic plan. why do we need this structure? what is it? what would it be capable of? we really need to have that broader, strategic discussion. not just on the numbers, but what are our national security needs? one legitimate question would be -- can we afford it? i do not agree with my

republican colleagues in the armed services who said that costs should be an issue. costs are always an issue. with a budget that is 40% out of whack on every dollar that we spend, this impacts the national security drive. if we spend all of the money on defense, but we have to cut infrastructure, devastate the economy, that is not a good trade. host: before we get to the phone calls, but defense companies and military facilities do you have in your district? guest: basically, is st. louis coord. i have a boeing plant at the north end of my district that makes the 737 and has military operations.

primarily, subcontractors. host: have you ever calculated how many jobs we are talking about? guest of the problem is, it is throughout the whole region. again, that is not all the fence. they do a lot of commercial aircraft. host: john, republican line. caller: obama might withdraw from a back, but then he would leave 100,000 civilians over there that the taxpayers are paying for? i heard this a long time ago. this libya war that they started, there will be reconstruction on them with taxpayer money in the u.s.. host: john said that he heard that a long time ago and that

the president just made this new announcement. host: we will not have 100,000 civilians in the u.s. -- guest: we will not have 100,000 civilians in the u.s. after this. this is between the department of defense, department of state, and others. we will continue to sell military equipment to iraq. we are not going to have tens of thousands of civilian contractors. it is not going to happen. host: what about looking at defense cuts and how much contractors are paid as a way to find savings? caller: -- guest: we can do a strategic view of the defense budget. you do not have to say the number has to be this, go below it and you jeopardize national security. there is way too much waste at

the pentagon. for many years. certainly, over the last decade. especially for these contractors. we fell in love with the notion that if you can make it happen on a computer screen, you can do it. way too expensive. host: you called for a strategic review. we have seen reports that the pentagon is incapable of telling congress what they are spending their money on. guest: you can do a strategic review, but yes, we have had the very in paris in situation of the armed services committee in a bipartisan way, structuring two a administration's, doing an audit, dollar for dollar, telling us how they spend their money. it is true that they cannot do it in a traditional way.

secretary panetta just announced, i am not sure if it was 2013 or 2014, one of the dates that they would actually do that with. host: any, democrat, riverside, ohio. guest: -- caller: you sound incredibly intelligent. let me ask you, often the u.s.- built military bases to protect our access to oil. after 911, -- 9/11, i believe that the u.s. closed military bases in saudi arabia and to move those two aircraft. so, could you -- i think i am right about this? guest: you are. caller: can you tell me how, when, and why they would close one place and moved it to somewhere else? how many bases are all around

the world that are possibly not needed any longer? if you could also talk about the revolving door of defense contractors with our representatives, as well as their staff, often moving quickly into executive positions with defense. guest: i should have been taking notes. [laughter] caller: 1, the military. 3, there has been a huge push for military action against iran. the everett's, both in the bush administration, they quit right before the invasion of iraq because they so disagreed with bush administration policy. you have a web site called race for iran, which i highly

recommend it to the public, to get verifiable, legitimate arguments and information. there is such a push for military action toward iran. guest: actually, the primary purpose of military bases is to make sure that our forces can be deployed so that we can be the global force that we are. we have been the guarantor of peace since world war ii in many places. we take about of criticism about our bases in europe. europe does not meet our protection, etc., but many of those bases are there because they are ready for deployment to different places throughout the world. we have a very strong naval presence in asia. part of the reasons the shipping lanes stay open. i think that it is worth

stepping back and say that with the rise of china, european union, india, that it is the same model or not. do we need to maintain our presence? certainly, in asia. as china rises, countries around them are nervous. is there going to be a counter- balance? the caller is right. part of it is to protect our energy needs. oil, natural gas, we need to make sure that there is enough stability out there that it keeps flowing. as far as why they moved, much of it had to do with local relationships with countries. we had a strong military presence in iran before the revolution. you have to sort of build your relationships where they are. i think that we have a tendency -- i made this comment earlier

-- there is a tendency in the military establishment to fall in line with the notion of what our military can accomplish. wherever there is a problem in the world, dropped down 20,000 marines and it can be fixed. that is not really true. there are strategic points, but it should be a last option. the limitations of that often need to be better understood. -- the limitations of that option need to be understood better. military action in iran would be a huge mistake. people in government, in the defense sector, whether you have been in government or not, we have very strong ethics laws. people have gone to jail. people who have taken kickbacks for defense contracts.

you have to be constantly vigilant about that. that sort of corruption is something that we will always have to fight. host: here is the section of "the new york times," "u.s. pivots eastward to address an uneasy allies." host: we want to get your reaction to this e-mail from a viewer, who says this --

guest: a couple of separate questions in there. first of all, $450 billion is not part of what will be saved by specifically reducing the overseas contingencies. it is a matter of considerable debate. host: we are talking about two possibilities. guest: yes. within the super committee, and you can get close to that by counting what we will not be spending for iraq and afghanistan, going forward. those are different piles of money. look, when democrats were "in charge," a loose term given the 60 votes required in the senate -- but let's just go with that, for the moment. we were $100,000 a strong, still, in iraq.

president obama correctly said that as much as he wants to get out of iraq, he was going to be as responsible getting in and out -- something like that, so it took time. the president also said that afghanistan was a priority. that we needed to recommit forces there. during those years, it was an incredible drain on the national security budget. we have to work with -- look at our national security budget and find savings. i think that we can do it. as far as evidence about where money has been wasted, clearly we can be more efficient. host: we will

host: we will hear from richard in minneapolis. caller: why is everyone afraid of talking about the deficit reduction? what are you congressman supposed to do while they are talking? i have not seen anything on c- span about the meetings. it is illegal. bring those people out in the open, throw water on them. get them cleaned up. host: the deficit deduction committee has held two public hearings. go to c-span.org for our coverage of that. tomorrow, they're holding their third, and cbo director doug elmendorf is going to testify. guest: i would not suggest throwing water on them, but there have been many public

discussions. there has not been a lot to talk about at this point. there are not serious proposals on the table. they are dealing with the same challenges that led to the debt ceiling debacle in july and august. as members of congress, we are actively involved. we are also involved in a bunch of other things. the rest of us are not just sitting around, twiddling our thumbs. host: i can give you a network and a time for that hearing -- live coverage at 10:00 a.m. on c-span to. that is tomorrow, wednesday. lmjames, an independent in texa. caller: as far as the super committee goes, what they should be concentrating on instead of cutting the military -- i

understand they're talking about cutting the veterans and military benefits and making them pay for their own health care -- what they should concentrate on is cutting out social programs for illegal aliens and drug addicts on welfare. take 50% of the savings from that, put it to the national debt, and give the rest to military veterans. host: how much money are we talking about if we take away social programs? guest: if specifically you were talking about social programs for illegal aliens, you would not get far. you do not qualify unless you have some legitimate status. so, that is a bit of a myth. if you went after that you would not get very far.

we need to understand we borrow between 35% and 40% of every dollar we spend. that is an enormous deficit. defense is 20% of the budget. social security, medicare, and medicaid at up to about 40%. there is no way to soft pedal that. there is no way to balance the budget and not impact anyone. we need to put revenue on the table. yes, we have had a significant increase in spending and it is part of the problem, but a recent study said dead the deficit -- said that 58% of the deficit this spending, and a 42% is tax cuts. we need to put both on the table. if you are someone that is deeply concerned about the

national security budget and you do not want to see further cuts, if you do not put revenue on the table that is almost impossible to avoid. host: the chairman of the armed services committee sent his own letter to the deficit reduction panel and you sent a separate letter. are there areas you agree? why did you send a separate letter? guest: the main reason is i think revenue should be on the table. host: the chairman disagrees? guest: on a couple of occasions when back into all corner he has reluctantly said revenue, but that is not where they want to go and that was not in his letter. i think you have to put revenue on the table. i do not think it is responsible to go to the super committee and say do not cut costs. you have to give them some other

place to go if they're not going after defense, particularly in light of this debt reduction agreement, which i did not vote for. you do not give -- if you do not give the super committee someplace else to go, defense is going to be caught, so i wanted to put revenue in there. i think a strategic review can find savings in defense. the republican side's line has been that as a percentage of gdp defense is the lowest it has done. if we did these cuts, we would be down -- they go through for structured by force structure and save these are the devastating cuts.

i think we could be more strategic. what are all these forces for? what are they doing? what is our plan? where can we find savings. those of the two areas i disagreed. host: jordan, a democratic caller in asheville, north carolina. caller: i was wondering on what your opinion was on why we are doing this money spending on things other than here on our land. why are we not taking care of our poor, our drug addicts? why are we spending money on wars we do not really need? guest: there are two separate issues there. we do spend an enormous amount of money in this country. i have not done the percentage of the budget. social security, medicare, and medicaid are 40% of the budget.

if you throw in on unemployment insurance, and retirement pay, including four veterans, that is 55% of the budget. another good chunk is on infrastructure and education. the overwhelming majority of the budget is spent here at home. the small amount that we spend overseas -- you know, it is primarily driven to make sure we maintain influence in the world and given the global nature of the economy we need to do that. how much are we spending? are we spending in the right places? that is debatable. the second issue is did it make sense to do the military engagement in iraq and afghanistan. we could have a debate, but those commitments are been drawn down, so as we look at how we handle this deficit situation, that money is been saved. as far as whether we should have

spent in the first place, it does not do and is -- us any good deficit-wise. host: i have this tweet and guest: i think that is a fair point. when we were at debating after a number of different issues, the surge in iraq, the withdrawal, what we would do in afghanistan -- there was talk the generals wanted more troops. there is never a situation where the military says if you just -- where the military doesn't say if you just give us 20,000 troops, we could do this. basically, there is no job they do not think they can do. that is why we have civilian

control. he needed more balanced perspective. that brings us back to the column from senator joseph lieberman. there is this belief that if there are 50,000 troops, 100,000 would be better. that is simply not true. the ability of the military to shape and control situations in foreign countries has a limit. president bush said nobody likes to be occupied. can you imagine the u.s., if we had 100,000 foreign troops operating through any of our cities? it is not something that lends to stability. you have to balance out a variety of interests. the balance in iraq and afghanistan is we need to draw down and let local forces take care of their security situation. host: what about the situation in uganda?

what is our role? guest: that makes a lot of sense. the best way to think about that is the difference between 100 and 100,000. the point of the 100 is not to engage in military action, but to train and provide assistance to local forces. really, that makes more sense. a small number of our forces can create a much better secure the environment because it is locally-driven. i spent three years as the chairman of the terrorism subcommittee and the way they like to put it is by, through, and with the local forces. it is not about us. we provide the training and support. we are not part of the fight. a great model is the philippines. they have a couple of different

al qaeda sympathetic groups. we have a couple of hundred u.s. for -- forces that have been training the military, it's finding out what needs to be done with the local population . host: why uganda? guest: is on stable. there is a chance of a al-qaida been there. it is the worst humanitarian crisis no one knows about. you have the forces and driven out that i've gone into the area of the eastern town go. we also have the genocide in uganda and this incredibly destabilize situation. it is in the early-rich. you have china cutting deals

with warlords. that jeopardized the global economy, our interest, and it is a enormous humanitarian crisis. hundreds of thousands of people rotate in and out of refugee camps. one of the big drivers is the lord's resistance army, which at one point was a rebel force, and now they're just a group of thugs and terrorists who exist by raping and pillaging. tore trying to put a end that. 100 troops is a small investment to make a big difference. host: we will be covering this hearing on uganda why the 10:00 a.m. this morning on c-span. is this a model for other countries? why not do this in syria, for example? guest: i think it is a model.

it is where i want to go -- a smaller, lighter, footprint to effect change. why not syria? you have to have a local partner. in the case of uganda, the government is working with us. the syrian government probably would not work with us. the same with the philippines. they welcomed us in. you have to have a reliable local partner. not as part of a problem with the broader eastern congo. while i applaud the effort to go after them, it is a smaller piece of the puzzle. in the congo we do not have a reliable partner. the military is not great. they are as much a part of the problem as they are the solution. there is not a local partner. host: chris, a republican in

flint, michigan. caller: i am a disabled american who has been out of work for eight or nine years. a lot of my friends are in the military, too. one of them get back home and realize there are no jobs and no one in congress is doing anything about it other than the mainstream painting the picture, how hard would be for them to find jobs over people like me who have been here the past 10 years trying to find work? guest: there is no question the economy is in a difficult situation for everyone. the unemployment rate is 9%. the rate for veterans coming back is higher than that. we have to do a number of different steps to improve the overall economy. i do not think it is true that nothing is being done, particularly where veterans are

concerned. there are efforts in the house and the senate to do a job training, to get veteran's opportunities to get skills updated. second, setting skill requirements to hire veterans. one of the most important things we can do -- unfortunately, applying for a job has become computer-driven. the computer says you have at this point, that point, and to qualify to go to the next level. a lot of experience does not translate to that. they would be an asset to a number of companies but they do not fit the profile. we're working with local businesses to try to change the profile to create opportunities. it is going to be a struggle. the more skills you have, the better off you will be, but congress is not doing nothing.

we are focused on trying to help veterans returning home and get jobs. they have skills that could really help our economy. we need to make sure businesses are aware of that. host: rick, a democratic caller in new york. caller: thank you for the street talk. i appreciate it. i think my president could take a lesson from you. i was not going to go in this direction, if you would allow me to respond, i would appreciate that, too, but the super committee, i feel, should deal with the medicare and medicaid costs. 40% of our problem -- it is huge -- almost half of our problem is medical costs and rising medical costs. i will take myself as an example. medicare should be opened up to yonder, healthier buyers like me

at monthly premiums. i paid $530 a month to my company so that i can have health care coverage, and i do not use it. 80% of americans that have health insurance do not use -- i wish this matter would not be swept under the rug. i cannot understand why it is not talk about more and more. host: let's get a response from the congressman. you buyguest: when insurance, a certain percentage is not going to use it, otherwise the system does not work. it only works of some group of people are paying more than they are getting back. health-care costs are a major driver of our deficit. health-care inflation has gone off. this says infected individuals and businesses -- everybody who has to buy health care.

the government is part of that. no one ensures more people than the government. you have federal employees, medicare, medicaid, retired federal employees -- is a huge chunk of the budget. the inflation has a devastating impact. we have to come up with some way to control costs and health care. we had that debate over the course of the last two years. if people are excited about reforming health care but less excited about controlling costs and what needs to be done, but that has to happen. we could afford the escalating costs as we also dealt with the revenue part of the equation. revenue has declined significantly as the result of many tax cuts and a very 10 -- confusing tax code that allows many people to get out without paying their fair share.

host: another tweet -- guest: i agree. the notion that we were ever engaged in a war on terrorism was a misnomer. we were engaged in a war against al-qaida, their ideology, and their affiliates. they declared war on us in 1996. we did not take it serious at the time. it moves around a little bit because it is not just al qaeda. is there affiliate's and their ideology. -- it is there affiliate's and their ideology. they have their presence in pakistan, are trying to get back into afghanistan, are in the yemen, have a presence in parts of north africa, affiliated groups in the philippines. that is who we are fighting.

we are not engaged in a war against the basque separatists, for instance. it is more specific. host: there is this headline in "the baltimore sun." in an interview, he said if the u.s. were to go to war with pakistan, afghanistan would support its neighbor, pakistan, not the united states. guest: let's start with the good news toyota we're not going to go to war with pakistan, -- good news. we are not going to go to war with pakistan. it is what i have been saying all along. constituents from afghanistan have more in common with pakistan and the united states, and if those bubble up, he will need to beat be responsive to

his constituents. i think we're going to need to draw down our overall troops in the region. unfortunately we have huge national security interests. this is where al qaeda came from -- where the 9/11 attacks were plotted. it is much is it where much of their senior leadership does look at -- it is where much of their senior leadership is located. we're going to need a containment strategy, but it is going to be difficult. the population is not sympathetic to the u.s. presence, and president hamid karzai's comments underscore the reality. host: our last phone call, a republican in west virginia, van. caller: good morning. i just want to give back to the contractors overseas. we have 45,000 troops, and

65,000 contractors in iraq, with average saturday of -- salary of $441,000 for each contractor. they talk about jobs here at home. if we brought a few billion dollars of that money back here and get some jobs going for bridges, roads, and all the stuff they're talking about, we would not need to raise taxes on nobody. guest: i agree, or by reducing the amount of money we spend on contractors is a smart place to save money. i applaud the president could the decision to draw down forces in iraq and the 62,000 contractors to a much smaller number, which i think is somewhere in the hundreds or

just over 1000 head unfortunate, given where our deficit is at -- 1000. unfortunately, given where our deficit is, people safely to save money we would not need to do all of this stuff. you have $1.20 or $1.30 in deficit. you cannot just can't yet one place -- you can not just caught in one place. we need to look every option there is for revenue. it is not just one small fixed prepa. host: congressman adam smith, thank you. guest: thank you. host: up next, cliff stearns, looking into solyndra. first, a news update.

>> a new obama campaign memo is slamming rick perry's and mitt romney's tax proposals, saying the rich would benefit at the expense of the middle class if a republican wins the white house in 2012. the memo describes the plans as far right, and draws parallels to proposals by congressional republicans. texas governor rick perry will announce his economic plans today, and will propose giving americans a choice between their current income tax, or a 20% flat tax rate when he announces part of its plans for the economy later today in south carolina. he laid out his intentions in an op-ed piece in "the wall street journal." he is calling his plan to cut, balance, and grow. the only history professor running for president offered

stern lessons. newt gingrich said "i literally felt like i was the recess monitor on the playground watching those two kids," referring to the back-and-forth between the former massachusetts governor and current texas governor last week. finally, it looks like joe the plumber is about to become joe the candidate. the man who became a household name after question barack obama about his economic policies in 2008 will announce whether he plans to run for congress. yes fog the paperwork to run for congress and its -- he has filed the paperwork to run for congress. he plans to run as a republican in ohio's ninth u.s. house

district, which is currently head by the longest serving democratic woman in the house, who is expected to face a primary challenge from in tennis to spinach, after their districts were combined. those are some of the latest headlines on c-span radio. >> from the texas book festival -- >> the president's strategy is cutting off the head of the state. that has been the idea, unfortunately, the reality has been different. >> while almost all of the other founding fathers are thinking about, and is on the eastern seaboard, jefferson is dreaming of his empire for liberty that will go all the way to the mississippi, and even to those great harbors on the pacific -- san diego, monterey, and san francisco. >> so, i had covered the

military and the cia after that in the years before and after 9/11 and as a reporter i have seen things grow up around me that i was not sure what they were. people i had known for a long time disappeared into world's debt did not exist before, or they had titles for agencies i have never heard of. after working in that realm you say what is going on? >> i decided to call it the ripple effect, which was a chapter title because i realized every time we use water it sets off a ripple effect -- a series of consequences most of us are not aware of >> watch every event booktv covers of mine. watch when you we what you want when you want. >> although this headline proved false, dewey's defeat by harry truman was iconic, and to continue to impact political

history. follow the career of thomas e. dewey, a dominant force as three-time governor of new york. "the contenders" live from the roosevelt hotel in new york city. >> "washington journal" continues. host: we are joined now by congressman cliff stearns to is been leading the investigation into solyndra. your investigation has been building toward having secretary steven chu come to testify. when will that happen? guest: we are hoping it happens before thanksgiving. we are going to ask the legal counsel for secretary steven chu to come forward and explain why and how they supported the roughly half of $1 billion

through two private hedge funds. at that point, all the tax payer money was subordinated to these two hedge funds. host: i want to get into how that subordination worked, reports have come up that the energy department has offered steven chu to testify next week, and you and several members of your committee said you wanted to come in s soon as possible, why not take them up on the offer? guest: first of all we are pleased that he wishes to testify. i know some people have less for his resignation, but i think he should be given every opportunity to present his case. of course, it would be under oath. he made the decision when he came in, and i think the council he inherited perhaps did not

wish to assign some of these documents, or perhaps the council he set up decided to come up with another analysis, but i think we should like to hear from him and give him a fair opportunity to explain his case. but, before we bring him and, it would be nice to have this council, the people that signed the oath, and perhaps the council he inherited. on the last hearing we had been chief financial officer of the treasury department where the checks are cut. they create money, and basically transfer it to the department of energy, and the department of energy gives out this money. it is not a loan guarantee. there is no private, commercial bank involved. essentially, the treasury department is spending the money, giving it to a doe , who gives it out to all these

companies. that is basically what happened. host: we are talking to congressman cliff stearns of the sixth district of florida. you want to ask questions about solyndra or any other issues give us a call on the democratic line, -- host: congressman, you said some people have called for secretary steven chu's resignation. do you think he needs to resign over this? guest: before i would commit on this i would like to hear from him personally. i think he should be given a fair opportunity to present his case. as you know, one of this council has indicated their interpretation of the policy act of 2005 is they could

subordinate, so let's hear their side before we make a judgment. host: let's explain the subordination. what do you think actually went wrong? was a law broken? explain the subordination issue that seems to be the crux of the energy and commerce committee's investigation. guest: is one sentence that basically says you cannot subordinate any taxpayer's money. host: we have that sentence from the energy policy act. guest: if you could show that, that would be good. host: this is the section under which this loan was given out under. section 17 02 states -- the obligation selby subject to the condition that the obligation is not supported to other financing.

guest: white. as it turned up -- right. as it turned out, secretary berner said in his 28 years he is never seen subordination to taxpayer money to outside companies like these two hedge funds. so, we have the chief financial officer of the treasury department categorically saying it has never been done. that is 28 years. now we have this back the by the energy policy act to host: what you are saying is it legally cannot be done? guest: you cannot legally subordinate. host: this is from "business week." the council for the energy department wrote a justification for when this happened, and she broke "-- wrote -- "the secretary brought authority to

take engines that would protect and maximize the interests of the united states." it is their argument that he could take this step if he thought it was in the best interest of the taxpayers, regardless of what other parts of a law said? guest: we have a constitution and a set of laws. council cannot decide on her own, or her council representatives, what is in the best interest of the united states. you have to follow the law. in this case, she did not care she needed value judgment based on this company -- did not. she made value judgment based on this company -- deere predicted to go bankrupt two years ago. they were pathetic investing. she is taken as one sentenced to you just read and interpreted that the united states'best interest is to subordinate taxpayers? that does not make sense.

if they have threaded $35 million at risk, why would be in the best -- $335 million at risk, why would it be in the best interest of the united states? host: they are saying this was sort of a bailout at the time, this was in the best interest of time to keep solyndra going for a longer, correct? guest: right, but they had red flags from the office of budget management, from the department of energy, from mary miller when she sent e-mail to the department of energy saying you should go to the department of justice to get a legal roller -- ruling on this. host: mary miller is with? guest: the treasury department. here you have these red flags. secondly you have people in the administration that said go to the department of justice to get a ruling, yet this lady went ahead and said in her opinion,

it is the best interest to subordinates taxpayers. it does not make sense, and when you read this sentence is clear you cannot do it. host: you have seen something like 78,000 pages of documents. have you found a smoking gun here yet? guest: i think we have. the best thing is to bring in the council, and the secretary of energy, and let them present their case for the american people. if, in the estimation of the american people, he broke the law, then i think that would be clear that there was no justification for what he did. host: of austin is on the democratic line from waldorf, maryland. good morning. are you there, austin? caller: i think this $500 million is a drop in the bucket. how come you're not

investigating the crooks on wall street that brought the country down? if this company had not gone bankrupt and succeeded would you still be investigating them? thank you. guest: if the company does not go bankrupt and is successful, they would not be in the headline. in this case they were a poster child for the administration. the president and vice president were touting it as all of the new green energy they were going to do. that is perhaps the one we looked at first because the president said it was the best and the most advanced example. drawing an analogy to wall street, me and many other people think a lot of things that happened on wall street were wrong, people should have gone to jail, and the commission that looked at it came up with their conclusion which is something i do not think the majority of americans agree with.

i did not think they're the same things. you're talking about solar manufacturers of panels to create jobs in america and the financial crisis in 2008. my committee does not have jurisdiction over wall street. host: we had your colleague on the investigation on recently to talk about not just the solyndra investigation but the entire department of energy loan program. i want to listen and give your reaction. -- get your reaction. sorry, we will pull them up. guest: you could tell me what she said. host: one of the issues she brought up is that we should investigate all of the doe loans, and that is something you have asked for. guest: i have asked for more

than one. sun power is one we have seen toyota it turns out most of the jobs will be in mexico -- scene. it turns out most of the jobs will be in mexico. i s for -- i have asked for looking at tesla, which is making these high-end automotive parts that are all electric, cost over one as a thousand dollars. it is a high-end market, and that it cannot go the defeat the distance as a guest car, so we -- they can not go the distance as a gas car, so we have to wonder why we are giving this money to the high density to cars. host: you're talking about the loan program that was started in 2005. total money given out was $35.9

billion under three different kinds of programs, solyndra been the 17 05 program, which was $16.2 billion given out. have any of these other companies gone bankrupt? guest: no, but evergreen solar went bankrupt. host: have these been given department of energy loans? guest: these have money from state or federal loan guarantees to develop solar manufacturing, and in all honesty the solar manufacturing markets dropped because of the huge amount of china bringing over here solar panels to flood the market. so, that hurt the american companies. i understand that.

host: did think the department of energy loan program was a bad idea to begin with? when it was passed there was money put into it to fund projects that may not have worked up. the point, as i understand it, was that some of these projects would not work out, is that correct? guest: there is a possibility date suggested some would not be successful, but they did not think in terms of this amount of money, and also did not realize that a lot of this money was going to manufacturing instead of research and development, which would provide incentives to have spinoff companies. when you log into the market and decide winners and losers -- when you move out into the market and decide winners en barack -- winners and losers, that is the government doing venture capitalism. we did not want to get involved in that.

host: nicole is in lancaster, california. good morning. caller: good morning. my three comments -- 1, what is intent to do about space junk. how does he fare with quicker, faster, u.s. printing press among the international world? host: a few questions on green energy jobs in general, but is there when you want to take, or do you want to stick with solyndra? guest: the president made a strong case he would turn the country around by using loan guarantees to deal with wind turbines and the manufacture of solar panels. i do not think that is going to happen. when you look at the solar

panels and wind turbines they're not necessarily economically viable, and at the same time china is doing the same thing with cheap labor. there are no environmental or safety conditions in china. they also have ready access to raw materials. if there is so much regulation in this industry in this country, it is more difficult for american companies to compete. that is why some of these companies are subcontracting manufacturing to finland, for better is, or mexico. the long and short of it is that is an area we would be better off using the technology we have from aerospace and nasa to try to come up with a competitive advantage should we have that the chinese do not, and put that into solar panel manufacturing. if we're going head-to-head, he will be difficult to compete.

host: this is a column today from "usa today" from the director of the copenhagen consensus center. he writes instead of building factories for the likes of solyndra, money would be much better spent on relatively inexpensive research and development across a vast number of exciting but still-to- expensive ideas is that something you would agree with? guest: absolutely. you just made my case that we would be better off, instead of going out and giving money to these manufacturers of solar panels to put it in research and development and come up with that advantage of that would give us a patented ability to

compete on. host: does the government have a role in the deployment stage? that seems to be the point from the doe. guest: in america, we believe deployment should be done through the free market because that way the rest becomes not of the government or the taxpayer, but of the company that is taking that risk. they are much better at doing this than the government. secondly, the due diligence as required in the private sector is much more thorough than the united states government can do, particularly the department of energy. they cannot do the due diligence. the point is we should do research and development, come up with a competitive advantage, and use that to go forward. host: a comment from robert on twitter.

guest: that is what i feel. we are dealing with a communist country. they do not have the environmental safety regulations we do, nor the labor conditions. if america is why do have free trade with a country like that i think we have to be very careful. in this case, i did not favor a huge amount of free trade with china because i was concerned about the irregularities in the agreement. he and adam smith indicated that if you're dealing with the country that does not play fair, you have to react. in many cases, china has not played fair. host: david is from saint louis on the independent line. caller: that brings up the point i wanted to make. i do not know you, your politics with regard to the obama administration, but it looks like you are intending to

investigate mostly obama administration professionals, when it seems to me that an investigation of the economic warfare being practiced by the people's republic of china -- knowing solyndra's costs, deliberately subsidized it and under cut it to put it out of business. that needs to be investigated, and tarriffs need to be raised in order to keep it from happening again guest: you make two good points. i have jurisdiction on the executive branch. that is what the constitution says. i cannot go into that area of china, or investigate their trade policies. that is not my jurisdiction terror i wish it was. i would certainly bring in -- jurisdiction. i wish it was. i would certainly bring in officials to say that china is

not playing fair. china is subsidizing their solar manufacturing at $30 billion a year, and giving free land to companies, and flooding the market with cheaply-done solar panels. the consumer looks at a price in this economy with 9.1% of employment and they will buy something that is inexpensive. china is -- unemployment, and it will buy something that is inexpensive. china is doing that. we have seen it happen with televisions from japan, with video recorders, and we lose manufacturing jobs and in the end we lose as a country. i think we need to be realistic that when countries are taking advantage of our free and open society, we have to react. adam smith said the same thing -- we need to protect our companies that are manufacturing with people that are actually continuing to do on

fair trade practices. so, i think that is very disturbing. host: again, talking with congressman cliff stearns from the north florida district. last week a panel asked the federal government to start the iffs.ss of considering tarr is that something you would support? guest: we should have a hearing and established in american minds that china is doing this, and we should react and say if they continue to do this, we're going to do something. lots of countries react if you take action. in this case, i think the united states should take action if we find out there is an enormous amount of unfair trade practices by china host: back to the phones.

norwalk, conn., on the democratic line, nicky. caller: congressman, is great to talk to a republican. i want to mix three points, and it will be about the solar situation, but first of all, a 40-year registered democrat, a tea party member, and getting into fights with people over my points of view with defending republicans. once i get over that, i want to make another point. you have not mentioned, or maybe i did not hear right, nancy pelosi's brother-in-law, getting three-quarters of $1 billion. he is an investment firm that is investing in solar reserve, which has another name. that is pretty much it. thank you for letting me make my

points. it is great talking to you, and i did want to say one more thing, please, guys, get in there, and make sure you have a voter id registration, so that when people go to vote at the polls they have to legally show their legally able to vote. i work in the polls, i see it, and i do not one voter fraud next year. host: on the solar energy? guest: i think he is a bloated -- alluding to what was in the newspaper about nancy pelosi's relative. this is a general statement. i think there is a sense of alarm that we have people who are wealthy donors to the obama administration and to the president for when he ran for president, and bumblers of money seem to be involved with these doe loan guarantees.

they are investors in the company in which taxpayers' money is placed. that seems troubling. when the white house dump their communications on us about a week and a half ago, we went through e-mail and saw continually people that owned hedge funds that were investing in these solar manufacturing, wind turbine, shall we say, limited partnerships, or in this case, corporations. so, i think it was troubling because throughout this process we continually see these people have access to the white house, the west wing, the inner circle of the white house, asking and questions, and at the same time there are investors in these solar manufacturing companies, and that should be disturbing to the american people.

host: do you just not believe the white house's argument that the subordination decision to give solyndra in the first place was made by the doe staff members whose job was to cross the numbers? guest: i did not think their own staff thought it was a decent investment. we have e-mail from them the same they were worried about it making cash flow. host: doe staff? guest: doe and omb. host: this is the office of management and budget, who doe has to run the loan through? guest: right. the rance emails, and doe did the same thing, to pare the long and short is there is absolutely

no reason to some -- same thing. the long and short is there was no reason to subordinate tax payer money. we have e-mail showing there was no way this company was one to make it. we had a senior loan officer, jonathan silver, resign one week after he was under oath. we brought the ceo of solyndra again, and he resigned shortly thereafter after not testifying. host: did you reject that silver's leaving was not belated to this program? guest: it might have been. host: do you believe someone should lose their jobs over this? guest: my experience is people have resigned under an arrangement that does not bring out the truth in what has happened. so many people have problems,

and in the end they just resigned, and a revision of the fired, and some need to be prosecuted. host: does anyone need to go to jail with solyndra? guest: i did not know if we can say that today, but if solyndra is a prototype and that -- example, then i think we have serious problems with this whole idea of giving tax payer money to manufacturers who are developing solar panels and when turbines. host: congressman cliff stearns from the six district of florida. we will go to carol, on the republican line from michigan. caller: going back to nancy pelosi, do you think it is a coincidence that her brother- yes meet brother-in-law was on the board, and money was going back to california? guest: coincidences' a good

word. i have seen it time and time again where people bet of supported the president are involved with these investments and also have the id vantage of talking to the white house and try to get them -- also have the advantage of trying to talk to the white house and get them to process these. we have an example of someone pushing the solyndra loan, and at the same time his wife was the legal counsel of solyndra. they ended up giving two $0.5 million to this law firm, and he was in the department of energy pushing cylinder. he then felt uncomfortable, and had an ethical review of the situation, and actually got a written opinion saying he should not be involved in solyndra, he should recuse himself. he said he did, the three days later we have an e-mail that he is pushing solyndra.

that as an example of people that are intimately tied to the administration, giving the money, actually thinking they have a responsibility to coordinate some of this tax payer money for investments. host: this is an article from " latimes.com ." host: will we see some of these people come in? guest: this is a good example. mr. speyer had an ethics violation in my opinion. the fact that his wife earned from solyndra, i would like to see that bill. i think it is $2.4 million dollars to be exact.

i do not think he should be involved. host: are these people we will see come in before steven chu comes in? are you saving him for the last one of these? guest: i think secretary steven chu is perhaps our prime, top- rated witness because we want to demonstrate our opinion that this is against the law -- what they did, the energy policy act, and we want him to explain why they did this. going back to the question we just got, and what you referred to, is if we see these people that were part of this process and we still see them helping the president, you understand that if the president gets reelected they will be back in the process acting -- asking for more money, and i just do nothing that is right.

host: if you have that question for steven chu, you want to hold off on asking that? guest: i think we will bring him in on short order. my druthers would be to talk to the council. you had mentioned her and others. we talked about her opinion, and try to understand why she made that, and then after we get that, then have secretary steven chu confirm -- does he understand? some of her memos do not go to her. they go to him, so he could claim he was ignorant of for memos, which is really far fetched. when you are doing an investigation and you have this amount of detail, i think you should move systematically and carefully on this and progress in a way you understand all the people, how they made the decisions, and then bring the top guy in last. host: a question on twitter from jim.

is there an energy source that governmentguest: subsidizing isr word than loan guarantee. that means the free-market goes out and takes a risk and it's the tax benefit. they can be subsidized for the research and development. we do that across this country with universities, and we do it with energy companies, too. we do it in the petroleum industry, but we do not go out and necessarily have venture- capital us like we do to the loan guarantee. an independent from florida. caller: you gave the republican the question, and he did not even ask for them. let me make a statement, and then asked a statement. it is so hypocritical of you to criticize mr. chu, he you not

only voted for, but gave contributions to our governor and pleaded guilty at stealing $1.7 billion from the taxpayers of the state of florida. the lieutenant governor is right on the verge of being indicted for charging me and you for $375,000 on a building that don't exist. host: can you respond? guest: in this case, he is making the charge that gov. scott had these problems with medicare, and he had all ultimately -- ultimately he did leave the company, and he did have to restore money, but the calller is making that comparison. i have no jurisdiction over the area that the governor was involved with. i did not know anything about

the governor's position, other than he won the governorship of the state. i'd think he is doing a good job. i think the calller is making the comparison that the people of florida decided they wanted that governor, and wanted gov. scott to be our governor, so i respect the people who voted for him. host: tim, a democrat from morocco, indiana. -- from rockviell, indiana. caller: the united states has the best investigative division in the whole world, and i am kind of wondering why the investigation is being done by politicians, rather than the fbi. they can forward the information to the fbi, but they are the ones that do the investigating,

especially on the federal level. guest: i think your question is applicable. we are responsible as members of congress to do oversight investigation, which we do. we have that responsibility under the constitution, but the fbi is going to look at them, too. bankrup, twpt, twokrupent days later the fbi raided them. we are trying to understand how the loan guarantees for processed and trying to do understand if the department of energy was small pieces and try to make sure this does not happen again. s and tryingpiecalfiese to make sure this does not happen again. host: the treasury department is

also watching its own investigation? now as i understand it the government and the oversight committee might be looking into this, too, right? guest: they're looking at the broad sector. host: what have your conversations been with him? or aree lanes blending are yo you clarifying that you will take stalingrad and they will take a broader program? -- take celindra. obviously there is a lot of people looking at this, and in many cases they should continue

these investigations. host: is there a timing on one of when these will be completed? guest: when we get the secretary, the next up is to try to look at other companies and evaluate them and come up with a broad consensus of what went wrong and try to provide instruction, whether it is legislately or through instruction on how the loan guarantees should be done and out what point should we not be involved with this type of what i say is government and capitalism. host: a question over e-mail -- guest: no, and i think we demonstrated under the bush administration they specifically said they should not go ahead with solyndra. i think the bush administration

is clear to that. host: but the loan program was part of the 2005 -- guest: that is correct. solyndra itself was not approved by the bush administration. it has specifically declined, and we have the documents that show that. the long and short of it is it was pushed by the obama administration once it came into office. host: ralph is a republican from clayton, new jersey. good morning. caller: good morning. i have two questions. the first question is this solyndra thing. in 2008 they contributed to the democratic party. it also contributed twice as much of republican party. i am a republican. -- it also contributed twice as much to the republican party.

as long as you keep taking the ateps were taken, i know lot of republicans besides myself that will go democrat. host: are using would like to see these loans continue? caller: i am saying i would like to see the whole jobs act passed so we can prove one way or the other whether it will work. as far as i am concerned, if you do not let it know that it don't work, i am voting democrats. guest: it is true that solyndra lobbied congress and entreated money, which is another are rich to think the taxpayers guarantee top a billion dollars to this company, and then they take some of this money to lobby congress and provide contributions to people in congress, i think is wrong. his major point is the proof is

in the pudding. let's go forward and if it succeeds, that is one thing. if it fails, the american people will see that is the wrong direction. he is basically saying let the president's job act go forward, and let's see what happens. i understand that, but of course you could do a lot of damage in between. in fact, the jobs act that the president pushed before the senate never got to a vote, because even some of the democrats did not want to vote for it. this is pretty much the whole plan the president proposed, except senator reid added a millionaire's tax. in the end, the jobs bill is dead, and i think many in congress on the senate side and house do not think the president's plan would work. host: salvador is an independent from kentucky. caller: you're talking politics.

i want to talk about energy. i know something about energy. i worked on the apollo program. as this president came into office and made the remark we can make the transition from fossil fuels to green energy in 10 years because we put a man on the moon in 10 years. we use existing missile technology to put a man on the moon, and we did not technique -- 10 years to get in there. we took 10 years to get him back. we took a capsule with a human being on it and sent it into space. the problem was getting the human being back to earth. this nonsense about green energy is just that, nonsense. host: to you have an estimation of how long it would take? caller: it would take 40 years to get viable energy other than fossil fuels. wind energy and

have been around for generations in holland. there isnnanels, nothing new about them. you cannot run new york in chicago with solar panels, it cannot be done. guest: you just heard from a physicist. i think he spelled out clearly will take 40 years to transition from fossil fuels to clean energy. what he is saying is in the in between time what we should do is develop the energy we have, the resources we have, whether it is no clear or coal, and if we shoulwe can go to the moon, e should be able to use them cleanly. i think what he is saying is we're kidding ourselves if we think we can transition from fossil fuels to windmills and solar panels, not to mention how many solar panels you would need

or how many windmills you would need to develop enough energy to run a large city. host: your energy and commerce committee is holding a hearing today on the status of online gambling. can you tell us what options are on the table right now? as i understand, there is a bill to legalize it in the united states? guest: there is a bill to legalize it for poker only come up but we passed recently a bill in congress to say no internet gambling on the internet. we did this by outlawing the use of credit card and money orders and money transfer, and that pretty much stopped it. now it has all gone overseas and done illegally. the people that are advocating internet gambling are saying because is going overseas, we're losing the tax revenue, and also, there is a lot of fraud. that fraud will occur anyway. secondly, i think the other side

of the coin is we want to have internet gambling, which would be poker possibly, there will be all kinds of gambling on the internet. for people that are addicted to gambling, they have the computer in their study in bedroom in this addiction would increase, so the trade-off is -- host: you are saying it would be too easy? guest: and also, children could get into it. children have a problem with pornography about lying about their age. the majority of congress when we passed this bill felt legalizing gambling on the internet was not the way to go, and now there's a bill to open it up for poker only. and then perhaps you will have a gambling across the board in sports and everywhere. at this point i support the status quo. the hearing is important, and i compliment the chairlady for

having this hearing, because i think we should hear both sides and have a new understanding of what the other people feel. host: is there a time frame for when we might see this bill come out of it? guest: i do not think there is a time frame. i do not know how many coats- hunters there are. my concern is that if the bill was brought up they would put in gambling across the board, and not just for poker. host: last question on solyndra, what is the next step? guest: we will bring in the department of energy and asked them to explain the memo saying why they could support host: hos -- host: you are also asking for documents from the white house? guest: we're having a little bit

of trouble. the president indicated he was going to be transparent. we have specifically asked for these documents. i am not sure he is going to claim executive privilege or we will have to subpoena the documents, but i think it's better to understand how this happened and bring in the council and explain why they subordinated taxpayers' money. host: thank you for coming in. of next, a discussion with john steele gordon on the political implications of the federal income tax. >> here are some of the latest headlines -- muammar gaddafi, his son and top aide were buried in an islamic ceremony at dawn today in an undisclosed location with a few relatives and officials in attendance. while it closed the book on his nearly 42-year rule, it did not silence international calls for an investigation into whether he

was executed by his captors. the defense secretary is declining to say whether the obama administration wants to now establish military relations with libya. at a news conference today in tokyo, the secretary said the u.s. would take its lead from nato. he said the immediate u.s. concerns are focused on the possibility of providing medical assistance to libyas wounded in preventing weapons from falling into the wrong hands. in brussels today, a key member of the parliamentary cabinet said even boosting the your resounds bailout fund might not be enough to calm market worries over the crisis. he says the european central bank might have to continue buying the bonds of nations like italy, even after a summit of european leaders tomorrow. at a hearing on europe's debt crisis will be live at 10:00 this morning. finally, home prices rose in august. in half of the major cities

measure -- measured by a private survey. standard and poor's case schiller index shows prices increase from july to august in 10 of the 20 cities attract. the greatest declines were in atlanta and los angeles. however, analysts are warning home prices are likely to fall begin waonce banks foreclosures that have been delayed. those are some of the latest headlines on c-span radio. >> middle and high school students, it is time to get those cameras rolling for this year c-span student cam video competition. make a 5-10 minute video and get it to c-span by the deadline of january 20, and you could win the grand prize of $5,000. for complete details go to studentcam.org. >> although this headline proved

false, dewey's defeat proved iconic. follow the career of thomas do we -- of thomas dewey. "the contenders" live from the roosevelt hotel in new york city. >> "washington journal" continues. host: joining us from new york this morning, john steele gordon. he is written a book. our topic is the history of the income tax. when was the income tax first introduced and why? guest: the first income tax was during the civil war, and that tax lapsed in the early 1870's. the personal income tax was

reintroduced in 1913, following an amendment to the constitution, which made it possible. host: what were the circumstances in that time that the income tax was introduced? guest: after the civil war, the government's revenue came overwhelmingly from the tariff, which was very high in order to protect american industry from largely british competition, and the government was also running large surpluses, but the tariff is a consumption tax that is added to the price of the imported goods, in consumption taxes are always are regressive, because people with lower incomes spend a higher percentage of their income in buying the necessary goods and services, whereas a very rich man might earn $10 million per year but only spend 2 million. he would only be paying tax on 2 percent -- 20% of his income as opposed to 100% of his income.

a lot of people thought this was very unfair. 89 before they introduce an income tax that would of only affected the rich, -- 1894 they introduce an income tax that would only affect rich. the supreme court ruled that illegal on a rather strange basis. there was one justice who was sick. he was known to favor the income tax. he was sick, so the court ruled 4-4. reargue.ided to every argu it was 5-4 against the income tax. one of the other justices switched his vote. there was no income tax. the pressure to have an income tax to make the rich pay their fair share continued. the supreme court became more

liberal, so at one point in 1909 they wanted to simply reintroduced the old income tax and defied the supreme court and say make it illegal again. president taft, who revered the supreme court and would later become chief justice, he did that idea, because he thought it would greatly limit the supreme court's prestige and power, so he suggested a very lawyer -- loyal alternative, the corporate tax, which was technically an excise tax, not an income tax. he argued that at that time only the rich owned corporate tax and a corporate tax was not a tax on the rich. that was adopted. they pass a constitutional amendment through to pass the personal tax. in 1913 that tax was instituted. host: firewood -- would grow

wilson?row guest: yes, and the democratic congress. it applied mostly to the upper middle class and above. i believe it was a 1 percent tax on incomes above 3000, which was a very comfortable income in 1913. it went up to 7% on incomes over 500,000, which at that time was a colossal income. host: going back to the ruling by the supreme court, what does the constitution say that the court decided to rule against personal income tax? guest: the constitution says any direct tax must be apportioned among the states according to population, which is obviously impossible with an income tax. the question was was an income tax a direct tax? the term is undefined in the

constitution. a delegate to the constitutional convention in 1787 asked the question, what is a direct tax? and she got no answer. in the 79 these the supreme court ruled a direct tax was any tax that could be apportioned among the states according to population. the phrase was hanging there in mid air, and the supreme court of the 1890's, a very superb -- conservative court, use that as a hook to call the income tax unconstitutional and rolled it was a direct tax. host: when the constitution was amended, what language did they use to get past what the supreme court felt was the direct tax? >> the amendment simply allows a personal income tax without regards to the state. host: you also mentioned the corporate tax. was that supposed to be

permanent? guest: taft succeeded to be a temporary stopgap until the personal income tax was enacted. then they kept the corporate tax, and let it as it was. that has been a source of enormous trouble for the last 98 years, because the taxes are completely uncoordinated. it is as though corporations were owned by margins -- marcion's that would other beat -- otherwise be untaxed. nowadays many are not rich at all. >> you wrote recently of the wall street journal, or -- short history of the tax. in the peace to talk about having a personal income tax and corporate tax, saying it has deeply pernicious effects. what are they? guest: it allows people to game this is done by switching between the taxes. for instance, in 1917, the tax

on high incomes went through the roof. it went up to 77%, and the corporate tax with 35%. many rich people put their assets into a corporation so it would be taxed at 35% instead of 37%. that has been going on ever since. today the income tax code is 100 times longer than the bible. i am not sure anybody knows exactly how long it is. it is huge, because as people would game the system and come up with new gimmicks to get out from paying taxes, to avoid taxes, congress would then enact laws that either forbade that particular tactic or would regulate it. sometimes would even encourage it. the tax system got longer and

longer and longer until it is now almost incomprehensible. host: the federal tax law pages, in 2011 those tax law pages, 72,536. in 1913 it was only 400 pages. the irs tax code is currently three volumes for a total of 4333 pages. if you look at the current 2011 tax rate, those making over 379,000 tax at 35%. if you make between 212 and 379, if you have a 13% tax rate. 69,000 to 145,000, 25%. the tax rate for those making 17,000 to 69, 10%. how has this changed over the years? guest: it is -- the top marginal

rate has gone up and down. it went up in world war i, as you would expect. it was cut severely in the 1920's and rose again in the 1930's. in fact, 1932 as the depression was getting ever deeper, congress raised the rates on income taxes to help balance the budget. it was an absolutely disastrous decision, one of the real reasons that had been an ordinary recession turned into the great depression. and up until the 1950's, it peaked in 1953 at 19%, which means if you earned an extra $10,000, you only got to keep 700 of it. in 1964, at the kennedy tax cuts proposed by john f. kennedy, enacted under lyndon johnson, cut the top rate to

70%. in 1981 under reagan it was cut to 50%. in 1986, when reagan and tip o'neill made a grand bargain, it was cut to 28 percent signed. and each time they cut their rates, what they did is they got rid of a bunch of loopholes. for instance, in the 1950's when you had a 93% tax rate, all interest costs were deductible, regardless of what you borrow the money for. -- borrowed the money for. the improved tax situation called the economy to improve, revenues wentenment up. host: rick is the first calller on this, a republican in middletown, new york.

you were on the air. caller: i was wondering if you could tell us if you have ever ridden -- read the book, the one that ron paul pushes a lot? i believe the federal reserve and the income tax reserve was enacted at the same time in 1913, and the holding with , could you street' tell me your points on ron paul, if he is talking accurate? i appreciate your -- host: if the history of the federal reserve. to coincide with the tax? coincide with the tax? guest: yes, it did, but that was coincidental. the only with the panic was avoided was it was j.p. morgan

as the central bank of the united states, and there has been a long history of opposition to the central bank, such as ron paul represented today. so we have done without a central banks and 1836, and the result had been a series of severe financial panics, followed by extended times of economic depression. we have panics in 1837, 1857, 1873, 1893, and 1907. j.p. morgan ended the one in 1907. people realize that while they might be able to function as a central bank, he was not going to be around forever. in a modern economy they simply had to have a modern big -- central bank. it took them six years to figure out how to do it. host: mr. gordon, here is a tweet from joe --

guest: well, the people did not vote for the income tax. it was enacted by congress. certainly the public pressure was that the rich were not paying their fair share. fairness tends to be in the height of the beholder, but there was no question the rich were paying a much lower percentage of their income in taxes to the federal government then word the less affluent. the public pressure was that these people should be paying more integral taxes so the less affluent people could pay less. host: was the government at the time be -- able to be in the black with having a terror attacks and not having an income tax? guest: yes. throughout the late 19th century and up until world war i, the government ran consistent large surpluses. in 1884 government revenues exceeded outlays by 34 percent

signed, which was a colossal surplus. the only reason it was there was because the tariff was being used not only as a revenue source, but as a protection against european competition and the industrial northeast was politically dominant in that time, and people like j.p. morgan wanted high tariffs to protect their industries. the tariffs should have been lower. host: barbara is up next. we're talking about the history of income tax. caller: my question is i do my tax -- i do my income tax every year, and as a single individual, i pay more than a family rate. since there is so many single people, could you tell me the origin of constitutionally how they could charge me as a single individual more than they do a family? i have a second part.

why in fact do most of the welfare recipients not have to pay any tax at all since they take so much from our government? guest: well, why we have different rates for single people and very people has been -- congress has used the income tax as a means of political gaming in order to win votes. politicians have a tendency to do that. over the years they have targeted one group or another in order to help them out or appear to help them out. remember what politicians love is headlines. the headline, senators' new moves on income tax for singles. -- "senator snoot moves on income tax for singles."

this accumulates over the years of the week of this tax code that makes the bible like " reader's digest." there's not much point in the government paying the money to prevent them from lapsing into a party in taxing the money back away from them. host: here is another treat for you. -- tweet for you. guest: people have said the prohibition, which was gathering strength in 1913, which was the government would be losing the exercise -- excise tax on liquor, and that would certainly be true. i do not believe it would of amounted to that much as to how much the government was receiving and liquor excise taxes. today it is about half the price of a bottle of whiskey is federal and state taxes. we drink a lot less per capita now than we did in 1913.

and the income tax was more to do with fairness than it had to do with gaining revenue. host: john come republican in florida. -- john, republican and florida. caller: i think people have bought into the lies that taxes are there to make rich people pay their fair share. people like rockefeller and morgan, these guys did not come up with the idea for the tax at of the goodness of their heart. they will benefit one way or the other. these are the progressives of the day. i ultimately with an income tax you end up with bigger government, and it benefits the large corporations by unfairly burdening smaller companies, which treaties -- decreases competition for the large

companies. we look at the bankers. if we did not have an income tax, people would have the extra cash and go out and buy a new car every three years or so. now you are forced to go to a bank and get an interest rate. these guys profit from the income tax, whether directly or indirectly. guest: yes, in some ways they do. certainly large companies can deal with what of the situation is better than small companies, and they have often used that not just with taxes, but large drug companies can pay the enormous cost of getting through all the hoops that the fda requires before a drug is legal for sale much better than a small company. they are using it as anti- competition device, but it was sophie tucker that said i have been rich and poor, and believe me rich is better. there is a reason to be rich. maybe you have more influence.

the very rich man can call up his congressman and getting -- and get him right on the phone. host: is common to add to the conversation -- this comment to add to the conversation -- jean, a democrat a calller from texas is next. and caller: i have a solution for the whole bunch. tax the foreign companies coming to this company, and tax the rich people and republicans. i sold my house two years ago, and i have lived in an rv, which is to under $50 for rent. my big has always been $250,000 per year, and it was paid for. they were still punishing me for texas for these big school districts so our kids can get a better future. that is stupid right there.

host: that brings up the mortgage interest deduction. what is the history behind tax credits? what is the history to the code? guest: they were introduced mainly in the 1930's, and never sends politicians have been using the tax system as a means of what they called tax expenditures, rather than the government sending you the check, they allow you to deduct it from your income tax. and this has -- for a long time the government policy was that people should own their own homes if it was at all possible. one of the ways to help that out was to allow the debt -- deduction of mortgage interest. we have had too much ownership, and the result was the problems with that ever since.

i am not against tax expenditures. congress wants to help out the ticket individuals or encourage them to do particular things, then congress should pay for it. they should appropriate the money, rather than do it through the back store of the tax code where it is not as visible. host: has anyone ever researched whether or not the mortgage interest deduction, the tax expenditures, have the desired outcome. that is more people buying homes? guest: home ownership has risen considerably since of the home ownership push began in the 1930's? . in the 1930's only 10% own their own homes. in the early 2000's when around 69% on their own home. now it is around 64. host: mark, an independent in

michigan. caller: the taxation act of 1920 was by the federal supreme court. i was under the assertion that the key words were voluntary or temporary. our politicians have never offered a non-burdensome tax. how about -- what would happen if we offered a seven-year tax cycle allowing everyone, no matter how much you may come out would not have to pay federal tax for one year, which would mean everyone would get one seventh of whenever they paid in fight the come city, state, county, township tax. you would get one seventh of that back. i'd think the public can spend or save that money better than the government has been doing having a deficit and still charging as taxes that really are not paying for anything.

-- i think the public can spend or save that money better than the government has been doing with a deficit and still charging us taxes that really are not paying for anything. guest: all taxes are burdensome, regardless of how small they are. in 1898 we went to war with spain, and we put on a special tax to fund the war on long best distance phone calls. the war ended in three months. the tax lasted until 2007. es --y that temporary tax is - dinosaurs are more common than temporary taxes. there may have been some tax some time where the wealthy

sunset provision, but i am not aware of it. host: in your piece back in september you talk about consequences of the corporate income tax rate and the personal income tax rate. you talk about the first one. the second one is that this has been a field day for demagogues and misguided to claim the rich are not paying for their "fair share." you use the example of warren buffett. can you explain? guest: he said he paid only 17% of his taxable income, where as his secretary, who i imagine is a well-bid secretary, was paying 35% sen. that sounds certainly unfair. why should the second richest man in the world pay a lower income tax rate than his secretary does? the reason, of course, is the secretary is paid wages, and that -- most of his income or

her income is in wages, and that is taxed at a higher rate in dividends and capital gains, which are paid -- warren buffett and some is overwhelmingly dividends and capital gains. he does take a salary as ceo of berkshire hathaway, but it is minuscule, something like $100,000 per year. his income was 35 million. also, remember, he owns 30% of berkshire hathaway. berkshire hathaway made $19 billion last year, and it paid 5.6 billion in taxes, corporate taxes. that $5.6 billion in a very real sense was paid by warren buffett, because he owns 30% of it. his personal income tax he only paid a small amount, 6 million, but through berkshire hathaway

he paid almost 3 billion in taxes. host: republican from minnesota is next. question or comment. caller: i have a comment in a little bit of a question in it. he goes on to say the taxation, no matter how you look at it, it is on labour, it is a percentage of slavery. -- if it is on labor, it is a percentage of slavery. but if it does not display a balanced controlled number, omb, that you do not have to comply to it, and this public protection says it can be used. this is been expired for over 25 years. how do they get away with this correction now? guest: i am afraid i have not

the faintest idea. that is a technicality. i am not a tax accountant or tax lawyer. i am afraid i have not any idea what the answer to your question is. host: this tweet for you -- guest: you are 100% correct. there are 60,000 lobbyists in washington who lobby on taxes alone. that is why the simpler the tax form, the simpler the tax code, the less lobbying there would be. we had a pure -- if we had a pure flat tax where the only deduction was a personal deduction, then there would be 60,000 lobbyists in washington out looking for a job, which would not leave me inconsolable with grief. host: what is the history of the flat tax? guest: steve forbes is the man to put it on the map when he ran

for president in 1996. this radically simplify is the tax code out by having -- instead of having a progress of marginal rate that we have today from 10% to 35%, it would be one great on the margin. say 20%. there would be no deductions other than a personal deduction, which would be quite generous. for perry's plan calls personal deduction of $12,500, and then a 20% rate on all income above that. he has a few deductions for mortgage interest and charitable deductions. there are very few places to hide tax [inaudible] . if you look at the tax code is full of provisions that say things like any company that is principally engaged in the

business of manufacturing widgets, and whose headquarters are in the city of 35 million, and is the stock that employs no more than eight people, should be treated to treat people as it is blah, blah, blah. now this means nothing to you and me, but if you happen to be that one company, that means a lot. ost: look for rick perry's announcement on his tax plan. go to c-span.org for more information. here is another tweet -- landfalls, new york. dan, independent calller is next. -- glenfalls, new york. caller: supreme court defined it as a gain on corporate

activities. why are citizens being sent to jail for not paying in income tax? guest: because the law requires them to pay the tax. it is not as corporations. there is a personal income tax. income -- and might be difficult to define in a legal sense, but everyone knows what it is. if you know your neighbor's lawn and he pays to $10, that is called income. -- pays you $10, that is called income. caller: i was wondering if you could tell us what this country would be life if no one paid taxes. it really gets me that they drink the water coming use everything that is out there for them, and then they complain about having to pay for it. guest: yes, if no one paid taxes, this country will not be a pleasant place to live in.

police and fire in the united states navy are nice to have around-- and the united states navy are nice to have around. taxes are often being perceived as unfair, and oftentimes they are unfair because of the complexity of the tax code, but we are remarkably -- abiding country when it comes to paying taxes as opposed to greece where people are hiding swimming pools in sending people tax bills based on them because they were not declaring them. it is a game in greece and other countries. host: bethesda, md., on the air. caller: my question is, is it true withholding at the beginning of world war ii that

the congress intended to stop withholding taxes at the end of the war, but that when they saw how easy it was to collect from everyone, especially in wages that began to grow, they decided to instead institute or keep the withholding tax? withholding of taxes from wages began under the tax act of 1942, which was also the tax act that moved the income tax from being upper middle class and rich man's tax to being a tax on ordinary american, and yes, again as i say, it if someone tells you is going to be a temporary tax, do not believe it.

here we are 70 years later, in withholding is still in place. i think it makes it easier to deal with, because otherwise people have to set aside money to pay their taxes at the end of the year, and they may have in emergencies of a dip into the fund, and at the end of the year they do not have the money to pay the taxes, and they are in trouble. so perhaps withholding is really a good idea. tweet for you -- guest: the flat tax impacts the rich, because there was only one of marginal rate. the idea that the rich should pay a higher marginal rate goes back all the way to carl marks in 1848. what a flat tax does it -- there are two kinds of rates. one is the marginal rate, the tax on the next dollar of

income. the other one is the effective tax rate, the percentage of total taxable income that is taxed away. if you earn $1 million today, if you weren't $1,000,001, there would be a 35% tax on the extra $1. the effective tax rate might be 20% or 25%. you would send the government 250,000. under a flat tax, the way they are scheduled with the personal deduction and a flat marginal rate, what happens is counter intuitive fleet a flat tax is progressive -- counter intuitively a flat tax is progressive. the richer you are, the larger percentage of your income goes to the government. host: we're talking about the history of the income tax with john steele gordon, author and financial historian.

he has written many books. this tweet -- guest: the intent here is that the evidence -- dividends come out after tax corporations. they send a portion of the remaining profit to stockholders. that money has already been taxed once, and therefore it should not be taxed again. in britain, for instance, they have a corporate tax of 28%, and any dividends that are paid out you get a 28% tax credit for the dividend income. only the very rich pay additional income tax on dividend income, and that would be a fairer way to do it. and on capital gains, they are

not indexed for inflation, so if you bought an asset in 1970 and sold it for twice as much in 2011, there has been a five times -- there has been five times inflation, so you have actually lost money on the investment of as a you have to pay tax on it. also, there is a factor of risk involved because you cannot capital losses. you cannot wage losses. -- you cannot have waged losses. losses. host: mary, an independent in new york. caller: my comment was the one to get rid of the deficit and how much we are in debt, and yet the irs, i heard on the news a couple of months ago, the irs gave all of the illegals $4

billion in returned tax funds and nobody checked to see how many kids they said they have. first of all, they are illegal, so they're not supposed to be here to begin with come up yet yet the irs decided to give them $4 billion. host: on all next in tennessee. -- arnold next in tennessee. caller: i would like to invite you to go to my web site and read a book i wrote. the web site is love godislove.org. it is a true story and you might find it interesting. according to a documentary by the late arron russo, entitled

"american freedom to financial." if this is true, means the income tax has always been illegal. guest: it has to be ratified by three-quarters of the states in order to be ratified as an amendment. they keep a very careful records of this, and that has to be certified. you can go on the web and find that very quickly, which states ratify the income tax. if you want to, you can go to washington and it is kept in the national archives and found out exactly what the vote was in each state legislature and what have you. host: jim hines has this tweet -- guest: well, we tried raising tariffs in 1930 with the smoot

holly tariff. today we have a global economy. you know, i did not look this morning when i got dressed, but i am probably wearing clothes made in seven or eight different countries. if we raise the tariff on goods coming into this country, every other country would raise goods on american goods, and we would have a collapse of international trade, which would be bad for just about everybody, so the tariff is a terrible way to raise revenue. host: new mexico. don, independent calller. caller: i would like to go back to the capital gains and dividends issue. reagan's former budget director has argued that capital gains and dividends be taxed as our earned income. this year we learned that boeing, general electric, and eight other companies paid no income tax. it seems to me that what we're

doing is giving a free ride to those people who have capital gains and dividends since the corporations are paying their taxes, and also, it is pointed out that these corporations have a tax rate of 35 percent signed when any -- when in affect the average is like 18 percent signed. i think the whole capital gains and dividends should be turned into an earned -- turned into earned income. please comment. guest: if i remember the figure, it is around 26% is the average corporation effective tax rate. there are corporations like general electric that famously pay no taxes last year. a lot of that is taxes are deferred, according to the endless rules and regulations to encourage corporations to invest in certain ways.

so general electric will indeed end up paying taxes, they're just not afford to pay them this year. i would be more than happy to get rid of all of that so the corporations have to pay every year on the profits they make that year. but it still -- if a corporation, and most corporations are paying taxes. berkshire hathaway last year, the effective tax rate is 29.6%. that is a fair piece of change. they've made 19 billion. they paid 5.6 billion in taxes. you can find a situation here and there were general electric this year is not paying taxes because of some reason or another, but the average corporation most certainly is paying taxes. host: bryan, democrat a calller in chicago. caller: in the interest of historical accuracy, you said early on the direct tax, as

mentioned in article one, section 2, clause 3, was never did find in one of the delegates of the constitutional convention refused to say or did not say, but in article one, section 9 of the constitution, beginning with clause 1, you do find direct tax mentioned. it says the migration or importation of such persons as any of the states now existing shall think proper to admit shall not be prohibited by the congress prior year to year 1808, but a tax or duty may be imposed on such importation, not exceeding $10 for each person. host: we have to leave it